[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