Two significant statutory limitations now restrict the deductibility of charitable contributions. These limitations, the result of changes made in the tax law in 1993, impose new requirements relating to substantiation and disclosure.
Amended Code Sec. 180(f)(8) now requires that all charitable contributions of $250 or more be substantiated with a contemporaneous acknowledgement provided by the donee organization substantiating the amount of cash and a description (but not the value) of any property contributed. The substantiation provided by the donee organization must also include a description and good faith estimate of the value of any goods and services which the donee organization may have provided in exchange for all or part of the contribution. The requirement that the acknowledgment be contemporaneous is satisfied if it is procured on or before the date (including extensions) on which the taxpayer files a return for the taxable year in which the contribution was made.
One important exception exists with respect to the substantiation requirement: Substantiation is not required if the donee organization files a return with the IRS reporting information sufficient to substantiate the amount of the deductible contribution.
The second important change governing charitable contributions imposes new reporting requirements on the charitable organization with respect to quid pro quo contributions. Thus, charitable organizations receiving a quid pro quo contribution contribution in excess of $75 (i.e., a payment exceeding $75 made partly as a contribution and partly in consideration for goods and services provided to the donor by the donee organization) is required to provide a written statement to the donor that informs the donor that the amount of the contribution which is deductible for federal income tax purposes is limited to the excess of the amount of any money (and the value of any property other than money) contributed by the donor over the value of the goods or services provided by the organization (i.e., the net contribution). The statement must also provide the donor with a good faith estimate of the value of goods or services furnished to the donor by the organization.
The reporting requirement is suspended where de minimis or token goods or services are provided to the donor. Similarly, the donee organization need not issue any statement if the donor received only an “intangible religious benefit” not generally sold in the commercial context.
The Congresional Report which accompanied the legislation provides that for purposes of the $75 threshold, separate payments for separate fundraising events made during the year will not be aggregated. However, the Report also remarks that the quid pro pro reporting requirement cannot be avoided by the simple expedient of writing multiple checks on the same date, since “contributions that are part of a single transaction will be aggregated for purposes of the $75 threshold.” [Reference: Revenue Reconciliation Act of 1993, Senate Committee Report]