The IRS is working on comprehensive regulations that will provide churches and other nonprofit organizations with guidance on complying with the charitable contribution substantiation rules that took effect in 1994. The regulations are being released in response to widespread noncompliance with the new rules. The IRS believes that most charities want to comply, but simply do not understand the new rules. When will the regulations be released? By the end of the year, says an IRS spokeswoman.
Key point. Among other issues, the regulations will address a common church question—how to treat a volunteer’s travel expenses incurred on a short-term missions trip on behalf of a local church. Such expenses often are deductible as a charitable contribution. But what if a volunteer’s expenses are $250 or more? Do the new substantiation rules apply, and if so, how? Many times the volunteer pays the expenses directly, and the church does not know how much they are and so cannot report them on the volunteer’s contribution receipt. Your author asked the IRS to address this issue in the regulations, and the IRS has confirmed that it will. We will give you the details as soon as the regulations are issued, probably by the end of the year.
Key point. Another issue the regulations will address—how does a charity value the goods or services that it provides in exchange for a donation? A common example—church bazaars and auctions. An IRS spokesman says the new regulations will suggest a number of ways a charity can value such goods or services.
This article originally appeared in Church Treasurer Alert, July 1995.