Relief Provided for Charitable Donors

Taxpayers who made contributions of $250 or more to charities during 1994 are being relieved from the statutory requirement that before they file their 1994 returns they obtain adequate written acknowledgements from the charities. The IRS is providing this relief because of difficulties taxpayers are reporting in obtaining these acknowledgements.

In a notice released today the IRS said that taxpayers can still claim deductions for charitable contributions of $250 or more on their 1994 returns if they make a good faith effort on or before Oct. 16, 1995, to obtain the required written acknowledgement from the charity. One example of a good faith effort would be sending a letter to the charity requesting the acknowledgement.

Congress changed the law in 1993 to require taxpayers making charitable contributions of $250 or more to obtain written acknowledgements from the charities for these contributions. This law requires that an acknowledgement be obtained by the earlier of the filing of the taxpayer' 8 return or the due date of the return, including extensions. It also requires that the acknowledgement state whether or not the taxpayer received anything in return for the contribution.

Taxpayers who do not itemize cannot claim charitable contribution deductions and are therefore not affected by this announcement. Taxpayers who have already filed their 1994 returns and wish to take advantage of this limited relief should file an amended return using Form 1040X.

Taxpayers are reminded that they must comply with all of the requirements of the tax law in order to be allowed a charitable contribution deduction. The law allows the taxpayer to take a deduction only to the extent that the taxpayer intended to and did make a contribution in excess of the fair market value of anything received in return.

Additional information on the relief announced today is contained in attached Notice 95-15, and will also appear in Internal Revenue Bulletin 1995-15, dated April 10, 1995. The lRS said it will soon issue additional guidance in the form of proposed regulations on substantiation of charitable contributions.

Part III. Administrative, Procedural, and Miscellaneous

Transitional Relief from the Substantiation Requirements of Section 170(f)(8) of the Internal Revenue Code

Notice 95-15

The Service has received numerous inquiries about the substantiation requirements for charitable contributions of $250 or more imposed by Congress in the 1993 tax law changes. Those requirements, found in §170(f)(8) of the Internal Revenue Code, generally provide that a taxpayer will not be allowed a charitable contribution deduction for a contribution of $250 or more unless the taxpayer substantiates the contribution with a "contemporaneous written acknowledgment" from the donee organization. The law requires the taxpayer to obtain the acknowledgment before the taxpayer files the return reporting the contribution or before the due date (including extensions) for the return, whichever comes first. These new substantiation requirements apply to contributions made on or after January 1, 1994.

The Service understands that there has been confusion about these new requirements, and as a result, many taxpayers have had difficulty obtaining the required written acknowledgments from donee organizations for contributions made during 1994. In light of these difficulties, the Service is providing the following relief:

For contributions of $250 or more made during calendar year 1994, a taxpayer who has not obtained the necessary contemporaneous written acknowledgment by the date specified in §170(f)(8) will be treated as having satisfied the requirements of that section if (1) the taxpayer has obtained the acknowledgment by October 16, 1995, or (2) the taxpayer has made a good faith effort to obtain the acknowledgment by that date. An example of a good faith effort would be sending the donee organization a letter requesting a written acknowledgment that meets the requirements of §170(f)(8).

A "contemporaneous written acknowledgment" is a written statement from a donee organization that contains the following information: (1) the amount of cash and a description (but not value) of any property other than cash contributed, (2) whether the donee organization provided any goods or services in consideration for the property contributed, and (3) a description and good faith estimate of the value of any goods or services provided by the donee organization in consideration for the property contributed. In addition (except for contributions made during calendar year 1994, for which relief is provided by this Notice), the taxpayer must obtain the acknowledgment before the taxpayer files the return reporting the contribution or before the due date (including extensions) for the return, whichever comes first.

Taxpayers are reminded that they must comply with all of the requirements of §170 in order to be allowed a charitable contribution deduction. If the taxpayer receives goods or services in exchange for a contribution to a donee organization, §170 generally allows the taxpayer to take a deduction only to the extent that the taxpayer intended to and did make a payment in excess of the fair market value of what was received in return.

The principal author of this notice is Rosemary DeLeone of the Office of Assistant Chief Counsel (Income Tax and Accounting). For further information regarding this notice, contact Rosemary DeLeone at (202) 622-4930 (not a toll-free call).

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