IRS Extends Time Limit for 1994 Charitable Contribution Substantiations

Extension results from charities often give receipts that do not comply with new laws.

Church Law and Tax 1995-05-01 Recent Developments

Charitable Contributions

Key point: The IRS has provided limited relief from the new charitable contribution substantiation rules that took effect in 1994.

The IRS has issued a notice giving donors until October 16, 1995 to obtain a receipt for individual charitable contributions of $250 or more that complies with the new charitable contribution substantiation rules that took effect in 1994. Under the new rules donors can substantiate an individual contribution of $250 or more only with a receipt issued by the charity that contains the following information: (1) the donor’s name; (2) a listing of each individual contribution of $250 or more; (3) a statement indicating whether or not the charity provided any goods or services to the donor in exchange for the contribution, and if so, a good faith estimate of the value of those goods or services; (4) if the charity provided no goods or services to a donor in exchange for a contribution, or if the only goods or services the church provided were “intangible religious benefits,” then the receipt must contain a statement to that effect. In addition, the receipt must be “contemporaneous,” meaning that it must be received by the donor on or before the earlier of the following two dates: (1) the date the donor files a tax return claiming a deduction for the contribution, or (2) the due date (including extensions) for filing the return.

The IRS has acknowledged that taxpayers are experiencing difficulties in obtaining receipts complying with these requirements. In most cases, this is because the charity is not familiar with the new rules. The IRS responded to these difficulties by releasing a notice informing taxpayers that they can still claim deductions for charitable contributions of $250 or more on their 1994 returns if they make a good faith effort on or before Oct. 16, 1995, to obtain the required written receipt from the charity. One example of a good faith effort would be sending a letter to the charity requesting the receipt.

The full text of the IRS notice is reproduced below:

The Service has received numerous inquiries about the substantiation requirements for charitable contributions of $250 or more imposed by Congress in the 1993 tax law changes. Those requirements, found in section 170(f)(8) of the Internal Revenue Code, generally provide that a taxpayer will not be allowed a charitable contribution deduction for a contribution of $250 or more unless the taxpayer substantiates the contribution with a “contemporaneous written acknowledgment” from the donee organization. The law requires the taxpayer to obtain the acknowledgment before the taxpayer files the return reporting the contribution or before the due date (including extensions) for the return, whichever comes first. These new substantiation requirements apply to contributions made on or after January 1, 1994.

The Service understands that there has been confusion about these new requirements, and as a result, many taxpayers have had difficulty obtaining the required written acknowledgments from donee organizations for contributions made during 1994. In light of these difficulties, the Service is providing the following relief:

For contributions of $250 or more made during calendar year 1994, a taxpayer who has not obtained the necessary contemporaneous written acknowledgment by the date specified in section 170(f)(8) will be treated as having satisfied the requirements of that section if (1) the taxpayer has obtained the acknowledgment by October 16, 1995, or (2) the taxpayer has made a good faith effort to obtain the acknowledgment by that date. An example of a good faith effort would be sending the donee organization a letter requesting a written acknowledgment that meets the requirements of section 170(f)(8). A “contemporaneous written acknowledgment” is a written statement from a donee organization that contains the following information: (1) the amount of cash and a description (but not value) of any property other than cash contributed, (2) whether the donee organization provided any goods or services in consideration for the property contributed, and (3) a description and good faith estimate of the value of any goods or services provided by the donee organization in consideration for the property contributed. In addition (except for contributions made during calendar year 1994, for which relief is provided by this Notice), the taxpayer must obtain the acknowledgment before the taxpayer files the return reporting the contribution or before the due date (including extensions) for the return, whichever comes first. Taxpayers are reminded that they must comply with all of the requirements of section 170 in order to be allowed a charitable contribution deduction. If the taxpayer receives goods or services in exchange for a contribution to a donee organization, section 170 generally allows the taxpayer to take a deduction only to the extent that the taxpayer intended to and did make a payment in excess of the fair market value of what was received in return.

The principal author of this notice is Rosemary DeLeone of the Office of Assistant Chief Counsel (Income Tax and Accounting). For further information regarding this notice, contact Rosemary DeLeone at (202) 622-4930 (not a toll-free call).

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