If the city transfers title to the property to the charity, the gift from the city will be treated as any other contribution and recorded on the financial statement and the Form 990 tax return as a contribution received in the year the transfer is completed. 

 

If the city gives free use of the property but retains title for the city, the gift will not be listed as a contribution on the tax return. The value of the free rent will count as public support, however, in the calculation of public support on Schedule A. Because the value does not show up on monthly budgets or statements of income and expense, it is often overlooked on Schedule A. But free rent from a governmental entity can sometimes make the difference between public charity and private foundation status.

 

Whether the value can be used as “in-kind” support for matching a grant from someone else will depend on the donor’s criteria. But it is certainly a real gift and is likely to count as matching money.