IRS Backs Off On Donor SSN Rule

January 7, 2016       Andy Segedin      

The Internal Revenue Service (IRS) announced Thursday that it has withdrawn a proposal that would have given nonprofits the option of substantiating charitable contribution deductions of $250 or more on behalf of donors. The amendment to the Income Tax Regulations would have placed organizations in the position of collecting donors’ tax information such as Social Security numbers – a concept panned by the likes of the National Council of Nonprofits and Independent Sector.

“The Treasury Department and the IRS received a substantial number of public comments in response to the notice of proposed rulemaking,” the IRS’ statement reads. “Many of these public comments questioned the need for donee reporting, and many comments expressed significant concerns about donee organizations collecting and maintaining taxpayer identification numbers for purposes of the specific-use information return.”

Bruce Friedland, public affairs specialist for the IRS, explained that current regulations require that donors receive written substantiation of gifts of $250 or more from the organization when seeking a deduction. Regulations have left the door open for an undefined substantiation alternative. “This was an attempt at an alternative,” he said.

The IRS received roughly 38,000 comments on the amendment, a sizable amount considering comments regarding regulations tend not to reach the hundreds. When asked whether the IRS plans to revisit the amendment, Friedland deferred to the statement which reads, in part, “… therefore that exception remains unavailable unless and until final regulations are issued prescribing the method for donee reporting.”

The National Council of Nonprofits had rallied against the proposal since it was first introduced in September, primarily on the grounds that it could facilitate scam artists seeking to solicit private information. Tim Delaney, president and CEO of the national council, said on Thursday that the organization was delighted by the news and that the withdrawal “proves the power of nonprofit advocacy.”

Legislation was proposed in both the House and Senate last month that would prohibit elements of the IRS’ amendment. The national council has thrown its support behind the House’s bipartisan bill that would bar the IRS from requiring or accepting donors’ Social Security numbers from organizations. The council will continue to support the bill in hopes of preventing future iterations of the IRS’ proposal. Similar proposals were made in the early 1990s and in the late 2000s, Delaney said.

“Again, the feel is that the [current] system has worked. I must say, I am also appreciative of the IRS and Treasury for listening. This proves that the system truly does work,” Delaney said. “We asked them to withdraw it and they did. I think it’s a strong statement by them and the nonprofit community that rallied to protect the public in terms of saying ‘no’ to the gathering of Social Security numbers.”

  • gift substantiation
  • Income Tax Regulations
  • IRS
  • tax