[Federal Register Volume 73, Number 153 (Thursday, August 7, 2008)]
[Proposed Rules]
[Pages 45908-45919]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-17953]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-140029-07]
RIN 1545-BH62


Substantiation and Reporting Requirements for Cash and Noncash 
Charitable Contribution Deductions

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: These proposed regulations provide guidance concerning 
substantiation and reporting requirements for cash and noncash 
charitable contributions under section 170 of the Internal Revenue Code 
(Code). The regulations reflect the enactment of provisions of the 
American Jobs Creation Act of 2004 and

[[Page 45909]]

the Pension Protection Act of 2006. The regulations provide guidance to 
individuals, partnerships, and corporations that make charitable 
contributions, and will affect any donor claiming a deduction for a 
charitable contribution after the date these regulations are published 
as final regulations in the Federal Register.

DATES: Written or electronic comments and requests for a public hearing 
must be received by November 5, 2008.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-140029-07), room 
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-
140029-07), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue, NW., Washington, DC 20224, or sent electronically via the 
Federal eRulemaking Portal at www.regulations.gov (IRS REG-140029-07).

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Susan J. Kassell at (202) 622-5020; concerning submissions of comments 
and requests for a hearing, Oluwafunmilayo Taylor at (202) 622-7180 
(not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collections of information contained in this notice of proposed 
rulemaking have been submitted to the Office of Management and Budget 
for review in accordance with the Paperwork Reduction Act of 1995 (44 
U.S.C. 3507(d)). Comments on the collections of information should be 
sent 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, with copies to the Internal Revenue 
Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, 
Washington, DC 20224. Comments on the collections of information should 
be received by October 6, 2008. Comments are specifically requested 
concerning:
    Whether the proposed collections of information are necessary for 
the proper performance of the functions of the IRS, including whether 
the information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
collections of information;
    How the quality, utility, and clarity of the information to be 
collected may be enhanced;
    How the burden of complying with the proposed collections of 
information may be minimized, including through the application of 
automated collection techniques or other forms of information 
technology; and
    Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    The collections of information in these proposed regulations are in 
Sec. Sec.  1.170A-15(a) and (d)(2); 1.170A-16(a), (b), (c), (d), (e), 
and (f); 1.170A-17(a)(3) and (a)(7); and 1.170A-18(a)(2) and (b). These 
collections of information will help the IRS determine if a taxpayer is 
entitled to a claimed deduction for a charitable contribution. The 
collections of information are required to obtain a benefit. The likely 
respondents are individuals, partnerships, and corporations that claim 
a deduction for a charitable contribution.
    The collections of information may vary depending on the item 
contributed, the amount of the deduction claimed for the contribution, 
and whether the taxpayer claiming the deduction is an individual, 
partnership, S corporation, C corporation that is a personal service 
corporation or closely held corporation, or other C corporation.
    The following estimates are based on the information that is 
available to the IRS. A respondent may require more or less time, 
depending on the circumstances.
    The estimated total annual reporting burden is 226,419 hours.
    The estimated annual burden per respondent varies from 5 minutes to 
4 hours, with an estimated average annual burden of slightly more than 
1 hour. The estimated number of respondents is 201,920.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    Books or records relating to a collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
return information are confidential, as required by section 6103.

Background

    This document contains proposed amendments to the Income Tax 
Regulations (26 CFR part 1) for substantiating and reporting deductions 
for charitable contributions under section 170 of the Internal Revenue 
Code. Section 170(f)(11), as added by section 883 of the American Jobs 
Creation Act of 2004, Public Law 108-357 (118 Stat. 1418) (Jobs Act), 
contains reporting and substantiation requirements relating to 
deductions for noncash charitable contributions. Under section 
170(f)(11)(C), for contributions of property for which a deduction of 
more than $5,000 is claimed, taxpayers are required to obtain a 
qualified appraisal of the property. Under section 170(f)(11)(D), for 
contributions of property for which a deduction of more than $500,000 
is claimed, taxpayers must attach a qualified appraisal of the property 
to the tax return on which the deduction is claimed.
    For appraisals prepared with respect to returns filed on or before 
August 17, 2006, Sec.  1.170A-13(c) of the current regulations provides 
definitions of the terms ``qualified appraisal'' and ``qualified 
appraiser''. For appraisals prepared with respect to returns filed 
after August 17, 2006, section 170(f)(11)(E), as added by the Jobs Act 
and amended by section 1219 of the Pension Protection Act of 2006, 
Public Law 109-280 (120 Stat. 780) (PPA), provides statutory 
definitions of the terms qualified appraisal and qualified appraiser.
    Section 170(f)(11)(E)(i) provides that the term qualified appraisal 
means an appraisal that is (1) treated as a qualified appraisal under 
regulations or other guidance prescribed by the Secretary, and (2) 
conducted by a qualified appraiser in accordance with generally 
accepted appraisal standards and any regulations or other guidance 
prescribed by the Secretary.
    Section 170(f)(11)(E)(ii) provides that the term qualified 
appraiser means an individual who (1) has earned an appraisal 
designation from a recognized professional appraiser organization or 
has otherwise met minimum education and experience requirements set 
forth in regulations prescribed by the Secretary, (2) regularly 
performs appraisals for which the individual receives compensation, and 
(3) meets such other requirements as may be prescribed by the Secretary 
in regulations or other guidance. Section 170(f)(11)(E)(iii) further 
provides that an individual will not be treated as a qualified 
appraiser unless that individual (1) demonstrates verifiable education 
and experience in valuing the type of property subject to the 
appraisal, and (2) has not been prohibited from practicing before the 
IRS by the Secretary under section 330(c) of Title 31 of the United 
States Code at any time during the 3-year period ending on the date of 
the appraisal.

[[Page 45910]]

    On October 19, 2006, the IRS and the Treasury Department released 
Notice 2006-96, 2006-46 IRB 902 (see Sec.  601.601(d)(2)(ii)(b) of this 
chapter), which provides transitional guidance relating to section 
170(f)(11)(E) as amended by the PPA. Specifically, Notice 2006-96 
provides transitional safe harbor definitions for the terms ``qualified 
appraisal'' (section 3.02(1)), ``generally accepted appraisal 
standards'' (section 3.02(2)), ``appraisal designation'' (section 
3.03(1)), ``education and experience in valuing the type of property'' 
(section 3.03(2)), and ``minimum education and experience'' (section 
3.03(3)). These definitions apply to contributions of property for 
which a deduction of more than $5,000 is claimed on returns filed after 
August 17, 2006. Notice 2006-96 solicited comments regarding the 
definitions of these terms. All comments received were considered in 
drafting these regulations.
    Section 1216 of the PPA added section 170(f)(16), which provides 
that no deduction is allowed for a contribution of clothing or a 
household item unless the clothing or household item is in good used 
condition or better. Section 1217 of the PPA added section 170(f)(17), 
which imposes a recordkeeping requirement for all cash contributions, 
regardless of amount. Section 1219 of the PPA added section 6695A, 
which imposes penalties on appraisers in certain circumstances. 
Regulations implementing the penalty provisions of section 6695A will 
be published separately.
    Section 170(f)(11)(H) authorizes the Secretary to prescribe 
regulations as may be necessary or appropriate to carry out the 
purposes of section 170(f)(11), including regulations that may provide 
that some or all of the requirements of section 170(f)(11) do not apply 
in appropriate cases. Other statutory authority to issue regulations is 
in sections 170(f)(11)(B), (C), (E)(i)(I) and (II), and (E)(ii)(I) and 
(III).

