Our organization is a 501c3 and provides housing to senior citizens. Some of the residents would like to make leasehold improvements to their units and "donate" the improvements back to the company as a way of receiving a tax deduction for the cost incurred.
I'm trying to figure out if this is possible and, if so, what basis is used for the donation amount.

To understand whether a TP can write off leasehold improvement to charity, you must first understand what type of charity will qualify you for the deduction and what types of contributions are deductible.Leasehold improvements,i.e., painting, installing retail counters, partitioning or etc are alterations to a building which are made by a tenant to make the space more usable. TPs usually donate household items,i.e., appliances, bowls and cookware, or utensils or etc. If a TP donates the entire property to the charity, the IRS would permit you to write off the FMV of the property.However, lease hold improvement constitutes a right to use the housing units. Since they are not donating their entire interest in the property, but merely a portion, they cannot claim a tax deduction for the amount of the donation.