Louis E. Michelson, A Professional Corporation

Providing Legal and Tax Advisory Services to Nonprofit Organizations

IRS Withdraws Proposed Gift Substantiation Regulations

January 27th, 2016 · No Comments · charitable contributions, Proposed Regulations, tax returns

A donor who claims a charitable contribution deduction for any contribution of $250 or more requires that the donor obtain substantiation in the form of a contemporaneous written acknowledgment from the charity.  Under an exception to this requirement (Internal Revenue Code Section 170(f)(8)(D)), a contemporaneous written acknowledgment is not required if the charity/donee organization files a return with the IRS in accordance with IRS regulations (“donee reporting”).

The Treasury Department and the Internal Revenue Service published proposed regulations in September, 2015 for donee reporting that would have allowed, but not required, charities to file a new, separate information return with the IRS (in addition to the Form 990) by February 28 every year to substantiate contributions of more than $250 in value.  The proposed regulations would create another alternative, and would not replace, the existing substantiation rules for contributions of $250 or more.

The new form would include donor names, addresses, and taxpayer identification numbers for all gifts over $250.  In addition to collecting donor information and filing the additional form, participating charities would also be required to provide each donor a copy of the report that contains his or her personal information.

The IRS on January 7, 2016 announced the withdrawal of the proposed regulations.  Nearly 38,000 comments on the proposed rules were submitted to the IRS.  The comments raised concerns for risk to donor privacy, including charities’ ability to safely collect and protect donor data.  Other comments focused on potential decrease in charitable giving and the significant administrative burdens on charities because of the proposed rules.

A copy of the withdrawal notice published in the Federal Register can be found at the following link.


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