Explanation of Provisions

I. In General

    The proposed regulations generally implement the Jobs Act and PPA 
changes to the substantiation and reporting rules for charitable 
contributions. For example, the proposed regulations implement the 
recordkeeping requirements imposed by the PPA for all cash 
contributions and the new definitions of a qualified appraisal and 
qualified appraiser applicable to all noncash contributions. The 
proposed regulations also incorporate the substantiation requirements 
for noncash contributions imposed by the Jobs Act on (1) a C 
corporation (other than a closely held corporation or a personal 
service corporation) claiming a deduction of more than $5,000, and (2) 
any taxpayer claiming a deduction in excess of $500,000.
    The proposed regulations also generally incorporate many of the 
requirements of Sec.  1.170A-13, except to the extent Sec.  1.170A-13 
is inconsistent with the Jobs Act and PPA requirements. For example, 
many of the requirements of Sec.  1.170A-13(c)(3) for a qualified 
appraisal are incorporated in proposed Sec.  1.170A-17(a); many of the 
``appraisal summary'' requirements of Sec.  1.170A-13(c)(4) are 
incorporated in the required entries for a completed Form 8283, 
``Noncash Charitable Contributions,'' in proposed Sec.  1.170A-16; and 
many of the requirements of Sec.  1.170A-13(c)(5) for a qualified 
appraiser are incorporated in proposed Sec.  1.170A-17(b).
    The IRS and the Treasury Department may propose additional changes 
to the substantiation regulations in the future and hereby request 
comments concerning additional issues that should be addressed.

II. Cash, Check or Other Monetary Gifts

    Proposed Sec.  1.170A-15 implements the requirements of section 
170(f)(17), which was added by the PPA and provides that no deduction 
is allowed for any contribution of a cash, check, or other monetary 
gift unless the donor maintains as a record of the contribution a bank 
record or written communication from the donee. Compare The Check 
Clearing for the 21st Century Act, Public Law 108-100, 117 Stat. 1178-
1180 (12 U.S.C. 5002(16) and 5003(b)), which provides guidance under 
the banking laws regarding substitute checks. The bank record or 
written communication must show the name of the donee, the date of the 
contribution, and the amount of the contribution.
    After section 170(f)(17) was enacted, the IRS and the Treasury 
Department received questions and comments about the new requirements. 
One commenter suggested a ``de minimis exception,'' under which donors 
of small amounts would not be required to maintain bank records or 
written communications from the donee. This suggestion was not adopted 
in the proposed regulations because the exception would be contrary to 
the statute and the express language in the legislative history that 
the provision applies ``regardless of the amount.'' However, there is 
precedent for exempting from the substantiation requirements certain 
types of payments for which a charitable beneficiary cannot provide a 
receipt, either because the charitable beneficiary has not yet been 
identified or because the charitable beneficiary has no firsthand 
knowledge of the amount of the payment. For example, a taxpayer making 
a contribution in the form of a transfer to a charitable remainder 
trust is not required to obtain the contemporaneous written 
acknowledgment generally required under section 170(f)(8). A similar 
exception is contained in the proposed regulations for monetary 
contributions to a charitable remainder trust of less than $250. The 
proposed regulations also provide an exception from the substantiation 
requirements for unreimbursed expenses of less than $250 incurred 
incident to the rendition of services to a charitable organization. 
Taxpayers claiming deductions for monetary contributions to a 
charitable remainder trust or for out of pocket expenses incurred 
incident to the rendition of services are advised to maintain records 
of the gifts or expenses.
    Some commenters asked how to comply with section 170(f)(17) if a 
bank statement does not include the name of the donee. In this 
situation, a monthly bank statement and a photocopy or image obtained 
from the bank of the front of the check indicating the name of the 
donee would satisfy the provision.

III. Revised Noncash Substantiation Requirements

    As under current rules, the proposed regulations provide that 
donors who claim deductions for noncash contributions of less than $250 
are required to obtain a receipt from the donee or keep reliable 
records. The proposed regulations provide that donors who make 
contributions of $250 or more but not more than $500 are required to 
obtain only a contemporaneous written acknowledgment, as provided under 
section 170(f)(8) and Sec.  1.170A-13(f), and are not required to 
obtain any other written records. No revisions to Sec.  1.170A-13(f) 
are proposed in these proposed regulations. For claimed contributions 
of more than $500 but not more than $5,000, the donor must obtain a 
contemporaneous written acknowledgment and must file a completed Form 
8283 (Section A) with the return on which the deduction is claimed. For 
claimed contributions of more than $5,000, in addition to a 
contemporaneous written acknowledgment, a qualified appraisal generally 
is required, and either Section A or Section B of Form 8283 (depending

[[Page 45911]]

on the type of property contributed) must be completed and filed with 
the return on which the deduction is claimed. For claimed contributions 
of more than $500,000, the donor must attach a copy of the qualified 
appraisal to the return. The proposed regulations also provide that the 
requirements for substantiation that must be submitted with a return 
also apply to the return for any carryover year under section 170(d).
    Section 1.170A-16(c) and Sec.  1.170A-16(d) of the proposed 
regulations generally apply to deductions claimed for contributions of 
motor vehicles. Section 1.170A-16(c)(4) and Sec.  1.170A-16(d)(2)(iii) 
explain the substantiation requirements for contributions of motor 
vehicles described in section 170(f)(12)(A)(ii) (vehicles that the 
donee organization sells without any significant intervening use or 
material improvement). These substantiation requirements are in 
addition to the requirements imposed in section 170(f)(12), as added by 
section 884 of the Jobs Act.
    Section 170(f)(11)(A)(ii)(II), as added by the PPA, provides that 
the requirements of sections 170(f)(11)(B), (C), and (D) do not apply 
if the donor shows that the failure to meet these requirements is due 
to reasonable cause and not to willful neglect. Section 170(f)(11)(H) 
provides that the Secretary may provide that some or all of the 
requirements of section 170(f)(11) do not apply in appropriate cases. 
The proposed regulations provide that, to satisfy the ``reasonable 
cause'' exception under section 170(f)(11)(A)(ii)(II), the donor must 
submit with the return a detailed explanation of why the failure to 
comply was due to reasonable cause and not to willful neglect, and must 
have timely obtained a contemporaneous written acknowledgment and a 
qualified appraisal, if applicable. The proposed regulations supersede 
Sec.  1.170A-13(c)(4)(H), which provides that a taxpayer who fails to 
file an appraisal summary (Form 8283) with the return is permitted to 
provide it within 90 days of a request from the IRS, and the deduction 
will be allowed if the donor's original failure to file the appraisal 
summary is a ``good faith omission.'' Consistent with the Congressional 
purpose for enacting section 170(f)(11) of reducing valuation abuses, 
the IRS and the Treasury Department anticipate that the ``reasonable 
cause'' exception will be strictly construed to apply only when the 
donor meets the requirements for the exception as specified in the 
regulations.

