Pressing Issues

IRS Withdraws Controversial Proposal

January 31. 2016

Treasury, IRS Withdraw Controversial Gift Substantiation Proposal
Citing overwhelming public opposition from almost 38,000 commenters, the Treasury Department and Internal Revenue Service announced that they have withdrawn their proposed regulation to create an alternative method for substantiating donations to charitable nonprofits. The proposed regulations would have permitted, but not required, charitable nonprofits to file a new, separate information return with the IRS (in addition to the Form 990) by February 28 every year to substantiate contributions of more than $250 in value. A new informational tax return (“Donee Report”) would have required the nonprofit using it to collect the donor’s name, address, and Social Security number (SSNs) or other taxpayer identification number, plus provide a copy to each donor. In a group comment urging withdrawal of the proposal, 215 nonprofits wrote that collection of SSNs would “expose the public to increased risk from identity theft, impose significant costs and burdens on nonprofit organizations, and create public confusion and disincentives for donors to support the work of nonprofits.”

The National Council of Nonprofits celebrated the withdrawal as “a prime example of the power of nonprofit advocacy and what can be achieved when charitable nonprofits speak up to protect the public, our missions, and the communities we serve.” Representative Keith Rothfus (R-PA-12) stated, “For the foreseeable future, these organizations will be able to continue to provide essential services to their communities without fear of the security risks and other potential negative consequences that are associated with this rule.” He is vowing to continue the push for passage of the bipartisan Charitable Giving Privacy Protection Act (H.R. 4281) that would prevent the IRS from requiring or accepting Social Security numbers as part of any gift substantiation process.

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