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August 7, 2020

IRS issues final regulations providing safe harbors for certain charitable donations by businesses and individuals, and addressing quid pro quo benefits received in return for some donations

The IRS has issued final regulations (TD 9907) under IRC Sections 162, 164 and 170, generally affecting taxpayers who make transfers to charitable organizations for business purposes and, in exchange, receive state or local tax credits or other third-party benefits. Specifically, the final regulations: (1) provide safe harbors under IRC Section 162 affecting the treatment of payments that businesses make to entities described in IRC Section 170(c); (2) provide a safe harbor under IRC Section 164 for payments to entities described in IRC Section 170(c) by individuals who itemize deductions and receive, or expect to receive, a state or local tax credit in return; and (3) update the regulations under IRC Section 170 to address how the quid pro quo principle applies to donors who receive benefits from a third-party in exchange for contributions. The regulations become effective on August 11, 2020. A Tax Alert is forthcoming.