The IRS has withdrawn proposed regulations (REG-138344-13) issued in September 2015 that would have given charitable organizations the opportunity to opt out of the current "contemporaneous written acknowledgement" (CWA) requirement for substantiating charitable contributions and, instead, adopt donee reporting as a means of satisfying Section 170(f)(8) substantiation requirements.

The proposed regulations specified rules with respect to the time and manner for donee reporting to satisfy the exception for substantiating charitable contribution deductions of $250 or more. In the preamble to the proposed regulations, the IRS noted that the exception was intended to create an alternative to the CWA, but it also expressed concerns about implementing such an exception due to the identity theft risks resulting from organizations collecting and storing donee information. For background and further discussion of the proposed regulations, see Tax Alert 2015-1798.

In response to the proposed regulations, the IRS received "a substantial number" of public comments, with many questioning the need for the donee reporting option and expressing significant concerns about organizations collecting and storing donee taxpayer identification numbers. Accordingly, the IRS has decided to withdraw the proposed regulations. Although Section 170(f)(8)(D) continues to refer to an exception to the CWA requirement, the IRS stated that the exception remains unavailable unless and until it issues final rules implementing it.

Implications

Concerns associated with properly protecting the sensitive information required from donees for donee reporting prompted the IRS to withdraw the proposed donee reporting regulations. Charitable organizations will not be able to avail themselves of such donee reporting as a means of satisfying the substantiation requirements set forth Section 170(f)(8) for charitable contributions in excess of $250. Rather, the current CWA requirement continues to remain the only method for verifying contributions that are made to charitable organizations.

Charitable organizations should review the procedures they have adopted for complying with the CWA requirement. A donor who makes a contribution of $250 or more should receive a CWA that contains the information stipulated under Section 170(f)(8)(B), such as the amount of cash contributed, a description of any property contributed and any consideration received. The CWA should be provided to the donor by the earlier of the date that the donor files the return for the year the contribution is made or the due date of the return, including extensions.

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RELATED RESOURCES

— For more information about EY's Exempt Organization Tax Services group, visit us at www.ey.com/ExemptOrg

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