[Federal Register Volume 60, Number 197 (Thursday, October 12, 1995)]
[Rules and Regulations]
[Pages 53126-53129]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25058]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
[TD 8623]
RIN 1545-AS27
Substantiation Requirement for Certain Contributions
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final and temporary regulations.
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SUMMARY: This document contains final regulations that provide guidance
regarding the substantiation requirements for charitable contributions
of $250 or more contained in section 170(f)(8) of the Internal Revenue
Code. The guidance contained in these final regulations will affect
organizations described in section 170(c) and individuals and entities
that make payments to those organizations.
EFFECTIVE DATE: January 1, 1994.
FOR FURTHER INFORMATION CONTACT: Jefferson K. Fox, 202-622-4930 (not a
toll-free call).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these final regulations
has been reviewed and approved by the Office of Management and Budget
in accordance with the Paperwork Reduction Act (44 U.S.C. 3504(h))
under control number 1545-1431. Responses to this collection of
information are required to substantiate deductions under section 170
of the Internal Revenue Code for certain charitable contributions. An
agency may not conduct or sponsor, and a person is not required to
respond to, a collection of information unless the collection displays
a valid control number.
The estimated burden per recordkeeper varies from 15 minutes to 30
minutes, depending on individual circumstances, with an estimated
average of 25 minutes.
Comments concerning the accuracy of this burden estimate and
suggestions for reducing this burden should be sent to the Internal
Revenue Service, Attention: IRS Reports Clearance Officer, PC:FP,
Washington, DC 20224, and to the Office of Management and Budget, Attn:
Desk Officer for the Department of the Treasury, Office of Information
and Regulatory Affairs, Washington DC 20503.
Books or records relating to this collection of information must be
[[Page 53127]]
retained as long as their contents may become material in the
administration of any internal revenue law. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. 6103.
Background
This document contains amendments to the Income Tax Regulations (26
CFR part 1) relating to the substantiation requirements under section
170(f)(8) of the Internal Revenue Code of 1986. Section 170(f)(8) was
added by section 13172 of the Omnibus Budget Reconciliation Act of
1993, Public Law 103-66 (107 Stat. 455, 1993-3 C.B. 43).
Temporary regulations (TD 8544) and a notice of proposed rulemaking
by cross-reference to temporary regulations under section 170(f)(8)
were published in the Federal Register for May 27, 1994 (59 FR 27458,
27515). The regulations primarily address the substantiation of
contributions made by payroll deduction and the substantiation of a
payment to a donee organization in exchange for goods or services with
insubstantial value.
A public hearing was held on November 10, 1994. On March 22, 1995,
the IRS released Notice 95-15, which was published in 1995-15 I.R.B.
22, dated April 10, 1995. Notice 95-15 provides transitional relief
(for 1994) from the substantiation requirement of section 170(f)(8).
After consideration of the public comments regarding the proposed
regulations, the regulations are adopted as revised by this Treasury
decision, and the corresponding temporary regulations are removed.
Explanation of Statutory Provisions
Section 170 allows a deduction for certain charitable contributions
to or for the use of an organization described in section 170(c). Under
section 170(f)(8), taxpayers who claim a deduction for a charitable
contribution of $250 or more must obtain substantiation of that
contribution from the donee organization and maintain the
substantiation in their records. See H.R. Conf. Rep. 213, 103d Cong.,
1st Sess. 565 (1993). Specifically, section 170(f)(8)(A) provides that
no charitable contribution deduction will be allowed under section
170(a) for a contribution of $250 or more unless the taxpayer
substantiates the contribution with a contemporaneous written
acknowledgment from the donee organization.
Section 170(f)(8)(B) provides that an acknowledgment meets the
requirements of section 170(f)(8)(A) if it includes the following
information: (a) The amount of cash and a description (but not
necessarily the value) of any property other than cash contributed; (b)
whether or not the donee organization provided any goods or services in
consideration for the cash or other property contributed; and (c) a
description and good faith estimate of the value of any goods or
services provided by the donee organization in consideration for the
cash or other property contributed, or if the goods or services consist
solely of intangible religious benefits, a statement to that effect.