IV. New Requirements for Qualified Appraisals and Qualified Appraisers

    New definitions of qualified appraisal and qualified appraiser, 
taking into account the PPA definitions of these terms in section 
170(f)(11)(E), are provided in proposed Sec.  1.170A-17. Some new terms 
to implement these new definitions are also included.
A. Qualified Appraisal
    In proposed Sec.  1.170A-17(a), the proposed regulations provide 
that a qualified appraisal means an appraisal document that is prepared 
by a qualified appraiser in accordance with generally accepted 
appraisal standards. Generally accepted appraisal standards are defined 
in the proposed regulations as the substance and principles of the 
Uniform Standards of Professional Appraisal Practice (USPAP), as 
developed by the Appraisal Standards Board of the Appraisal Foundation. 
See Title XI of the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989, Public Law 101-73, 103 Stat. 183 (12 U.S.C. 
3331-3351). The proposed regulations are similar to section 3.02(2) of 
Notice 2006-96, except that the proposed regulations require compliance 
with the substance and principles of USPAP.
    Commenters suggested requiring that appraisal documents be ``in 
accordance with published appraisal standards of national professional 
appraisal credentialing organizations,'' including references to 
certain other specific standards such as the Uniform Appraisal 
Standards for Federal Land Acquisitions, and requiring appraisers to 
include specific items in an appraisal, such as all sales of the 
contributed property within 18 months of the appraisal date. The IRS 
and the Treasury Department believe the ``substance and principles of 
USPAP'' is broad enough to include these suggestions. One commenter 
suggested that generally accepted appraisal standards are satisfied by 
an appraisal issued by a corporation or company that is regularly 
engaged in the business of producing appraisals, relies on the services 
of specialist departments, is affiliated with an auction house, dealer 
or association of dealers that conducts at least 100 auctions or sales 
per year, and regularly conducts appraisals for estate, income and/or 
charitable donation purposes. This suggestion was not incorporated in 
the proposed regulations because it does not contain any ``appraisal 
standards.''
    Application of the ``substance and principles of USPAP'' rule 
provided in the proposed regulations may be illustrated by the 
following situation. The IRS is aware that some appraisers of historic 
conservation easements have stated that local ordinances restricting 
modifications of a facade should be disregarded because local 
governments do not enforce these ordinances. Under applicable substance 
and principles of USPAP, an appraiser must identify and analyze any 
known restrictions, ordinances, or similar items, and the likelihood of 
any modification to those restrictions, in formulating a value opinion. 
For example, see USPAP Standards Rules 1-2(e)(iv), 1-3(a), and 2-2(vi). 
An appraisal that does not take into account a local ordinance is not 
consistent with the substance and principles of USPAP. See also Sec.  
1.170A-14(h)(3)(ii).
    In addition, some commenters requested a specific reference to 
highest and best use in the proposed regulations. This suggestion was 
not incorporated in the proposed regulations because USPAP Standards 
Rule 1-3(b) requires an appraiser to ``develop an opinion of the 
highest and best use of the real estate'' when it is ``necessary for 
credible assignment results in developing a market value opinion.'' An 
appraisal that does not include a development of highest and best use 
when required by USPAP is not consistent with the substance and 
principles of USPAP.
    The proposed regulations also clarify the current rules. For 
example, the current regulations require an appraisal to be made no 
earlier than 60 days before the contribution date. Under the proposed 
regulations, the valuation effective date, which is the date to which 
the value opinion applies, generally must be the date of the 
contribution. In cases where the appraisal is prepared before the date 
of the contribution, the valuation effective date must be no earlier 
than 60 days before the date of the contribution and no later than the 
date of the contribution. The date the appraiser signs the appraisal 
report (appraisal report date) must be no earlier than 60 days before 
the date of the contribution and no later than the due date (including 
extensions) of the return on which the deduction is claimed or 
reported. As under current regulations, if the deduction is claimed for 
the first time on an amended return, the appraisal report date must be 
no later than the date the amended return is filed.
    Several commenters requested clarification of when a contribution 
is ``made'' for purposes of determining the proper year of the 
deduction and the timeliness of the appraisal. Under

[[Page 45912]]

Sec.  1.170A-1(b) of the current regulations, generally a contribution 
is made at the time delivery is effected. The IRS and the Treasury 
Department invite comments about when the contribution should be 
treated as ``made'' for section 170 purposes if a donor contributes a 
conservation easement to a qualified organization in a jurisdiction 
where a completed transfer requires execution, delivery, and recording 
of the transfer documents in the local governmental office, and the 
parties deliver the fully executed easement documents to the 
appropriate governmental office for recording in one year, but the 
documents are not recorded until the following year.
    One commenter asked the IRS to state that an appraisal prepared by 
an insurance or real estate broker is not a qualified appraisal. This 
recommendation was not adopted in the proposed regulations because an 
insurance or real estate broker's appraisal, like any other appraisal, 
is a qualified appraisal if it meets all of the requirements for a 
qualified appraisal by a qualified appraiser.
B. Qualified Appraiser
    Section 1.170A-17(b) of the proposed regulations incorporates many 
of the requirements from the current regulations, but certain other 
provisions were modified. For example, the appraiser declarations 
required in the appraisal and on Form 8283 have been modified. In 
addition, the proposed regulations contain several new terms 
implementing the PPA requirements of a qualified appraiser under 
section 170(f)(11)(E)(ii) and (iii). In general, under the proposed 
regulations, a ``qualified appraiser'' must be an individual with 
verifiable education and experience in valuing the relevant type of 
property for which the appraisal is performed.
    The PPA refers to two types of education and experience: Minimum 
education and experience in section 170(f)(11)(E)(ii)(I) to establish 
qualification as an appraiser generally, and verifiable education and 
experience in valuing the type of property subject to the appraisal in 
section 170(f)(11)(E)(iii)(I) to establish qualification as an 
appraiser for a particular appraisal. The IRS and the Treasury 
Department believe that it is sufficient for an appraiser to satisfy 
the more stringent requirement of verifiable education and experience 
in valuing the type of property subject to the appraisal. Satisfaction 
of that requirement will also satisfy the minimum education and 
experience requirement of section 170(f)(11)(E)(ii)(I). The proposed 
regulations provide that an individual has verifiable education and 
experience if the individual has successfully completed professional or 
college-level coursework in valuing the relevant type of property and 
has two or more years experience in valuing that type of property.
    Furthermore, because significant education and experience are 
required to obtain a designation from a recognized professional 
appraiser organization, under the proposed regulations appraisers with 
these designations are deemed to have demonstrated sufficient 
verifiable education and experience. One commenter asked about the 
qualifications of organizations that award designations and suggested 
that a recognized professional appraisal organization should be one 
that, among other things, offers comprehensive educational programs in 
USPAP and principles of valuation, and requires qualification to be 
demonstrated through written exams and peer reviews. The proposed 
regulations incorporate some of these principles in the definition of 
education and experience in valuing the relevant type of property.
    A number of comments focused on education and experience. Several 
commenters suggested that an appraiser's evidence of education and 
experience should be required to be verifiable as provided in section 
170(f)(11)(E)(iii)(I). The proposed regulations incorporate this 
suggestion by requiring a statement in the appraisal of the appraiser's 
specified education and experience in valuing the relevant type of 
property. The proposed regulations also require the appraiser to 
complete coursework in valuing the category of property that is 
customary in the appraisal field for an appraiser to value.
    One commenter indicated that some of its appraiser employees may 
have significant experience but lack formal education, and suggested 
that ``education and experience'' be interpreted as ``education or 
experience.'' The commenter also asked that the ``education and 
experience'' requirement be applied to a group of appraisers rather 
than individually. The proposed regulations do not adopt these 
suggestions because they are contrary to the section 170(f)(11)(E) 
requirement that the person who signs the appraisal report be an 
individual with the requisite education and experience in valuing the 
relevant type of property. However, the proposed regulations define 
education broadly to include coursework obtained in an employment 
context, provided it is similar to an educational program of an 
educational institution or a generally recognized professional 
appraisal organization.
    Section 3.03(3)(a)(ii) of Notice 2006-96 provides that, for real 
estate appraisers, education and experience are sufficient if the 
appraiser holds a license or certificate to value the relevant type of 
property in the state in which the property is located. This provision 
was not incorporated in the proposed regulations, which set forth more 
specific requirements applicable to all appraisers.
    Several commenters asked for a definition of ``types of property'' 
for purposes of identifying the required education and experience. More 
education and experience may be necessary and available for some types 
of property than for others. Therefore, the proposed regulations 
provide that the relevant type of property is determined by what is 
customary in the appraisal profession. The IRS and the Treasury 
Department request suggestions for categorizing types of property that 
would be helpful in determining the qualification of appraisers, for 
purposes of both the education and experience requirements.
    The IRS and the Treasury Department believe that the term 
``regularly performs appraisals for which the individual receives 
compensation'' under section 170(f)(11)(E)(ii)(II) is generally 
encompassed by the experience requirement of section 
170(f)(11)(E)(iii)(I) and does not need to be separately met. One 
corporate commenter was concerned that its individual employees could 
never be qualified appraisers, because the corporation receives the 
compensation, not the individual employees. Similar comments were 
received from otherwise qualified individual appraisers who do not 
regularly receive compensation. The proposed regulations address both 
of these concerns by not separately stating a compensation requirement.
    Expressing concerns about identity theft, some commenters requested 
elimination of the requirements of supplying the appraiser's taxpayer 
identification number on Form 8283 and in the appraisal, as currently 
required under Sec. Sec.  1.170A-13(c)(3)(ii)(E) and 1.170A-
13(c)(4)(ii)(I). The concern arises from appraisers who do not have a 
taxpayer identification number other than a social security number. The 
proposed regulations continue to require this information because, 
pursuant to Sec.  301.6109-1(a)(1)(ii)(D) of the Procedure and 
Administration Regulations, an appraiser may obtain an employer 
identification number even if

