IRS Proposes Implementing a Donee Report From

* IRS Withdrew these proposed regulations on 01/08/2015

The Omnibus Budget Reconciliation Act of 1993 (or “OBRA93”) contained two major provisions affecting charities and their donors by introducing the "substantiation" and "disclosure" requirements.

The Disclosure Requirement

The disclosure requirement addressed "quid pro quo” contributions. It requires that an organization provides a written disclosure statement to a donor who makes a payment exceeding $75 and received goods and services from the organization. The written statement must: 1) inform the donor that the amount of the contribution that is deductible is limited to the excess of the amount contributed by the donor over the value of the goods or services provided by the donee organization, and 2) contain a good faith estimate of the fair market value of the goods and services

The Substantiation Requirement

IRC 170(f)(8)(A) provides no deduction will be allowed by an individual taxpayer for a contribution of $250 or more unless the contributor has a contemporaneous written acknowledgment (or “CWA”) from the charity. The CWA must include (1) Name of the Organization (2) Amount of Cash Contribution (3) Description (but not the value) of noncash contribution (3) Statement that no goods or services were provided by the organization in return for the contribution, if applicable, (4) Description and good faith estimate of the value of goods or services the organization provided the donor. For a written acknowledgment to be “contemporaneous,” the donor must receive the acknowledgment from the organization by the earlier of: (1) the date on which the donor files his or her tax return for the year of the contribution or; (2) the due date of the return.

Prescribed Form Exception

When OBRA93 was enacted, it included IRC Section 170(f)(8)(D) which added an exception to the CWA requirement. The donee can also fulfill its reporting requirements “… if the donee organization files a return, on such form and in accordance with such regulations as the Secretary may prescribe.”

IRS Proposed Regulation

Twenty-two years after OBRA93, on September 16, 2015, the IRS issued proposals on developing the prescribed form for donee charitable donation reporting. The regulations indicate a form similar to a 1098 form used to report mortgage interest. As currently written the use of a prescribed form will be optional for all organizations, at least initially. The form would need to be filed by February 28th of the year following the contribution. Late filing of the prescribed form by the charity to the IRS would preclude the form from being used as contribution substantiation, (i.e. used by the taxpayer in lieu of the CWA)

Question and issues raised by the proposed regulations

The Proposed regulations raise some concerns that would be involved in implementing a prescribed form. Identification numbers (i.e. social security numbers) would have to be obtained by the charities from donors in order to put on a prescribed form. The IRS acknowledges the potential risks, such as identify theft, in that regard. There are questions of whether the prescribed form would incorporate the quid pro quo disclosure requirements by adding a box to report the value of goods and services received. Additionally, it is unclear if an organization chooses to use the prescribed form if they can use it for some but not all donors and issue CWAs to the remaining donors.

Comments and further information

The IRS is requesting comments on all aspects of the implementation of the prescribed form. Written or electronic comments must be received by December 16, 2015. To comment electronically or for information to comment by mail go to www.regulations.gov (ID: IRS-2015-0049-0001). All comments will be available to view at that website.

IRS contacts for further information

For information concerning the proposed regulations, contact Robert Basso at (202) 317-7011. For information concerning comments or a request for a public hearing, contact Oluwafunmilayo Taylor at (202) 317-6901. 

Auto Donation Procedures Unraveled

1098-C

When the Charity received a donated car, it would give a form 1098C to the donor. If the car was sold by the charity already, it would list the sale proceeds on the form 1098C, which would limit the donor’s deduction.  If there are no sales proceeds listed, you can look at boxes 5a and 5b, if either of these is checked, the charity does not intend to sell the car and the donor would be entitled to an FMV deduction.  If neither of boxes 5a and 5b are checked, the charity probably intends to sell the car. [Note, the donor taxpayer may not get a copy of Form 1098C.  The charity is required to send that to the IRS and most charities use that as their acknowledgment to the donor, but they also are allowed to put that info from 1098C on an acknowledgement letter and give that to the donor.]

Form 8282

 When the charity sells the car (within 3 years of receiving it), they are required to file Form 8282 with the IRS. Also they are required to send the donor a copy of the form.   The sales proceeds info will be there (and should match the info on form 1098C if the sales proceeds were listed there as well.)   So for form 8282,  the donor may not receive it from the charity in time to file your tax return and you potentially may never receive one if the vehicle is never sold.  Most likely the vehicle will be sold. If you did not get a copy of the form 8282 from the charity it’s likely they did not know they had to send it to the donor (or the IRS for that matter). 

Form 8283

Is the form the donor taxpayer files with their return to get their deduction.  There is a portion in part IV for the charity to fill out and sign.  Some charities  give the donor this form with Part IV already filled out when they receive the donation.  This section is more of a reminder to the charity that they have to send the donor Form 8282 when they sell the property. And in almost all cases the question “Does the organization intend to use the property for an unrelated use?” should be checked “no.”  Yes to that question would mean the charity intends to use the vehicle , but not for charitable purposes (like if they ran an unrelated business).  If the box is blank, you can confirm with the charity and check the “no” box.

The main problem with all this is when the Taxpayer files their tax return and claims an FMV deduction and then receives the from 8282 (could be years later) giving the sales information.  As the instructions to Form 8383 state [As a result of the sale by the donee, the donor's contribution deduction may be limited or part of the prior year contribution deduction may have to be recaptured. See Pub. 526]