Charitable Contributions

Church Law and Tax 1989-05-01 Recent Developments Charitable Contributions Richard R. Hammar, J.D., LL.M., CPA

Church Law and Tax 1989-05-01 Recent Developments

Charitable Contributions

The IRS is becoming increasingly concerned about donors who claim charitable contribution deductions for “gifts” to charity for which they receive a “premium” in return. IRS Commissioner Lawrence Gibbs recently warned that if charities do not begin properly notifying donors that such “contributions” are not fully deductible, then Congress may be forced to enact legislation requiring that such notice be given. Gibbs cited an “alarming number” of misleading solicitations. No charity has yet lost its tax-exempt status because of a failure to properly notify donors that contributions for which a premium are received are not fully deductible, but Gibbs did suggest that the IRS might apply section 6701 of the Internal Revenue Code to such charities. Section 6701 imposes a penalty of $1,000 upon a person or organization that “aids and abets” in the understatement of another’s tax liability. The $1,000 penalty may be assessed against a charitable organization for every donor’s tax return that understates tax liability because a full charitable contribution deduction was claimed despite the donor’s receipt of a premium from the charity. This issue was discussed fully in a feature article in the November-December 1988 issue of Church Law & Tax Report.

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