[[Page 45913]]

the appraiser does not have employees. This number may be obtained by 
completing Form SS-4, ``Application for Employer Identification 
Number.'' See Pub. 1635, ``Understanding Your Employer Identification 
Number.'' If an appraiser is employed by a firm, the firm's employer 
identification number should be used.
    Taxpayers are reminded that the IRS may challenge the amount of a 
claimed deduction, even if the donor substantiates the amount of the 
deduction with a qualified appraisal prepared by a qualified appraiser.
C. Clothing and Household Items
    Section 1.170A-18 of the proposed regulations implements section 
170(f)(16), which provides that no deduction is allowed for any 
contribution of clothing or a household item unless it is in good used 
condition or better. The purpose of this provision relates to ensuring 
that donated clothing and household items are ``of meaningful use to 
charitable organizations.'' Joint Committee on Taxation, Technical 
Explanation of H.R. 4, the ``Pension Protection Act of 2006'' (Aug. 3, 
2006). The IRS and the Treasury Department are aware that a number of 
charities publish donation guidelines listing items the charity will 
and will not accept, and believe that the guidelines are helpful in 
ensuring that charities receive donations of items that are of 
meaningful use to the charity. The IRS and the Treasury Department 
request comments regarding how donation guidelines published by a 
charity may relate to the ``good used condition'' requirement in 
section 170(f)(16).
    Under the proposed regulations, no deduction is allowed unless the 
clothing or household item is in good used condition or better at the 
time of the contribution. The proposed regulations also provide that 
this rule does not apply to a contribution of a single item of clothing 
or a household item for which a donor claims a deduction of more than 
$500 if the donor submits a qualified appraisal with the return on 
which the deduction is claimed. Several commenters questioned whether a 
qualified appraisal is required for any contribution of an item of 
clothing or a household item with a claimed value over $500. If the 
item is not in good used condition or better and a deduction in excess 
of $500 is claimed, the taxpayer must obtain a qualified appraisal and 
file a completed Form 8283 (Section B) with the return on which the 
deduction is claimed. If the item is in good used condition or better 
and a deduction in excess of $500 is claimed, the taxpayer must file a 
completed Form 8283 (Section A or B depending on the type of 
contribution and claimed amount), but a qualified appraisal is required 
only if the claimed contribution amount exceeds $5,000.
    If the donor claims a deduction of less than $250, Sec.  1.170A-
16(a) of the proposed regulations requires that the donor obtain a 
receipt from the donee or maintain reliable written records of the 
contribution. A reliable written record for a contribution of clothing 
or a household item must include a description of the condition of the 
item. If the donor claims a deduction of $250 or more, the donor must 
obtain from the donee a receipt that meets the requirements of section 
170(f)(8) (contemporaneous written acknowledgment).

Proposed Effective/Applicability Date

    These proposed regulations are proposed to apply to contributions 
occurring after the date these regulations are published as final 
regulations in the Federal Register. Taxpayers should continue to 
comply with the recordkeeping and return requirements in Sec.  1.170A-
13 of the existing regulations to the extent those provisions are not 
superseded by the Jobs Act or the PPA.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866. Therefore, a regulatory assessment is not required. It is hereby 
certified that these regulations will not have a significant economic 
impact on a substantial number of small entities. Therefore, a 
regulatory flexibility analysis under the Regulatory Flexibility Act (5 
U.S.C. chapter 6) is not required. This certification is based on the 
belief of the IRS and the Treasury Department that these regulations 
reduce the burden on taxpayers by clarifying and simplifying the 
existing substantiation and reporting requirements for charitable 
contributions. Furthermore, to the extent these regulations contain 
requirements that may impact small entities that are not contained in 
the current substantiation and reporting rules, those additional 
requirements are based on statutory changes to the rules that are being 
incorporated into the regulations. Pursuant to section 7805(f) of the 
Internal Revenue Code, this notice of proposed rulemaking has been 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small businesses.

Comments and Requests for a Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) or electronic comments that are submitted timely 
to the IRS. The IRS and the Treasury Department request comments on the 
clarity of the proposed rules and how they can be made easier to 
understand. All comments will be available for public inspection and 
copying. A public hearing will be scheduled if requested in writing by 
any person that timely submits comments. If a public hearing is 
scheduled, notice of the date, time, and place for the public hearing 
will be published in the Federal Register.

Drafting Information

    The principal author of this regulation is Susan J. Kassell of the 
Office of Associate Chief Counsel (Income Tax and Accounting). Other 
personnel from the IRS and the Treasury Department participated in its 
development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Partial Withdrawal of Proposed Regulations

    Accordingly, under the authority of 26 U.S.C. 7805, Sec.  1.170A-13 
of the notice of proposed rulemaking (LR-83-87) that was published in 
the Federal Register on Thursday May 5, 1988 (53 FR 16156) is 
withdrawn.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 is amended by adding 
entries in numerical order to read as follows:

    Authority: 26 U.S.C. 7805 * * *

    Sec.  1.170A-15 also issued under 26 U.S.C. 170(a)(1). Sec.  
1.170A-16 also issued under 26 U.S.C. 170(a)(1) and 170(f)(11). 
Sec.  1.170A-17 also issued under 26 U.S.C. 170(a)(1) and 
170(f)(11). Sec.  1.170A-18 also issued under 26 U.S.C. 170(a)(1).


Sec. Sec.  1.170-0 and 1.170-2  [Removed]

    Par. 2. Sections 1.170-0 and 1.170-2 are removed.


Sec.  1.170A-13  [Amended]

    Par. 3. In Sec.  1.170A-13, paragraphs (a)(3), (b)(3)(i)(B), 
(b)(4), and (d) are removed.
    Par. 4. Section 1.170A-15 is added to read as follows:

[[Page 45914]]

Sec.  1.170A-15  Substantiation requirements for charitable 
contribution of a cash, check, or other monetary gift.

    (a) In general--(1) Bank record or written communication required. 
No deduction is allowed under section 170(a) for a charitable 
contribution in the form of a cash, check, or other monetary gift (as 
described in paragraph (b)(1) of this section) unless the donor 
substantiates the deduction with a bank record (as described in 
paragraph (b)(2) of this section) or a written communication (as 
described in paragraph (b)(3) of this section) from the donee showing 
the name of the donee, the date of the contribution, and the amount of 
the contribution.
    (2) Additional substantiation required for contributions of $250 or 
more. No deduction is allowed under section 170(a) for any contribution 
of $250 or more unless the donor substantiates the contribution with a 
contemporaneous written acknowledgment (as described in section 
170(f)(8) and Sec.  1.170A-13(f)) from the donee.
    (3) Single document may be used. The requirements of paragraphs 
(a)(1) and (a)(2) of this section may be met by a single document that 
contains all the information required by paragraphs (a)(1) and (a)(2) 
of this section, if the single document is obtained by the donor no 
later than the date prescribed by paragraph (c) of this section.
    (b) Terms--(1) Monetary gift includes a transfer of a gift card 
redeemable for cash, and a payment made by credit card, electronic fund 
transfer (as described in section 5061(e)(2)), an online payment 
service, or payroll deduction.
    (2) Bank record includes a statement from a financial institution, 
an electronic fund transfer receipt, a canceled check, a scanned image 
of both sides of a canceled check obtained from a bank Web site, or a 
credit card statement.
    (3) Written communication includes electronic mail correspondence.
    (c) Deadline for receipt of substantiation. The substantiation 
described in paragraph (a) of this section must be received by the 
donor on or before the earlier of--
    (1) The date the donor files the original return for the taxable 
year in which the contribution was made; or
    (2) The due date (including extensions) for filing the donor's 
original return for that year.
    (d) Distributing organizations as donees--(1) In general. The 
following organizations are treated as donees for purposes of section 
170(f)(17) and paragraph (a) of this section, 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):
    (i) An organization described in section 170(c).
    (ii) 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.
    (2) Contributions made by payroll deduction. In the case of a 
charitable contribution made by payroll deduction, a donor is treated 
as meeting the requirements of section 170(f)(17) and paragraph (a) of 
this section if, no later than the date described in paragraph (c) of 
this section, the donor obtains--
    (i) A pay stub, Form W-2, ``Wage and Tax Statement,'' or other 
employer-furnished document that sets forth the amount withheld during 
the taxable year for payment to a donee; and
    (ii) A pledge card or other document prepared by or at the 
direction of the donee that shows the name of the donee.
    (e) Substantiation of out-of-pocket expenses. Paragraph (a)(1) of 
this section does not apply to a donor who incurs unreimbursed expenses 
of less than $250 incident to the rendition of services, within the 
meaning of Sec.  1.170A-1(g). For substantiation of unreimbursed out-
of-pocket expenses of $250 or more, see Sec.  1.170A-13(f)(10).
    (f) Charitable contributions made by partnership or S corporation. 
If a partnership or an S corporation makes a charitable contribution, 
the partnership or S corporation is treated as the donor for purposes 
of section 170(f)(17) and paragraph (a) of this section.
    (g) Transfers to certain trusts. The requirements of section 
170(f)(17) and paragraph (a)(1) of this section do not apply to a 
transfer of a cash, check, or other monetary gift to a trust described 
in section 170(f)(2)(B), a charitable remainder annuity trust (as 
defined in section 664(d)(1)), or a charitable remainder unitrust (as 
defined in section 664(d)(2) or (d)(3) or Sec.  1.664-3(a)(1)(i)(b)). 
The requirements of section 170(f)(17) and paragraphs (a)(1) and (a)(2) 
of this section do apply, however, to a transfer to a pooled income 
fund (as defined in section 642(c)(5)). For contributions of $250 or 
more, see section 170(f)(8) and Sec.  1.170A-13(f)(13).
    (h) Effective/applicability date. This section applies to 
contributions made after the date these regulations are published as 
final regulations in the Federal Register.
    Par. 5. Section 1.170A-16 is added to read as follows:


