Final Regulations: Substantiation and Reporting of Charitable Contributions
Tax-Exempt Organizations Alert 09/18/18 Norah L. Jones, Patricia Spiccia
On July 27, 2018, the Internal Revenue Service issued final regulations (T.D. 9836) for the substantiation and reporting of charitable contributions for purposes of the charitable contribution deduction. Key highlights from the final regulations are summarized below.
Substantiation of Monetary Contributions
The final regulations provide, among other things, that no charitable contribution deduction is allowed for any monetary contribution, unless the donor substantiates the deduction with a bank record or a written communication from the donee showing the name of the donee, the date of the contribution, and the amount of the contribution. A blank pledge card provided by a donee organization but filled out by the donor does not constitute adequate substantiation for a monetary contribution. The taxpayer must maintain (1) a bank record (e.g., a canceled check, credit card statement, or electronic fund transfer receipt); or (2) a written communication from the donee that shows the name of the donee organization, the date of the contribution, and the amount of the contribution. The final regulations clarify, among other things, that the written communication described above may be transmitted via email.
Additionally, any monetary contribution of $250 or more also must be substantiated with a contemporaneous written acknowledgment (a Contemporaneous Acknowledgment) of the contribution by the donee organization that includes the following: (1) the amount of cash and a description (but not value) of any property other than cash contributed; (2) a statement of whether the donee organization provided any goods or services in consideration, in whole or in part, for any such cash or property; and (3) a description and good faith estimate of the value of any such goods or services or a statement that such goods or services consist solely of intangible religious benefits, if applicable.
Substantiation of Non-Cash Contributions
Non-cash contributions of less than $250 must be substantiated with one of the following:
- a receipt from the donee showing (1) the name and address of the donee; (2) the date of the contribution; (3) a description (but not the value) of the property in sufficient detail under the circumstances; and (4) in the case of securities, the name of the issuer, the type of security, and whether the securities are publicly traded (collectively, the Receipt Contents); or
- a reliable written record maintained by the donor, which includes: (1) the Receipt Contents; (2) the fair market value of the property on the date the contribution was made; (3) the method used in determining the fair market value; and (4) if the contribution consists of clothing or a household item, the condition of the item.
Non-cash contributions of $250 or more but not in excess of $500 must be substantiated with a Contemporaneous Acknowledgment. For a non-cash contribution of more than $500 but not more than $5,000, the donor must obtain a Contemporaneous Acknowledgment and file a completed Form 8283, Section A, which requires certain information about the donor, the donee, and the contributed property. Subject to certain exceptions, a donor of non-cash contributions in excess of $5,000 must (a) obtain a Contemporaneous Acknowledgment; (b) obtain a “qualified appraisal,” prepared by a “qualified appraiser;” and (c) complete Form 8283, Section B, which requires certain information about the donor, the donee, the appraiser, and the contributed property. For non-cash contributions in excess of $500,000, the donor also must attach a “qualified appraisal” to the return for the taxable year in which the contribution is made and to the return for each carryover year. The final regulations also define “qualified appraisal” and “qualified appraiser”, impose certain new requirements in connection with the education and experience required to be a qualified appraiser, and provide clarifications regarding the appraisal requirements and process.
The new rules pertaining to the education and experience required for qualified appraisers apply to contributions made on or after January 1, 2019. The rest of the final regulations apply to contributions made after July 30, 2018.
This update is intended as a general summary of legal matters and not as specific advice to any particular client. If you have any questions concerning the subject matter of this update, please contact Norah L. Jones at (312) 715-5052 / [email protected], Patricia M. Spiccia at (312) 715-5284 / [email protected], or your Quarles & Brady attorney.