Exempt Organizations Advisory - IRS Publishes Proposed Rules Regarding Substantiation and Reporting Requirements for Cash and Noncash Charitable Contributions

Catherine W. Wilkinson (cwilkinson@steptoe.com)
Suzanne Ross McDowell (smcdowell@steptoe.com)
Randal T. Evans (revans@steptoe.com)

In a notice published on August 7, 2008, the IRS proposed amendments to the income tax regulations to provide guidance on the substantiation and reporting requirements for cash and noncash charitable contributions. The proposed regulations implement provisions added to the tax code by the American Jobs Creation Act of 2004 (the “Jobs Act”) and the Pension Protection Act of 2006 (“PPA”).  The proposed regulations implement the recordkeeping requirements imposed by the PPA for all cash contributions; provide guidance regarding the definitions of a “qualified appraisal” and “qualified appraiser” for purposes of noncash contributions; and incorporate the substantiation requirements for noncash contributions imposed by the Jobs Act on (1) a C corporation (other than a closely held corporation or a personal service corporation) claiming a deduction of more than $5,000, and (2) any taxpayer claiming a deduction in excess of $500,000. 

The regulations will affect any donor claiming a deduction for a charitable contribution after the date the rules are published as final regulations.  The notice states that the IRS and Treasury may propose additional changes to the substantiation regulations in the future, and requests comments regarding additional issues that should be addressed.  Written or electronic comments and requests for a public hearing must be received by November 5, 2008.