Sec.  1.170A-16  Substantiation and reporting requirements for noncash 
charitable contributions.

    (a) Substantiation of charitable contributions of less than $250--
(1) Individuals, partnerships, and certain corporations required to 
obtain receipt. Except as provided in paragraph (a)(2) of this section, 
no deduction is allowed under section 170(a) for a noncash charitable 
contribution of less than $250 by an individual, partnership, S 
corporation, or C corporation that is a personal service corporation or 
closely held corporation unless the donor maintains for each 
contribution a receipt from the donee showing the following 
information:
    (i) The name and address of the donee;
    (ii) The date of the contribution;
    (iii) A description of the property in sufficient detail under the 
circumstances (taking into account the value of the property) for a 
person who is not generally familiar with the type of property to 
ascertain that the described property is the contributed property; and
    (iv) In the case of securities, the name of the issuer, the type of 
security, and whether the securities are publicly traded securities 
within the meaning of Sec.  1.170A-13(c)(7)(xi).
    (2) Substitution of reliable written records--(i) In general. If it 
is impractical to obtain a receipt (for example, a donor deposits 
canned food at a donee's unattended drop site), the donor may satisfy 
the recordkeeping rules of this paragraph (a)(2)(i) by maintaining 
reliable written records (as described in paragraphs (a)(2)(ii) and 
(a)(2)(iii) of this section) for the contributed property.
    (ii) Reliable written records. The reliability of written records 
is to be determined on the basis of all of the facts and circumstances 
of a particular case, including the contemporaneous nature of the 
writing evidencing the contribution.
    (iii) Contents of reliable written records. Reliable written 
records must include--
    (A) The information required by paragraph (a)(1) of this section;
    (B) The fair market value of the property on the date the 
contribution was made;
    (C) The method used in determining the fair market value; and
    (D) In the case of a contribution of clothing or a household item 
as defined in Sec.  1.170A-18(c), the condition of the item.

[[Page 45915]]

    (3) Additional substantiation rules may apply. For additional 
substantiation rules, see paragraph (f) of this section.
    (b) Substantiation of charitable contributions of $250 or more but 
not more than $500. No deduction is allowed under section 170(a) for a 
noncash charitable contribution of $250 or more but not more than $500 
unless the donor substantiates the contribution with a contemporaneous 
written acknowledgment (as described in section 170(f)(8) and Sec.  
1.170A-13(f)).
    (c) Substantiation of charitable contributions of more than $500 
but not more than $5,000--(1) In general. No deduction is allowed under 
section 170(a) for a noncash charitable contribution of more than $500 
but not more than $5,000 unless the donor substantiates the 
contribution with a contemporaneous written acknowledgment (as 
described in section 170(f)(8) and Sec.  1.170A-13(f)) and meets the 
applicable requirements of this section.
    (2) Individuals, partnerships, and certain corporations also 
required to file Form 8283 (Section A). No deduction is allowed under 
section 170(a) for a noncash charitable contribution of more than $500 
but not more than $5,000 by an individual, partnership, S corporation, 
or C corporation that is a personal service corporation or closely held 
corporation unless the donor--
    (i) Substantiates the contribution with a contemporaneous written 
acknowledgment (as described in section 170(f)(8) and Sec.  1.170A-
13(f)); and
    (ii) Completes Form 8283 (Section A), ``Noncash Charitable 
Contributions'' (as provided in paragraph (c)(3) of this section), or a 
successor form, and files it with the return on which the deduction is 
claimed.
    (3) Completion of Form 8283 (Section A). A completed Form 8283 
(Section A) includes--
    (i) The donor's name and taxpayer identification number (social 
security number if the donor is an individual or employer 
identification number if the donor is a partnership or corporation);
    (ii) The name and address of the donee;
    (iii) The date of the contribution;
    (iv) The following information about the contributed property:
    (A) A description of the property in sufficient detail under the 
circumstances (taking into account the value of the property) for a 
person who is not generally familiar with the type of property to 
ascertain that the described property is the contributed property;
    (B) In the case of real or personal property, the condition of the 
property;
    (C) In the case of securities, the name of the issuer, the type of 
security, and whether the securities are publicly traded securities 
within the meaning of Sec.  1.170A-13(c)(7)(xi); and
    (D) The fair market value of the property on the date the 
contribution was made and the method used in determining the fair 
market value;
    (v) The manner of acquisition (for example, by purchase, gift, 
bequest, inheritance, or exchange), and the approximate date of 
acquisition of the property by the donor (except that in the case of a 
contribution of publicly traded securities as defined in Sec.  1.170A-
13(c)(7)(xi), a representation that the donor held the securities for 
more than one year is sufficient) or, if the property was created, 
produced, or manufactured by or for the donor, the approximate date the 
property was substantially completed;
    (vi) The cost or other basis, adjusted as provided by section 1016, 
of the property (except that the cost or basis is not required for 
contributions of publicly traded securities (as defined in Sec.  
1.170A-13(c)(7)(xi)) that if sold on the contribution date would have 
resulted in long term capital gain);
    (vii) In the case of tangible personal property, whether the donee 
has certified it for a use related to the purpose or function 
constituting the donee's basis for exemption under section 501 (or in 
the case of a governmental unit, an exclusively public purpose); and
    (viii) Any other information required by Form 8283 (Section A) or 
the instructions to Form 8283 (Section A).
    (4) Additional requirement for certain motor vehicle contributions. 
In the case of a contribution of a qualified vehicle described in 
section 170(f)(12)(A)(ii) for which an acknowledgment under section 
170(f)(12)(B)(iii) is provided to the IRS by the donee organization, 
the donor must attach a copy of the acknowledgment to the Form 8283 
(Section A) for the return on which the deduction is claimed.
    (5) Additional substantiation rules may apply. For additional 
substantiation rules, see paragraph (f) of this section.
    (d) Substantiation of charitable contributions of more than 
$5,000--(1) In general. Except as provided in paragraph (d)(2) of this 
section, no deduction is allowed under section 170(a) for a noncash 
charitable contribution of more than $5,000 unless the donor--
    (i) Substantiates the contribution with a contemporaneous written 
acknowledgment (as described in section 170(f)(8) and Sec.  1.170A-
13(f));
    (ii) Obtains a qualified appraisal (as defined in Sec.  1.170A-
17(a)(1)) prepared by a qualified appraiser (as defined in Sec.  
1.170A-17(b)(1)); and
    (iii) Completes Form 8283 (Section B) (as provided in paragraph 
(d)(3) of this section), or a successor form, and files it with the 
return on which the deduction is claimed.
    (2) Exception for certain noncash contributions. A qualified 
appraisal is not required, and a completed Form 8283 (Section A) 
(containing the information required in paragraph (c)(3) of this 
section) meets the requirements of paragraph (d)(1)(iii) of this 
section for contributions of--
    (i) Publicly traded securities as defined in Sec.  1.170A-
13(c)(7)(xi);
    (ii) Property described in section 170(e)(1)(B)(iii)(certain 
intellectual property);
    (iii) A qualified vehicle described in section 170(f)(12)(A)(ii) 
for which an acknowledgment under section 170(f)(12)(B)(iii) is 
provided to the IRS by the donee organization and attached to the Form 
8283 (Section A) by the donor; and
    (v) Property described in section 1221(a)(1) (inventory and 
property held by the donor primarily for sale to customers in the 
ordinary course of the donor's trade or business).
    (3) Completed Form 8283 (Section B). A completed Form 8283 (Section 
B) includes--
    (i) The donor's name and taxpayer identification number (social 
security number if the donor is an individual or employer 
identification number if the donor is a partnership or corporation);
    (ii) The donee's name, address, taxpayer identification number, and 
signature, the date signed by the donee, and the date the donee 
received the property;
    (iii) The appraiser's name, address, taxpayer identification 
number, appraiser declaration (as described in paragraph (d)(4) of this 
section), signature, and the date signed by the appraiser;
    (iv) The following information about the contributed property:
    (A) The fair market value on the valuation effective date (as 
defined in Sec.  1.170A-17(a)(5)(i)).
    (B) A description in sufficient detail under the circumstances 
(taking into account the value of the property) for a person who is not 
generally familiar with the type of property to ascertain that the 
described property is the contributed property.

