Legislation Introduced To Block IRS’s Donor SSN Rule

December 18, 2015       Andy Segedin      

A bipartisan House bill could pull the rug out from under a proposed amendment to Income Tax Regulations that has drawn the ire of nonprofits.

The Charitable Giving Privacy Protection Act (H.R. 4281), introduced on Thursday by Rep. Keith Rothfus (R-PA) and Rep. Brian Higgins (D-NY), would prohibit the Internal Revenue Service (IRS) from requiring or accepting Social Security numbers of donors from organizations. The proposed bill would cut into an IRS proposal that would give organizations the option to substantiate gifts of $250 or more on behalf of donors by collecting information such as Social Security numbers. Organizations, including the National Council of Nonprofits, have opposed the amendment, claiming that it could open the door for scam artists to solicit donors’ private information.

Kate Rosario, Rothfus’ communication director, said that impetus for the bill came from the 35,000 or so comments, many of them negative, that the IRS proposal has received from across the country. Rothfus’ office has, since the introduction of H.R. 4281, received calls of support from nonprofits in the Pittsburgh area, Rosario said. The proposed legislation will next go before the House Committee on Ways and Means.

The House bill was introduced just nine days after Sen. Pat Roberts (R-KS) introduced the Protecting Charitable Contributions Act of 2015 (S. 2370), which prohibits the IRS from modifying standards or regulations for the substantiation of charitable contributions. The bill has since been referred to the Senate’s Committee on Finance.

Roberts will seek cosponsors for the bill after the New Year, according to Sarah Little, communications director. Little stated in an email that Roberts, a member of the Committee on Finance, hopes that the bill will be included in the Senate’s next tax reform package.

David L. Thompson, vice president of public policy for the National Council of Nonprofits, discussed the IRS’ proposed amendment in a newsletter shortly after it was announced in September and received more feedback than any prior posting. “People had an immediate negative reaction to collecting Social Security numbers, even if it’s voluntary,” Thompson said. The council has filed joint comments in opposition of the change with Independent Sector and more than 200 other organizations.

Issues with the proposed amendment are threefold, according to Thompson, and include:

  • Whether or not the voluntary collection of Social Security numbers could lead to the requirement to do so;
  • The possibility that watchdog groups could consider the collection of Social Security numbers a best practice, hurting organizations’ ratings should they choose not to; and,
  • That the amendment would contradict the general practice that donors should not disclose Social Security numbers to charities.

The council has yet to take an official position on the Senate bill, but has backed the House proposal, according to Thompson. Describing Rothfus and Higgins’ bill as “laser precise,” Thompson said that the legislation would remove the sticking point for most nonprofits, the collection of Social Security numbers, but leave the door open for reform that could benefit donors. Moving forward, Thompson expects for the council to analyze the proposals and be in communication with the House Committee on Ways and Means and Senate Committee on Finance.

In addition to the concerns voiced by the council, Independent Sector is wary of the potential liability associated with collecting and storing sensitive donor information and how that may impact donor relationships, according to Geoffrey Plague, vice president of public policy. “You don’t have to look very hard or far back to find major personal data and privacy breaches in the federal government and major corporations,” Plague said.  Independent Sector has yet to take an official position or preference on the two pieces of legislation, Plague said, but generally prefers allowing for regulatory processes to play out.

Laura Kalick, tax consulting director for BDO’s National Healthcare and Nonprofit and Education practices in Washington, D.C., too, has fielded concerns about cyber security, regulatory burdens and a chilling effect on donations. Many nonprofits automatically generate documents to substantiate donor gifts as a practice, Kalick said, adding that she had not heard complaints regarding the current gift-substantiation policies. “I think it makes sense to just kill it and say that we don’t need regulation,” Kalick said. “I don’t think any charity, given the option, would do it.”

  • congress
  • gift substantiation
  • Independent Sector
  • IRS
  • legislation
  • National Council of Nonprofits