Adequate Charitable Gift Documentation

Family Philanthropy Lawyers – Ainer & Fraker, LLP

The IRS recently denied a taxpayer’s substantial charitable contribution to his church because the acknowledgement letter from the church lacked the required no goods or services provided statement. The church supplied the taxpayer (we’ll call him Bill) with a replacement acknowledgement letter that included the statement, but the IRS rejected the replacement since it was not received contemporaneously. An obviously upset Bill took the issue to tax court but ended up with the same result – no deduction – because his documentation did not meet the law’s requirements.

To make sure you don’t get caught up in similar unfortunate circumstances, take a moment to review the rules for monetary charitable contributions:

  1. For a contribution of cash, check, or other monetary gift, regardless of amount, you must maintain a bank record (for example, a canceled check or a credit card receipt) or a written communication from the donee organization showing its name, plus the date and amount of the contribution. It’s not sufficient to maintain other written records, such as a log of contributions.
  2. No charitable deduction is allowed for any contribution of $250 or more, even if you have the documentation listed in #1 above, unless you substantiate the contribution by a
    contemporaneously written acknowledgement of the contribution by the donee organization. Contemporaneously means you must have the receipt in hand by the time you file your return (or by the due date, if earlier); if you don’t, you won’t be able to claim the deduction. It is up to the donor to request the acknowledgment from the donee organization; the law does not require the organization to automatically provide the acknowledgment.
  3. The acknowledgement must include the amount of cash and a description (but not value) of any property other than cash contributed. In addition, the acknowledgement must include a statement indicating whether the donee provided any goods or services other than intangible benefits, and if so, a good-faith estimate of the value of any such goods or services.

However, if Bill had made separate contributions of less than $250 each and had met the requirements of #1 above, he would not have had the problems he did. Certainly, Bill and his church have learned a valuable but costly lesson.

Make sure you don’t end up with the same problem. Review your charitable acknowledgements and make sure they meet the requirements above.