[[Page 45916]]

    (C) In the case of real or tangible personal property, the 
condition of the property;
    (v) The manner of acquisition (for example, by purchase, gift, 
bequest, inheritance, or exchange), and the approximate date of 
acquisition of the property by the donor, or, if the property was 
created, produced, or manufactured by or for the donor, the approximate 
date the property was substantially completed;
    (vi) The cost or other basis, adjusted as provided by section 1016;
    (vii) A statement explaining whether the charitable contribution 
was made by means of a bargain sale and, if so, the amount of any 
consideration received from the donee for the contribution; and
    (viii) Any other information required by Form 8283 (Section B) or 
the instructions to Form 8283 (Section B).
    (4) Appraiser declaration. The appraiser declaration referred to in 
paragraph (d)(3)(iii) of this section must include the following 
statement: ``I understand that my appraisal will be used in connection 
with a return or claim for refund. I also understand that, if a 
substantial or gross valuation misstatement of the value of the 
property claimed on the return or claim for refund results from my 
appraisal, I may be subject to a penalty under section 6695A of the 
Internal Revenue Code, as well as other applicable penalties. I affirm 
that I have not been barred from presenting evidence or testimony 
before the Department of the Treasury or the Internal Revenue Service 
pursuant to 31 U.S.C. section 330(c).''
    (5) Donee signature--(i) Person authorized to sign. The person who 
signs Form 8283 for the donee must be either an official authorized to 
sign the tax or information returns of the donee, or a person 
specifically authorized to sign Forms 8283 by that official. In the 
case of a donee that is a governmental unit, the person who signs Form 
8283 for the donee must be an official of the governmental unit.
    (ii) Effect of donee signature. The signature of the donee on Form 
8283 does not represent concurrence in the appraised value of the 
contributed property. Rather, it represents acknowledgment of receipt 
of the property described in Form 8283 on the date specified in Form 
8283 and that the donee understands the information reporting 
requirements imposed by section 6050L and Sec.  1.6050L-1.
    (iii) Certain information not required on Form 8283 before donee 
signs. Before Form 8283 is signed by the donee, Form 8283 must be 
completed (as described in paragraph (d)(3) of this section), except 
that it is not required to contain the following:
    (A) Information about the qualified appraiser or the appraiser 
declaration.
    (B) The manner or date of acquisition.
    (C) The cost or other basis of the property.
    (D) The appraised fair market value of the contributed property.
    (E) The amount claimed as a charitable contribution.
    (6) Additional substantiation rules may apply. For additional 
substantiation rules, see paragraph (f) of this section.
    (e) Substantiation of noncash charitable contributions of more than 
$500,000--(1) In general. Except as provided in paragraph (e)(2) of 
this section, no deduction is allowed under section 170(a) for a 
noncash charitable contribution of more than $500,000 unless the 
donor--
    (i) Substantiates the contribution with a contemporaneous written 
acknowledgment (as described in section 170(f)(8) and Sec.  1.170A-
13(f));
    (ii) Obtains a qualified appraisal (as defined in Sec.  1.170A-
17(a)(1)) prepared by a qualified appraiser (as defined in Sec.  
1.170A-17(b)(1));
    (iii) Completes (as described in paragraph (d)(3) of this section) 
Form 8283 (Section B) and files it with the return on which the 
deduction is claimed; and
    (iv) Attaches the qualified appraisal of the property to the return 
on which the deduction is claimed.
    (2) Exception for certain noncash contributions. For contributions 
of property described in paragraph (d)(2) of this section, a qualified 
appraisal is not required, and a completed Form 8283 (Section A) 
(containing the information required in paragraph (c)(3) of this 
section) meets the requirements of paragraph (e)(1)(iii) of this 
section.
    (3) Additional substantiation rules may apply. For additional 
substantiation rules, see paragraph (f) of this section.
    (f) Additional substantiation requirements that may be applicable 
to any noncash contribution--(1) Signed Form 8283 furnished by donor to 
donee. A donor who presents a Form 8283 to a donee for signature must 
furnish to the donee a copy of Form 8283 as signed by the donee.
    (2) Number of Forms 8283--(i) In general. For each item of 
contributed property for which a Form 8283 is required under paragraphs 
(c), (d), or (e) of this section, a donor must attach a separate Form 
8283 to the return on which the deduction for the item is claimed.
    (ii) Exception for similar items. The donor may attach a single 
Form 8283 for all similar items of property (as defined in Sec.  
1.170A-13(c)(7)(iii)) contributed to the same donee during the donor's 
taxable year, if the donor includes on Form 8283 the information 
required by paragraph (c)(3) or (d)(3) of this section for each item of 
property.
    (3) Substantiation requirements for carryovers of noncash 
contribution deductions. The rules in paragraphs (c)(2)(ii), 
(d)(1)(iii), (d)(2), (e)(1)(iii) and (e)(1)(iv) of this section 
(regarding substantiation that must be submitted with a return) apply 
to the return for any carryover year under section 170(d).
    (4) Partners and S corporation shareholders--(i) Form 8283 must be 
provided to partners and S corporation shareholders. If the donor is a 
partnership or S corporation, the donor must provide a copy of the 
completed Form 8283 to every partner or shareholder who receives an 
allocation of a charitable contribution deduction under section 170 for 
the property described in Form 8283.
    (ii) Partners and S corporation shareholders must attach Form 8283 
to return. A partner of a partnership or shareholder of an S 
corporation who receives an allocation of a deduction under section 170 
for a charitable contribution of property to which paragraphs (c), (d), 
or (e) of this section applies must attach a copy of the partnership's 
or S corporation's completed Form 8283 to the return on which the 
deduction is claimed.
    (5) Determination of deduction amount for purposes of 
substantiation rules--(i) In general. In determining whether the amount 
of a donor's deduction exceeds the amounts set forth in section 
170(f)(11)(B) (noncash contributions exceeding $500), 170(f)(11)(C) 
(noncash contributions exceeding $5,000), or 170(f)(11)(D) (noncash 
contributions exceeding $500,000), the rules of paragraphs (f)(5)(ii) 
and (f)(5)(iii) of this section apply.
    (ii) Similar items of property must be aggregated. Under section 
170(f)(11)(F), the donor must aggregate the amount claimed as a 
deduction for all similar items of property (as defined in Sec.  
1.170A-13(c)(7)(iii)) contributed during the taxable year. For rules 
regarding the number of qualified appraisals and Forms 8283 required if 
similar items of property are contributed, see Sec. Sec.  1.170A-
13(c)(3)(iv)(A) and 1.170A-13(c)(4)(iv)(B).
    (iii) For contributions of certain inventory and scientific 
property, excess of amount claimed over cost of goods sold taken into 
account. (A) In general. In determining the amount of a donor's

