December 21, 1993
New Tax Law Changes Affect Charities
WASHINGTON - Charities have a new substantiation requirement
for certain contributions that receive on or after January 1, 1994,
due to the Omnibus Budget Reconciliation Act of 1993.
To assist charities in complying with these new rules the IRS
has developed new Publication 1771, Charitable Contributions-
Substantiation and Disclosure Requirements. The IRS said it is
mailing this publication to over 500,000 charities in December 1993.
Beginning January 1, charities receiving payments described as
"quid pro quo contributions," in excess of $75, must provide a
written statement to the donor. A quid pro quo contribution is one
in which part of the payment is for goods or services received and
part is a contribution.
This statement must give a good faith estimate of the value of
the goods and services plus inform the donor that the charitable
deduction is limited to the amount of the payment in excess of the
value of the goods and services provided. For example, if a person
gives a charity $100 and receives in exchange a $40 dinner, the
charity must inform the donor in writing that the diner was valued
at $40 and only the portion of the payment exceeding the value of
the dinner, $60, qualifies as a charitable contribution.
A written statement is not required it the goods or services
provided by the organization are de minimis, token goods or
services, or an intangible religious benefit.
The responsibility for providing disclosure statements for quid
pro quo contributions over $75 rests with the charity. The charity
must provide the statement in connection with either the
solicitation or the receipt of the contribution. A penalty of $10
per contribution can be imposed on the charity for each failure to
provide the required statement.
Charities also need to be aware of a new change affecting
contributors. For charitable contributions of $250 or made after
Dec. 31, 1993, the donor is not allowed a deduction unless the gift
is acknowledged by the charity in writing. Also, the donor must
obtain the acknowledgement by the earlier of the date the return is
filed or the due date of the return, including any extensions.
The acknowledgement must contain the amount of the cash or
check and a description of any noncash property contributed. It
must state whether the charity provided any goods or services in
return for the contribution. If so, it must also include a
description and good faith estimate of the value of the goods or
services or, if the goods and services consist solely of intangible
religious benefits, a statement to that effect.
Previous | Next
1993 IRS News Releases | News Releases Main | Home