On Friday, December 1, 2006, the IRS published guidelines for complying with new charitable contribution substantiation requirements imposed by the Pension Act. See IRS Notice 2006-110, available at www.irs.gov/pub/irs-drop/n-06-110.pdf.

The Pension Act requires a taxpayer who claims a charitable deduction for a contribution paid by cash, check, or other monetary gift to maintain a bank record or a written communication from the recipient charitable organization showing the organization’s name, the date of the contribution, and the amount of the contribution. Notice 2006-110 addresses the narrow issue of substantiation of charitable contributions made through payroll deductions. The Notice essentially applies existing regulations that, before the enactment of the Pension Act, applied only to payroll deductions exceeding $250. Under Notice 2006-110, an individual making a charitable contribution via payroll deduction should keep both of the following to substantiate his or her charitable contribution:

  • A pay stub, Form W-2, or other documentation furnished by his or her employer that sets forth the amount withheld by the employer for the purpose of payment to the charitable organization; and
  • A pledge card or other document prepared by or at the direction of the recipient charitable organization that shows the name of the recipient charitable organization.

If a donor’s gift exceeds $250, the pledge card or other document also must contain a statement to the effect that the recipient charitable organization does not provide goods or services in exchange for any contribution made to the organization by payroll deduction.