At a training session for church treasurers, an accountant discussed recent instances where an IRS auditor has disallowed a charitable deduction to a church. In each case both the church and the donation were legitimate and documentation was ample. The churches had mailed the required annual statement of cash donations received from the giver. These auditors are disallowing the entire year’s donations because the annual statement of donations did not contain the required boilerplate language, “No goods have been received in exchange for this donation.”
Parish treasurers should be aware of this potential issue and insert the required language in their donation statements as appropriate.
Regulations and law:
Under U.S. Tax Code Sec. 170, a taxpayer is allowed a charitable contribution deduction for a contribution or gift to or for the use of an organization organized and operated exclusively for charitable or educational purposes. Under Code Sec. 170(f)(8)(A), no charitable contribution deduction for any contribution of $250 or more is allowed unless the taxpayer substantiates the contribution with a contemporaneous written acknowledgment of the contribution by the donee organization that meets certain specified requirements. Under Code Sec. 170(f)(8)(B), the donee organization must state in the acknowledgment whether the donee organization provided any goods or services in consideration, in whole or part, for the contributed property or cash. If so, the acknowledgment generally must include a description and good faith estimate of the value of any goods or services provided. (Reg. § 1.170A-13(f)(2)) Under Code Sec. 170(f)(8)(C), a written acknowledgment is contemporaneous if it’s obtained by the taxpayer on or before the earlier of: (1) the date the taxpayer files the original return for the tax year of the contribution; or (2) the due date (including extensions) for filing the original return for the year. (Reg. § 1.170A-13(f)(3))