Under section 170(f)(8)(C), a written acknowledgment is
contemporaneous, for purposes of section 170(f)(8)(A), if it is
obtained on or before the earlier of: (a) The date the taxpayer files
its original return for the taxable year in which the contribution was
made, or (b) the due date, including extensions, for filing the
taxpayer's original return for that year.
Section 170(f)(8)(E) directs the Secretary to prescribe such
regulations as are necessary or appropriate to carry out the purposes
of section 170(f)(8), including regulations that may provide that some
or all of the requirements of section 170(f)(8) do not apply in
appropriate cases.
Public Comments
Contributions Made by Payroll Deduction
The proposed regulations permit a taxpayer to substantiate
contributions made by payroll deduction by a combination of two
documents: (a) A pay stub, Form W-2, or other document furnished by the
taxpayer's employer that evidences the amount withheld from the
taxpayer's wages, and (b) a pledge card or other document prepared by
the donee organization that states that the donee organization did not
provide any goods or services as whole or partial consideration for any
contributions made by payroll deduction.
Commentators reported that pledge cards are frequently prepared by
employers at the direction of the donee organization. They suggested
that the IRS accept pledge cards with the required language if the
pledge cards are prepared either by the employer or by the donee
organization. In response to this suggestion, these final regulations
provide that pledge cards prepared by the donee organization or by
another party at the donee organization's direction can be used as part
of the substantiation for a contribution made by payroll deduction.
Commentators asked whether a Form W-2 that reflects the total
amount contributed by payroll deduction, but does not separately list
each contribution of $250 or more, can be used as evidence of the
amount withheld from the employee's wages to be paid to the donee
organization. Section 170(f)(8)(B) provides that an acknowledgment must
reflect the amount of cash and a description of property other than
cash contributed to the charitable organization. When a taxpayer makes
multiple contributions to a charitable organization, the statute does
not require the acknowledgment to list each contribution separately.
Consequently, an acknowledgment provided for purposes of section
170(f)(8) may substantiate multiple contributions with a statement of
the total amount contributed by a taxpayer during the year, rather than
an itemized list of separate contributions. Therefore, a Form W-2
reflecting an employee's total annual contribution, without separately
listing the amount of each contribution, can be used as evidence of the
amount withheld from the employee's wages. Because the statute does not
require an itemized acknowledgment, it was unnecessary to clarify the
proposed regulations to address this concern.
Commentators also asked whether the donee organization must use any
particular wording on the pledge card or other document prepared for
purposes of substantiating a charitable contribution made by payroll
deduction. Because the IRS and the Treasury Department do not believe
that any particular wording is required, these final regulations
clarify that the pledge card or other document is only required to
include a statement to the effect that no goods or services were
provided in consideration for the contribution made by the payroll
deduction.
Commentators asked for guidance regarding the proper method of
substantiating lump-sum contributions made by employees through their
employers other than by payroll withholding. Commentators stated that
employees occasionally make contributions in the form of checks payable
to their employer, who then deposits the checks in an employer account
and sends the donee organization a single check drawn on the employer
account. When employees' payments are transferred to a donee
organization in this manner, it is difficult for the organization to
identify the persons who made contributions, and thus the employees may
be unable to obtain the requisite substantiation. These difficulties
can be eliminated if
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the employees' contribution checks are made payable to the donee
organization and the employer simply forwards the employees' checks to
the donee organization. The donee organization can then provide
substantiation as it would for any individual contribution made by
check. Therefore, the final regulations have not been modified to
address this point.
Goods or Services With Insubstantial Value
The proposed regulations provide that goods or services that have
insubstantial value under the guidelines provided in Rev. Proc. 90-12
(1990-1 C.B. 471), and Rev. Proc. 92-49 (1992-1 C.B. 987), and any
successor documents, are not required to be taken into account for
purposes of section 170(f)(8). The IRS re-proposed this provision in
proposed regulations under section 170(f)(8) that were published in the
Federal Register for August 4, 1995 (60 FR 39896), and it has therefore
been deleted from these final regulations. Taxpayers may rely on those
proposed regulations for payments made on or after January 1, 1994.
