Okay, it’s not the best rip-off of Shakespeare. I thought about calling this blog “Be Careful What You Ask For.” This installment addresses some proposed regulations that came out last week.
Every year, we at HM&M may be perceived by some of our clients as harpies – shrieking, scolding and nagging about obtaining “contemporaneous written acknowledgements” (“CWAs”) from charitable organizations to which they make contributions that they want to deduct on their income tax returns. The contents of a “written acknowledgement” are set forth in the regulations under Section 170 of the Code. “Contemporaneous” generally means having obtained the written acknowledgement at some time before you timely file your return. Don’t have these CWAs at the time that you file your return? No deduction. I blogged on June 5, 2012 about missing CWAs in one case involving millions of dollars of lost charitable contribution deductions and about another case in which the taxpayers lost a mere $22,000 in deductions for contributions to their church. (click here to see June 5 post)
In Section 170(f)(8)(D) of the Code, enacted in 1993, there is an exception to the CWA rule. The donor does not have to get a CWA, if the donee files a return, on such form and in accordance with such regulations as the IRS prescribes. The IRS issued proposed regulations in September 2015 – a mere 22 years later.
Sounds great, right? No more need to worry about collecting those pesky CWAs. What took the IRS so long? Well, hold on a minute.
First and foremost, do you want any charity to which you give money to have your social security number? Are you sure that every charity to which you give has appropriate cybersecurity? The donor’s SSN is required on the proposed form/return.
Second, the filing of such return will be optional for each donee. Also, the use of such return will be optional for the donor.
Finally, the IRS says in its preamble to the proposed regulations that “given the effectiveness and minimal burden of the CWA process, it is expected that donee reporting will be used in an extremely low percentage of cases.”
So, maybe the IRS wasn’t too focused on promptly obeying a statutory mandate of little or no importance or use. Sorry, it looks like we’ll continue to be harpies.