* 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.