[[Page 45917]]

contribution of property to which section 170(e)(3) or (4) applies, the 
donor must take into account only the excess of the amount claimed as a 
deduction over the amount that would have been treated as the cost of 
goods sold if the donor had sold the contributed property to the donee.
    (B) Example. The following example illustrates the rule of this 
paragraph (f)(5)(iii):

    Example. X Corporation makes a contribution to which section 
170(e)(3) applies of clothing for the care of the needy. The cost of 
the property to X Corporation is $5,000, and, pursuant to section 
170(e)(3)(B), X Corporation claims a charitable contribution 
deduction of $8,000. The amount taken into account for purposes of 
determining the $5,000 threshold of paragraph (d) of this section is 
$3,000 ($8,000 - $5,000).

    (6) Failure due to reasonable cause. If a donor fails to meet the 
requirements of paragraphs (c), (d), or (e) of this section, the 
donor's deduction will be disallowed unless the donor establishes that 
the failure was due to reasonable cause and not to willful neglect. The 
donor may establish that the failure was due to reasonable cause and 
not to willful neglect only if the donor--
    (i) Submits with the return a detailed explanation that the failure 
to meet the requirements of this section was due to reasonable cause 
and not to willful neglect;
    (ii) Obtained a contemporaneous written acknowledgment (as required 
by section 170(f)(8) and Sec.  1.170A-13(f)(3)); and
    (iii) Obtained a qualified appraisal (as defined by section 
170(f)(11)(E)(i) and Sec.  1.170A-17(a)(1)) prepared by a qualified 
appraiser (as defined by section 170(f)(11)(E)(ii) and Sec.  1.170A-
17(b)(1)) within the dates specified in Sec.  1.170A-17(a)(4), if 
required.
    (7) Additional requirement for returns claiming conservation 
easements for buildings in registered historic districts. [Reserved]
    (g) Effective/applicability date. This section applies to 
contributions made after the date these regulations are published as 
final regulations in the Federal Register.
    Par. 6. Section 1.170A-17 is added to read as follows:


Sec.  1.170A-17  Qualified appraisal and qualified appraiser.

    (a) Qualified appraisal--(1) Definition. For purposes of section 
170(f)(11) and Sec. Sec.  1.170A-16(d)(1)(ii) and 1.170A-16(e)(1)(ii), 
the term qualified appraisal means an appraisal document that is 
prepared by a qualified appraiser (as defined in paragraph (b)(1) of 
this section) in accordance with generally accepted appraisal standards 
(as defined in paragraph (a)(2) of this section) and otherwise complies 
with the requirements of this paragraph (a).
    (2) Generally accepted appraisal standards defined. For purposes of 
paragraph (a)(1) of this section, generally accepted appraisal 
standards means the substance and principles of the Uniform Standards 
of Professional Appraisal Practice, as developed by the Appraisal 
Standards Board of the Appraisal Foundation.
    (3) Contents of qualified appraisal. A qualified appraisal must 
include--
    (i) The following information about the contributed property:
    (A) A description in sufficient detail under the circumstances 
(taking into account the value of the property) for a person who is not 
generally familiar with the type of property to ascertain that the 
appraised property is the contributed property.
    (B) In the case of real or personal tangible property, the 
condition of the property.
    (C) The valuation effective date (as defined in paragraph (a)(5)(i) 
of this section).
    (D) The fair market value (within the meaning of Sec.  1.170A-
1(c)(2)) of the contributed property on the valuation effective date;
    (ii) The terms of any agreement or understanding by or on behalf of 
the donor and donee that relates to the use, sale, or other disposition 
of the contributed property, including, for example, the terms of any 
agreement or understanding that--
    (A) Restricts temporarily or permanently a donee's right to use or 
dispose of the contributed property;
    (B) Reserves to, or confers upon, anyone (other than a donee or an 
organization participating with a donee in cooperative fundraising) any 
right to the income from the contributed property or to the possession 
of the property, including the right to vote contributed securities, to 
acquire the property by purchase or otherwise, or to designate the 
person having income, possession, or right to acquire; or
    (C) Earmarks contributed property for a particular use;
    (iii) The date (or expected date) of the contribution to the donee;
    (iv) The following information about the appraiser:
    (A) Name, address, and taxpayer identification number.
    (B) Qualifications to value the type of property being valued, 
including the appraiser's education and experience.
    (C) If the appraiser is acting in his or her capacity as a partner 
in a partnership, an employee of any person (whether an individual, 
corporation, or partnership), or an independent contractor engaged by a 
person other than the donor, the name, address, and taxpayer 
identification number of the partnership or the person who employs or 
engages the qualified appraiser;
    (v) The signature of the appraiser and the date signed by the 
appraiser (appraisal report date);
    (vi) The following declaration by the appraiser: ``I understand 
that my appraisal will be used in connection with a return or claim for 
refund. I also understand that, if a substantial or gross valuation 
misstatement of the value of the property claimed on the return or 
claim for refund results from my appraisal, I may be subject to a 
penalty under section 6695A of the Internal Revenue Code, as well as 
other applicable penalties. I affirm that I have not been barred from 
presenting evidence or testimony before the Department of the Treasury 
or the Internal Revenue Service pursuant to 31 U.S.C. section 330(c);''
    (vii) A statement that the appraisal was prepared for income tax 
purposes;
    (viii) The method of valuation used to determine the fair market 
value, such as the income approach, the market-data approach, or the 
replacement-cost-less-depreciation approach; and
    (ix) The specific basis for the valuation, such as specific 
comparable sales transactions or statistical sampling, including a 
justification for using sampling and an explanation of the sampling 
procedure employed.
    (4) Timely appraisal report. A qualified appraisal must be signed 
and dated by the qualified appraiser no earlier than 60 days before the 
date of the contribution and no later than--
    (i) The due date (including extensions) of the return on which the 
deduction for the contribution is first claimed;
    (ii) In the case of a donor that is a partnership or S corporation, 
the due date (including extensions) of the return on which the 
deduction for the contribution is first reported; or
    (iii) In the case of a deduction first claimed on an amended 
return, the date on which the amended return is filed.
    (5) Valuation effective date--(i) Definition. The valuation 
effective date is the date to which the value opinion applies.
    (ii) Timely valuation effective date. For an appraisal report dated 
before the date of the contribution (as described in Sec.  1.170A-
1(b)), the valuation effective date must be no earlier than 60 days 
before the date of the contribution and no later than the date of the

