Guidance on Recordkeeping Requirements for Gifts to Charity Sought from IRS

Patrick Lester of the United Way has asked Treasury for immediate guidance on new recordkeeping requirements for monetary gifts to charity under the Pension Protection Act of 2006, noting that the way the new requirements are interpreted could cause problems for United Way workplace-giving campaigns.

September 19, 2006

Mr. Michael Desmond
Tax Legislative Counsel
U.S. Department of Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20220

Dear Mr. Desmond,
United Way of America is seeking immediate guidance from Treasury on new record keeping requirements for monetary gifts to charity under the Pension Protection Act of 2006. Depending upon how these new requirements are interpreted, they may prove problematic for United Way workplace giving campaigns across the nation, which are already under way.

Section 1217 of the new law requires taxpayers claiming a charitable deduction to maintain records of all monetary contributions as follows:

"(17) RECORDKEEPING. -- No deduction shall be allowed under subsection (a) for any contribution of a cash, check, or other monetary gift unless the donor maintains as a record of such contribution a bank record or a written communication from the donee showing the name of the donee organization, the date of the contribution, and the amount of the contribution."

Under current Treasury Department regulations (Section 1.170A-13(f)(11)), for contributions of $250 or more, taxpayers must provide substantiation through pay stubs, W-2 forms, or other written documents, combined with a pledge card prepared by the recipient charity.

We are seeking clarification of Section 1217 -- specifically to determine if existing regulatory requirements will be continued, but applied to all gifts made through workplace campaigns, or if new procedures must be adopted to comply with the new law.

Thank you for your prompt attention to this matter. Please call if I can provide further information or assistance.

Sincerely,
Patrick Lester

Five Unrelated Cases on Charitable Deduction Substantiation

Charitable Contribution Deductions Denied for Failure to Provide Proof 09/18/06 The Tax Court, in a summary opinion, has sustained the IRS's denial of an individual's claimed charitable contribution deductions because the individual failed to provide reliable evidence of the contributions that he claimed he made to a church.

Deductions for Contributions to Church Disallowed 09/18/06 The Tax Court, in a summary opinion, has sustained the IRS's deficiencies against an individual stemming from deductions claimed for charitable contributions to a church, finding that he could not produce cancelled checks, receipts, or any other reliable evidence documenting those contributions.

Deductions for Charitable Contributions Disallowed; Penalties Imposed 09/18/06 The Tax Court, in a summary opinion, has held that the IRS properly disallowed an in dividual's claimed deductions for charitable contributions to a church because he failed to substantiate the contributions and has found him liable for accuracy-related penalties.

Documents Lacking Date, Amount Fail Charitable Contribution Requirements 09/18/06 The Tax Court, in a summary opinion, has disallowed an individual's charitable contribution deductions, finding that his proffered records failed to meet the substantiation requirements because they didn't show the dates or the amounts of his individual contributions, and has imposed an accuracy-related penalty.

Tax Court Denies Charitable Deductions and Imposes Penalty 09/18/06 The Tax Court, in a summary opinion, has sustained the IRS's deficiency determinations against two individuals, finding they are not entitled to charitable contribution deductions because they could not provide reliable evidence supporting the deductions, and it has imposed an accuracy-related penalty.

New Tax Filing Requirement for Small Nonprofits

The Pension Protection Act of 2006 ccontains numerous changes to the tax law provisions affecting tax-exempt organizations, including a provision requiring exempt organizations not otherwise required to file the 990 information return to file an annual notice with the IRS. Organizations covered by the new law that are not currently required to file the form 990 information return include exempt organizations with gross receipts under $25,000.

The provision requires these organizations to furnish the following information to the Secretary annually, in electronic form:

1. the legal name of the organization,

2. any name under which the organization operates or does business,

3. the organization’s mailing address and Internet web site address (if any),

4. the organization’s taxpayer identification number,

5. the name and address of a principal officer, and

6. evidence of the organization’s continuing basis for its exemption from the generally applicable information return filing requirements.

Upon such organization’s termination of existence, the organization is required to furnish notice of such termination.

If an organization fails to provide the required notice for three consecutive years, the organization’s tax-exempt status is revoked. In addition, if an organization that is required to file an annual information return under section 6033(a) (Form 990) fails to file such an information return for three consecutive years, the organization’s taxexempt status is revoked.

The IRS will be providing further information on this requirement on its website at http://www.irs.gov/charities/article/0,,id=161145,00.html

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October 11 – 14, 2006
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1023 Application Status

From the IRS regarding Status of 1023 Applications:

The Process: Upon receipt, exemption applications accompanied by the required user fee are initially separated into three groups: (1) those that can be processed immediately based on information submitted, (2) those that need minor additional information to be resolved, and (3) those that require additional development.

If your application falls in the first or second group, you will receive either your determination letter or a request for additional information, via phone, fax, or letter, within approximately 60 days of the date the application was submitted. If your application falls within the third group, you will be contacted once your application has been assigned to an EO specialist.

Current Status of Applications Requiring Additional Development: Cases received as of December 2005* are currently being assigned.

What You Can Do:

If you submitted your application or determination letter request:

• in or after the month indicated above, continue to check this web page for updates and wait for us to contact you. There is no need to call.
• before the month indicated above and you have not been contacted by the IRS about your application, you may want to contact TE/GE Customer Account Services.

You will need the following information before you contact the IRS to verify the status of an application or determination letter request:

• The name of the organization on whose behalf the request was submitted;
• The organization's employer identification number (EIN);
• The document locator number assigned to the request (if you have received one); and
• A proper power of attorney submitted with the exemption application unless you are legally authorized to represent the organization, such as an officer or director.

More information on the process for submitting exemption applications and requests for rulings or determination letters may be found on this website.