On January 7, the IRS and Treasury withdrew proposed regulations that would have implemented the statutory exception to the “contemporaneous written acknowledgement” (CWA) requirement for substantiating charitable contribution deductions of $250 or more under Section 170(f)(8)(D).
Section 170(f)(8)(A) requires taxpayers who claim a deduction for a charitable contribution of $250 or more to receive a CWA of the contribution by the donee organization. Section 170(f)(8)(D), however, provides an exception to this requirement if the donee reports the contribution on a return, in accordance with such regulations as Treasury may prescribe.
Some taxpayers have argued that the donee reporting exception under Section 170(f)(8)(D) applies in the absence of regulations implementing the exception. For example, some taxpayers who have not received a CWA have argued on audit that the requirement can be satisfied by having the donee file an amended Form 990 that discloses the contribution.
On September 17, 2015, IRS and Treasury issued proposed regulations that would have implemented the exception by permitting, but not requiring, donee organizations to file a specific-use information return that would include, among other things, the donor’s name, address, and taxpayer identification number. The IRS and Treasury received a substantial number of public comments in response to the notice of proposed rulemaking, questioning the need for donee reporting and expressing concerns about the collection and maintenance of taxpayer identification numbers.
In response to the comments, Treasury and the IRS have decided to withdraw these proposed regulations. As a result, it will continue to be critical for 501(c)(3) organizations to provide CWAs to their donors and for donors to be sure that they have received CWAs prior to filing their Form 1040s (or by the due dates of their Form 1040s). In the notice of withdrawal, Treasury and the IRS make it clear that an organization that fails to provide a CWA will not be able to correct its error by filing a Form 990 or an amended Form 990 that reports the donation. Donors who do not receive a CWA for donations of $250 or more will not be entitled to deductions.