[[Page 45918]]

contribution. For an appraisal report dated on or after the date of the 
contribution, the valuation effective date must be the date of the 
contribution.
    (6) Exclusion for donor knowledge of falsity. An appraisal is not a 
qualified appraisal for a particular contribution, even if the 
requirements of this paragraph (a) are met, if a reasonable person 
would conclude that the donor failed to disclose or misrepresented 
facts that would cause the appraiser to overstate the value of the 
contributed property.
    (7) Number of appraisals required. A donor must obtain a separate 
qualified appraisal for each item of property for which an appraisal is 
required under paragraphs (c), (d), or (e) of this section and that is 
not included in a group of similar items of property (as defined in 
Sec.  1.170A-13(c)(7)(iii)). For rules regarding the number of 
appraisals required if similar items of property are contributed, see 
Sec.  1.170A-13(c)(3)(iv)(A).
    (8) Prohibited appraisal fees. The fee for a qualified appraisal 
cannot be based to any extent on the appraised value of the property. 
For example, a fee for an appraisal will be treated as based on the 
appraised value of the property if any part of the fee depends on the 
amount of the appraised value that is allowed by the IRS after an 
examination.
    (9) Retention of qualified appraisal. The donor must retain the 
qualified appraisal for so long as it may be relevant in the 
administration of any internal revenue law.
    (10) Appraisal disregarded pursuant to 31 U.S.C. 330(c). If an 
appraisal is disregarded pursuant to 31 U.S.C. 330(c), it has no 
probative effect as to the value of the appraised property and does not 
satisfy the appraisal requirements of paragraphs (d) and (e) of this 
section, unless the appraisal and Form 8283 include the appraiser 
signature, the date signed by the appraiser, and the appraiser 
declaration described in paragraphs (a)(3)(v) and (a)(3)(vi) of this 
section and Sec. Sec.  1.170A-16(d)(3)(iii) and (d)(4), and the donor 
had no knowledge that the signature, date, or declaration was false 
when the appraisal and Form 8283 were signed by the appraiser.
    (11) Partial interest. If the contributed property is a partial 
interest, the appraisal must be of the partial interest.
    (b) Qualified appraiser--(1) Definition. For purposes of section 
170(f)(11) and Sec. Sec.  1.170A-16(d)(1)(ii) and 1.170A-16(e)(1)(ii), 
the term qualified appraiser means an individual with verifiable 
education and experience in valuing the relevant type of property for 
which the appraisal is performed (as described in paragraphs (b)(2) 
through (b)(4) of this section).
    (2) Education and experience in valuing relevant type of property. 
(i) In general. An individual is treated as having education and 
experience in valuing the relevant type of property within the meaning 
of paragraph (b)(1) of this section if, as of the date the individual 
signs the appraisal, the individual has--
    (A) Successfully completed (for example, received a passing grade 
on a final examination) professional or college-level coursework (as 
described in paragraph (b)(2)(ii) of this section) in valuing the 
relevant type of property (as described in paragraph (b)(3) of this 
section), and has two or more years of experience in valuing the 
relevant type of property (as described in paragraph (b)(3) of this 
section); or
    (B) Earned a recognized appraisal designation (as described in 
paragraph (b)(2)(iii) of this section) for the relevant type of 
property (as described in paragraph (b)(3) of this section).
    (ii) Coursework must be obtained from professional or college-level 
educational institution, appraisal organization, or employer 
educational program. For purposes of paragraph (b)(2)(i)(A) of this 
section, the coursework must be obtained from--
    (A) A professional or college-level educational organization 
described in section 170(b)(1)(A)(ii);
    (B) A generally recognized professional appraisal organization that 
regularly offers educational programs in the principles of valuation; 
or
    (C) An employer as part of an employee apprenticeship or 
educational program substantially similar to the educational programs 
described in paragraphs (b)(2)(ii)(A) and (B) of this section.
    (iii) Recognized appraisal designation defined. A recognized 
appraisal designation means a designation awarded by a recognized 
professional appraiser organization on the basis of demonstrated 
competency. For example, an appraiser who has earned a designation 
similar to the Member of the Appraisal Institute (MAI), Senior 
Residential Appraiser (SRA), Senior Real Estate Appraiser (SREA), or 
Senior Real Property Appraiser (SRPA) membership designation has earned 
a recognized appraisal designation.
    (3) Relevant type of property defined--(i) In general. The relevant 
type of property means the category of property customary in the 
appraisal field for an appraiser to value.
    (ii) Examples. The following examples illustrate the rule of 
paragraph (b)(3)(i) of this section:

    Example (1). Coursework in valuing relevant type of property. 
There are very few professional-level courses offered in widget 
appraising, and it is customary in the appraisal field for personal 
property appraisers to appraise widgets. Appraiser A has 
successfully completed professional-level coursework in valuing 
personal property generally but has completed no coursework in 
valuing widgets. The coursework completed by Appraiser A is for the 
relevant type of property under paragraphs (b)(2)(i) and (b)(3)(i) 
of this section.
    Example (2). Experience in valuing relevant type of property. It 
is customary for professional antique appraisers to appraise antique 
widgets. Appraiser A has 2 years of experience in valuing antiques 
generally and is asked to appraise an antique widget. Appraiser A 
has obtained experience in valuing the relevant type of property 
under paragraphs (b)(2)(i) and (b)(3)(i) of this section.
    Example (3). No experience in valuing relevant type of property. 
It is not customary for professional antique appraisers to appraise 
new widgets. Appraiser A has experience in appraising antiques 
generally but no experience in appraising new widgets. Appraiser A 
is asked to appraise a new widget. Appraiser A does not have 
experience in valuing the relevant type of property under paragraphs 
(b)(2)(i) and (b)(3)(i) of this section.

    (4) Verifiable. For purposes of paragraph (b)(1) of this section, 
education and experience in valuing the relevant type of property are 
verifiable if the appraiser specifies in the appraisal the appraiser's 
education and experience in valuing the relevant type of property (as 
described in paragraphs (b)(2) and (b)(3) of this section), and the 
appraiser makes a declaration in the appraisal that, because of the 
appraiser's education and experience described in this paragraph 
(b)(4), the appraiser is qualified to make appraisals of the relevant 
type of property being valued.
    (5) Individuals who are not qualified appraisers. The following 
individuals cannot be qualified appraisers for the appraised property:
    (i) An individual who receives a fee prohibited by paragraph (a)(8) 
of this section.
    (ii) The donor of the property.
    (iii) A party to the transaction in which the donor acquired the 
property (for example, the individual who sold, exchanged, or gave the 
property to the donor, or any individual who acted as an agent for the 
transferor or for the donor for the sale, exchange, or gift), unless 
the property is contributed within 2 months of the date of acquisition 
and its appraised value does not exceed its acquisition price.

[[Page 45919]]

    (iv) The donee of the property.
    (v) Any individual who is either--
    (A) Related (within the meaning of section 267(b)) to, or an 
employee of, any of the individuals described in paragraphs (b)(5)(ii), 
(b)(5)(iii), or (b)(5)(iv) of this section, or married to an individual 
who is in a relationship described in section 267(b) with any of the 
foregoing individuals; or
    (B) An independent contractor who is regularly used as an appraiser 
by any of the individuals described in paragraphs (b)(5)(ii), 
(b)(5)(iii), or (b)(5)(iv) of this section, and who does not perform a 
majority of his or her appraisals for others during the taxable year.
    (vi) An individual who is prohibited from practicing before the 
Internal Revenue Service by the Secretary under 31 U.S.C. section 
330(c) at any time during the 3-year period ending on the date the 
appraisal is signed by the individual.
    (c) Effective/applicability date. This section applies to 
contributions made after the date these regulations are published as 
final regulations in the Federal Register.
    Par. 7. Section 1.170A-18 is added to read as follows: Sec.  
1.170A-18 Contributions of clothing and household items--(a) In 
general. Except as provided in paragraph (b) of this section, no 
deduction is allowed under section 170(a) for a contribution of 
clothing or a household item (as described in paragraph (c) of this 
section) unless--
    (1) The item is in good used condition or better at the time of the 
contribution; and
    (2) The donor meets the substantiation requirements of Sec.  
1.170A-16.
    (b) Certain contributions of clothing or household items with 
claimed value of more than $500. The rule described in paragraph (a)(1) 
of this section does not apply to a contribution of a single item of 
clothing or a household item for which a deduction of more than $500 is 
claimed, if the donor submits with the return on which the deduction is 
claimed a qualified appraisal (as defined in Sec.  1.170A-17(a)(1)) of 
the property prepared by a qualified appraiser (as defined in Sec.  
1.170A-17(b)(1)) and a completed Form 8283 (Section B) (as described in 
Sec.  1.170A-16(d)(3)).
    (c) Definition of household items. For purposes of section 
170(f)(16) and this section, the term household items includes 
furniture, furnishings, electronics, appliances, linens, and other 
similar items. Food, paintings, antiques, and other objects of art, 
jewelry, gems, and collections are not household items.
    (d) Effective/applicability date. This section applies to 
contributions made after the date these regulations are published as 
final regulations in the Federal Register.

Sherri L. Brown,
Acting Deputy Commissioner for Services and Enforcement.
[FR Doc. E8-17953 Filed 8-6-08; 8:45 am]
BILLING CODE 4830-01-P