Additional Comments Addressed in Proposed Regulations Published in the
Federal Register for August 4, 1995
Commentators raised a number of other questions about the
substantiation regulations, including the following: (a) whether, in
calculating a charitable contribution deduction, a donor can rely on a
donee organization's estimate of the fair market value of any quid pro
quo provided to the donor, (b) how certain types of benefits provided
to a donor are to be valued, (c) how the fair market value of goods or
services sold at a charity auction can be established, (d) how goods or
services are to be treated when provided to a donor who has no
expectation of receiving a quid pro quo, (e) how unreimbursed out-of-
pocket expenses incurred by a taxpayer incident to the rendition of
services to a donee organization can be substantiated, and (f) how
certain transfers to a charitable remainder trust can be substantiated.
The proposed regulations published August 4, 1995, address these
questions, as explained in the preamble to those proposed regulations.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in EO 12866. Therefore, a
regulatory assessment is not required. It has also been determined that
section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5)
and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do not apply to
these regulations, and, therefore, a Regulatory Flexibility Analysis is
not required. Pursuant to section 7805(f) of the Internal Revenue Code,
the notice of proposed rulemaking preceding these regulations was
submitted to the Small Business Administration for comment on its
impact on small business.
Drafting Information: The principal authors of these regulations
are Jefferson K. Fox, Office of the Assistant Chief Counsel (Income
Tax & Accounting), IRS, and Joel S. Rutstein and Rosemary DeLeone,
who are formerly of that office. However, other personnel from the
IRS and Treasury Department participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 602 are amended as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 is amended by
removing the entry for 1.170A-13T and the general authority continues
to read as follows:
Authority: 26 U.S.C. 7805. * * *
Par. 2. In Sec. 1.170A-13, paragraph (e) is added and reserved and
paragraph (f) is added to read as follows:
Sec. 1.170A-13 Recordkeeping and return requirements for deductions
for charitable contributions.
* * * * *
(e) [Reserved]
(f) Substantiation of charitable contributions of $250 or more.
(1) through (10) [Reserved]
(11) Contributions made by payroll deduction--(i) Form of
substantiation. A contribution made by means of withholding from a
taxpayer's wages and payment by the taxpayer's employer to a donee
organization may be substantiated, for purposes of section 170(f)(8),
by both--
(A) A pay stub, Form W-2, or other document furnished by the
employer that sets forth the amount withheld by the employer for the
purpose of payment to a donee organization; and
(B) A pledge card or other document prepared by or at the direction
of the donee organization that includes a statement to the effect that
the organization does not provide goods or services in whole or partial
consideration for any contributions made to the organization by payroll
deduction.
(ii) Application of $250 threshold. For the purpose of applying the
$250 threshold provided in section 170(f)(8)(A) to contributions made
by the means described in paragraph (f)(11)(i) of this section, the
amount withheld from each payment of wages to a taxpayer is treated as
a separate contribution.
(12) Distributing organizations as donees. An organization
described in section 170(c), or an organization described in 5 CFR
950.105 (a Principal Combined Fund Organization for purposes of the
Combined Federal Campaign) and acting in that capacity, that receives a
payment made as a contribution is treated as a donee organization
solely for purposes of section 170(f)(8), even if the organization
(pursuant to the donor's instructions or otherwise) distributes the
amount received to one or more organizations described in section
170(c). This paragraph (f)(12) does not apply, however, to a case in
which the distributee organization provides goods or services as part
of a transaction structured with a view to avoid taking the goods or
services into account in determining the amount of the deduction to
which the donor is entitled under section 170.
(13) through (15) [Reserved]
(16) Effective date. Paragraphs (f) (11) and (12) of this section
apply to contributions made on or after January 1, 1994.
Sec. 1.170A-13T [Removed]
Par. 3. Section 1.170A-13T is removed.
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
Par. 4. The authority citation for part 602 continues to read as
follows:
Authority: 26 U.S.C. 7805.
Sec. 602.101 [Amended]
Par. 5. In Sec. 602.101, paragraph (c) is amended by removing the
entry for 1.170A-13T from the table and revising the entry for 1.170A-
13 to read as follows:
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Current OMB
CFR part or section where identified and described control No.
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* * * * *
1.170A-13............................................... 1545-0074
1545-0754
1545-0908
1545-1431
* * * * *
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Dated: September 22, 1995.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved:
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 95-25058 Filed 10-11-95; 8:45 am]
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