Weigh In On the IRS’ New Gift Substantiation Proposal

Action Alert

Submit your comments before the Wednesday, December 16 deadline.

The Internal Revenue Service (IRS) is proposing new regulations that would establish a voluntary process for nonprofits to substantiate gifts of $250 or more from individual donors.

Under this new process, nonprofits could file a voluntary, alternative information return that would require collecting donors’ Social Security numbers (SSN) or taxpayer identification numbers (TIN) to substantiate gifts. This form would have to be filed in addition to the organization’s 990 and sent to the donor by February 28 of each year for donations received in the previous tax year.

Currently, the IRS requires nonprofits to substantiate gifts of $250 or more by providing donors with written documentation, typically an acknowledgement letter stating the amount of the gift or value of any non-cash item that is donated. Many arts organizations already have a sufficient practice in place to send donors acknowledgement letters for contributions and feel that this additional proposed process–though voluntary–would be unnecessary and cause additional administrative burdens. Here are a few other concerns about this proposal:

  • Donors will be less likely to give–or will give less than $250–if they may have to give their SSN or TIN. (The IRS currently advises protecting these numbers from fraud by only providing them when “absolutely necessary.”)
  • Collecting SSNs and TINs would impose other legal requirements on nonprofits to retain and protect those numbers from identity theft.
  • The costs associated with implementing the proposed procedures could otherwise be spent on mission-related activities.
  • This process is unnecessary. In its proposal, the IRS states that the current substantiation process “works effectively, with the minimal burden on donors and donees.” It also predicts this proposed “donee reporting will be used in an extremely limited number of cases.”

PAA will speak up on this issue and submit comments on behalf of its members, however, we want you to make your voices heard! Click the button below to submit your comments directly to the IRS about how this new proposal would affect your organization. The deadline to file is next Wednesday, December 16.

Please keep in mind the following tips:

  • Your comments will be available to the public.
  • Brief, direct comments are most effective.
  • Provide a specific example of how this proposal would impact your organization.

View these tips and resources from the National Council of Nonprofits for submitting comments on the issue.

Image credit: Franklin Fischer via Flickr