Overwhelming opposition to IRS proposed rule for optional reporting of Donor’s Tax Identification details by the Donee organizations

December 16th is the deadline for Treasury Department and IRS to hear comments on all aspects of the proposed rules concerning the time and manner for donee organizations to file newly proposed information returns that would report the required information about contributions (donee reporting). This filing would provide an exception to the “contemporaneous written acknowledgement” requirement for substantiating charitable contribution deductions, whereby a taxpayer who claims a charitable deduction for any contribution of $250 or more is required to obtain substantiation in the form of a contemporaneous written acknowledgment (CWA) from the donee organization.

The proposed regulations require that, in order for a donor to be relieved of the current CWA requirement, a donee organization that uses donee reporting must file a return with the IRS reporting certain information and must furnish a copy of the return to the donor whose contribution is reported on such return. These regulations provide the content of the return under section 170(f)(8)(D), the time for filing the return, and the requirement to furnish a copy to the donor. Moreover, any burden associated with the collection of information under the proposed regulations is minimized by the fact that donee reporting under the proposed regulations is optional on the part of any donee, including small entities. However, the proposed rule is optional and the donees need not use this donee reporting process and donors can continue to use the current CWA process.

Text of Federal Register announcement for proposed rule

Most of the charities feel that the proposal is a bad idea and have overwhelmingly expressed their voice against the proposed rule.

Comments to the proposed regulations

The National Council of Nonprofits opposes the proposed Donee Reporting Rule and encourages donors and nonprofits to submit comments to the federal government explaining the real-world consequences of the rule, if promulgated as written.

According to a note published by the:

1. “Never” is the better answer. A charitable nonprofit should never be asking a donor for her or his Social Security number when soliciting donations; if someone is asking in relation to a donation, that should be considered a sign of a scam or fraudulent solicitation.

2. The proposed Donee Reporting Rule conflicts with the IRS’ advice to taxpayers. The Internal Revenue Service advises taxpayers on its website and on a YouTube video to only give out their Social Security numbers when “absolutely necessary.” Yet the IRS proposed voluntary system essentially requires nonprofits to do just that: ask donors to give out their SSNs when it is not absolutely necessary. Voluntary and “absolutely necessary” are polar opposite  instructions that undermine taxpayer protections and public confidence – public confidence in both the IRS and innocent charitable nonprofits.

3. Requests for Social Security numbers could result in reduced charitable contributions. Numerous individuals commenting on the proposed rule have raised the concern that donors will be unwilling to contribute more than $250 to a charitable nonprofit if it asks for Social Security numbers.

4. Concerns about identity theft are very real. Just this year, hackers have accessed sensitive employee data at the federal Office of Personnel Management and the Central Intelligence Agency, two sophisticated entities with the resources and commitment to fighting intelligence breaches. And yet, hackers could not be thwarted. It is irresponsible for Treasury and the IRS to propose a system that calls on nonprofits to collect, store, and protect SSNs when identity theft is a growing challenge that even the federal government is not yet able to overcome.

5. The current contemporaneous written acknowledgement system is working. The proposed regulations make several admissions that raise the question: why are Treasury and the IRS bothering to create a new, optional, parallel reporting regime that will require more administrative burdens on both nonprofits and government personnel? The background description of the status quo states that the present contemporaneous written acknowledgement (CWA) “system works effectively, with minimal burden on donors and donees, and the Treasury and the IRS have received few requests … to implement a donee reporting system.” Treasury and the IRS even repeat their key admission: “Given the effectiveness and minimal burden of the CWA process, it is expected that donee reporting will be used in an extremely low percentage of cases.” Since there is not an overriding need for an alternative system, the flawed proposal to adopt a confusing and potentially dangerous Donee Report Rule should be rejected.

6. Just because the proposal is voluntary now is no reason to ignore its potential adverse impacts. Some might say they are not concerned about the proposed Donee Report Rule because it is purely voluntary at this time.


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About Us Bhatia & Co, Inc, Certified Public Accountants is a diversified Full service financial and business services firm concentrating on providingservices to domestic and international organizations, with special focus on international transactions and tax planning. Our Team of highly skilled and diversified range of finance and business professionals provide services in areas of business and individual tax,audit & review, international tax planning, incorporation and corporatecompliance, accounting, outsourcing, business consulting, financial and retirement planning, immigration consulting and litigation support to adiverse range of clients.. We are located in the prestigious Techmart building in the heart of Silicon Valley in Santa Clara,CA for the last 13+ years and have offices in New Delhi for 30+ years. . Our current engagements include cross border tax planning and transactions, corporate structuring, and complex Tax audits and representation including recent oversees disclosure programs (OVDP/OVDI). Our organization is headed by Neeraj Bhatia, who is an accomplished accounting professional with 30+ years expertise in international and domestic tax planning and compliance for startups and multinational entities. Neeraj is a licensed CPA in California, New York and Colorado and a CA in India. He also has a LL.M. in International Taxation from the US, Costs and Works (Management) Accountancy, and a Bachelor (Honors) degree in Commerce from India. During his academic years he has received several awards and scholarships for being the top ranker nationally.

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