Posted by Casey Hagy, CPA
In September 2015 the IRS proposed regulations that would change the gift substantiation rules. Under the current law, donors that claim a charitable contribution deduction of $250 or more must obtain contemporaneous written acknowledgment (CWA) from the charitable organization. This CWA usually takes the form of a letter and must include the amount of the donation, a statement saying whether any goods and services were provided in exchange for the donation and, if applicable, a good faith estimate of the value of any goods and services provided by the donee. The current law also states that donors are exempt from their requirements to obtain a CWA if the nonprofit organization reports the donation to the IRS.
The proposed regulations attempt to implement a process through which nonprofit organizations can report contribution information to the IRS. The new regulations would permit, but not require, charitable organizations to file a separate information return with the IRS to substantiate contributions greater than $250. The new information return would require nonprofit organizations to obtain the donor’s name, address, and social security number. This form would be due to the IRS by February 28 and the organization would also be required to provide a copy to each donor by that date (but only the information that pertains to that donor).
The IRS is currently accepting written comments regarding their proposed regulations before they are adopted as final. The National Council of Nonprofits is encouraging nonprofit organizations to take action and submit comments to the IRS about the negative consequences this new rule could have on nonprofits. The following are a few concerns from the National Council of Nonprofits:
- Donors may be hesitant to provide social security numbers, which could result in reduced charitable contributions.
- The new process could impose significant costs and burdens on nonprofit organizations.
- Increased identify theft issues.
The IRS is accepting comments from the public through December 16. Click here to gather more talking points from the Nation Council of Nonprofits and to submit your own comment.