The Catholic University of America

Summary of Federal Laws

Tax

Tax Issues Related to Donations

Substantiation and Disclosure Provisions

26 USC 170; 26 CFR 1.170a-15-17 (pending)

Substantiation and disclosure provisions, under I.R.C. § 170(f)(8), apply for contributions made to tax exempt organizations after December 31, 1993. For charitable contributions of $250 or more, the donor needs to receive a contemporaneous written acknowledgment from the I.R.C. § 501(c)(3) organization of the gift. (nb: See below the changes made by the Pension Protection Act of 2006 and effective Jan. 1, 2007.)The acknowledgment should note the amount of any cash contribution and, if the donation is in the form of property, the acknowledgment must describe, but need not value the property. Valuation of the property is the responsibility of the donor. The final regulations addressing the substantiation of contributions made by payroll deduction may be found at 60 Fed. Reg. 53,126 (Oct. 12, 1995). Basically, the acknowledgment tracks what is stated above. Pledge cards and pay stubs, or Form W-2s may be used to substantiate payroll contributions.

Pursuant to the American Jobs Creation Act of 2004, a new rule applies to donation of vehicles. For contributions made beginning Jan. 1, 2005, a deduction for vehicles whose value exceeds $500 will not be allowed unless the taxpayer substantiates the contribution with a contemporaneous written acknowledgment, and if the 501(c)(3) sells the vehicle the new law limits the deduction to the gross proceeds received from the sale. If the vehicle will not be sold, the donee must include a certification as to intended us of the vehicle.

Proposed Rules on Substantiation and Reporting Requirements for Cash and Noncash Charitable Contribution Deductions, 73 Fed. Reg. 45908, August 7, 2008

These proposed regulations provide guidance concerning substantiation and reporting requirements for cash and noncash charitable contributions under section 170 of the Internal Revenue Code. The regulations reflect the enactment of provisions of the American Jobs Creation Act of 2004 and
the Pension Protection Act of 2006.

Pension Protection Act of 2006 and substantiation rules: Recordkeeping Requirements for Donors:

This change will only affect taxpayers who itemize their taxes: The new law is effective for most taxpayers for contributions made after Jan. 1, 2007. The change (Section 1217) requires taxpayers claiming a charitable deduction to maintain records of all monetary contributions. This might be a cancelled check, a print out of an electronic banking report, or a receipt from the charitable organization showing the date and amount of the contribution. The text of the new law is as follows:

SEC. 1217. MODIFICATION OF RECORDKEEPING REQUIREMENTS FOR CERTAIN CHARITABLE CONTRIBUTIONS.
(a) RECORDKEEPING REQUIREMENT.--Subsection (f) of section 170, as amended by this Act, is amended by adding at the end the following new paragraph:
"(17) RECORDKEEPING.--No deduction shall be allowed under subsection (a) for any contribution of a cash, check, or other monetary gift unless the donor maintains as a record of such contribution a bank record or a written communication from the donee showing the name of the donee organization, the date of the contribution, and the amount of the contribution.". (b) EFFECTIVE DATE.--The amendment made by this section shall apply to contributions made in taxable years beginning after the date of the enactment of this Act. (Editor's note: The law was signed August 17, 2006)

IRS Notice 2006-01: Guidance on Vehicle Donations

January 23, 2006: This notice provides guidance on the reporting requirements for donee organizations that receive a contribution of a qualified vehicle after December 31, 2004, the claimed value of which is more than $500.

If a donee organization receives a contribution of a qualified vehicle with a claimed value of more than $500 after December 31, 2004, the donee organization is required to provide a contemporaneous written acknowledgment to the donor. The donee organization may use a completed Form 1098-C for the contemporaneous written acknowledgment. See section 3.03 of Notice 2005-44, 2005-25 I.R.B. 1287, for guidance on the information that must be included in a contemporaneous written acknowledgment and the deadline for furnishing the acknowledgment to the donor.

Any donee organization that provides a contemporaneous written acknowledgment to a donor under this section is required to report to the IRS the information contained in the acknowledgment. The report is due by February 28 (March 31 if filing electronically) of the year following the year in which the donee organization provides the acknowledgment to the donor.

Quid Pro Quo and disguised tuition benefits

See IRS Memorandum # ILM 200623063
, released June 9, 2006, which adopts the position that the section 6714 penalty applied when a statement provided by a church to donors said nothing about the tuition benefits donors received in return for their contributions. Under the program, a member family contributed to the church an amount equal to or exceeding the cost of the child(rens) tuition to attend the parish school. At the end of the year, the church provided a statement to the member family showing contributions for the year, without any reduction for tuition paid.

Resources

2013 IRS Publication 526: Charitable Contributions: (focus on what can be deducted)

2013 IRS Publication on Charitable Contributions: Substantiation and Disclosure Requirements: 16 page clearly written brochure

NACUANOTES Dec. 19, 2006 The Pension Protection Act of 2006: Charitable Giving and Reform Measures Impacting Colleges and Universities: This is an excellent resource that gives an overview of all sections of this new law that impact colleges and universities, including the provisions on charitable substantiation. Many helpful hyperlinks included.

Latest Version of Publication 1771. (Charitable Contributions: Substantiation and Disclosure Requirements).

See also Donee Responsibilities with Respect to Charitable Contributions.

Revisions to IRS Publication 4302, A Charity's Guide to Car Donations

The August 2004 version of the above publication is no longer valid, that is it does not apply to donations commencing January 1, 2005. Use this fact sheet in the interim.

 

IRS Rules and Regulations: What you need to Know to Stay out of Trouble, by Alison Paul

(from CASE website)

 
 
 
 
 
 
 updated 9/13/13 to IRS publication on substantiation and disclosure requirements
 
 updated 12/10/13 to add IRS pub 526