Keeping Adequate Records for Charitable Donations

When a taxpayer makes a charitable donation, he or she must maintain adequate records.  Without such records, the taxpayer is not entitled to a charitable deduction under Section 170 of the Internal Revenue Code.  This situation occurred in Joyce A. Linzy v. Commissioner because the taxpayer, who ironically owned and operated an income tax return preparation business, was unable to provide proper records.

The taxpayer made charitable contributions to Church 1 and Church 2 in 2007.  The contributions to Church 1 totaled $7,500 and were acknowledged by both a letter dated January 1, 2010 and copies of checks, all for amounts greater than $250.  The contributions to Church 2 were evidenced by a tithing statement dated January 1, 2010 which acknowledged that the taxpayer donated a total of $2,255 and included several copies of checks, some of which were for amounts less than $250.

For cash donations less than $250, a canceled check, a receipt or other reliable evidence is considered an adequate record.  To be reliable, the other evidence must show the name of the donee, the date of the contribution and the amount of the contribution.  However, for contributions of cash of $250 or more, the donor must obtain a contemporaneous written acknowledgement of the donation from the donee.   This acknowledgement must, at a minimum, contain a description of the contribution, a statement about whether any goods or services were provided in consideration and a good faith estimate of the value of any such goods or services.  Critical for the taxpayer in the above case, the acknowledgement must be obtained on or before the earlier of: (1) the date on which taxpayer files a return for the taxable year in which the contribution was made; or (2) the due date for filing such return. 

Thus, unfortunately for the taxpayer, the contributions made to Church 1 were not deductible because the letter did not state whether goods or services were received as consideration and it was not received by the proper date. As for the contributions to Church 2, the tithing statement is sufficient evidence for those donations under $250 but does not work for those over $250 because it was also received two years after the appropriate date.


IRS Exempt Organization Newsletter 2011-18

On November 18, the IRS released its Exempt Organization Newsletter, Issue Number 2011-18. Topics include the following:

  1. IRS Seeks Applicants for Advisory Committee on Tax Exempt and Government Entities
  2. Reinstatement of Exempt Status after Automatic Revocation
  3. Certain Small Organizations Not Required to File Application for Exemption Have Annual Filing Requirement
  4. Filing Form 990-N for a Prior Year
  5. IRS Survey of Exempt Organizations
  6. Telephone Numbers for FBAR Hotline
  7. Webinar on Reporting Employer-Sponsored Health Plan Coverage on Form W-2 Now Available on IRS Video Portal
  8. Office of Professional Responsibility and Return Preparer Office Offer Free Webinar




IRS Releases Additional Guidance for Credit Counseling Organizations

As we discussed in our Janaury 18, 2011 post, credit counseling and down payment assistance organizations are subject to special scrutiny by the IRS.  The IRS recently issued “Frequently Asked Questions” regarding credit counseling organizations, including factors the IRS considers to determine whether such organizations qualify under Section 501(c)(3).   This information is useful for new organizations as well as existing organizations to confirm the organization continues to operate within the IRS guidelines.

Written by in: General

Revised 990 Regulations

Until recently, when an organization sought public charity status on its Form 1023 and received a favorable determination letter from the Internal Revenue Service recognizing it as exempt under Section 501(c)(3) of the Code, its public charity status (if granted) would be for a five-year “advance ruling period”. After this advance ruling period, the organization would make a separate filing to the IRS to establish public charity status based on satisfaction of one of the Support Tests. On September 7, 2011, final regulations were issued that change the timing and process of determining public charity status.  A brief description of the changes can be read here.

Powered by WordPress | Published by Bryan Cave LLP | Privacy Policy | Disclaimer | Advertising Notice | Site Map
Home | Our Team | Our Practice | FAQ | Clients | Our Firm | Contact Us | Twitter