IRS changes to tax code could spell trouble for many non-profits

Many non-profits provide critical social services to some of the most vulnerable and disadvantaged populations.  Whether the targeted population is in the United States or abroad non-profits registered as 501-c 3 tax–exempted through the Internal Revenue Service (IRS).  This classification also benefits donors by providing them with a contemporaneous written acknowledgement provided by the donee organization, which provides proof of a charitable contribution and allows the donor tax-deductible self reporting forms.   Based on the Federal Register notice dated September 17, 2015[1], the IRS proposed to add additional requirements to the current Income Tax regulations under code 170 (f)(8) governing the substantiation of charitable contributions of $250 or more.   The checks and balances is assured to the IRS given that the donor would self-report for a tax deduction and the donee organization files a 990, “Return of Organization Exempt From Income Taxâ€.  Now the IRS would like to change this requiring donee organizations to collect additional personal information from donors including social security numbers to keep tax exemption status for donations over $250 dollars.

Let it sink in.  This means that the organization that asks you to contribute to those Thanksgiving dinners to the homeless, the healthcare or HIV treatment to those who can’t afford to pay, the after-school program, or your University that is raising money for capital improvements.  The IRS is proposing they collect your personal identification information to file for all donations over $250.  The implications of new addition to the disclosure code are severe and will be immediate if these regulations are approved, particularly for small non-profits.  In an ever increasing environment of identify theft will donors be willing to add another layer of risk to “do goodâ€.  In the mail just last week I received notice from the Office of Personnel Management stating that my personal information including my social security number could have been compromised in a breach and offering identify monitoring.  If our own government can’t keep our personal information safe is it reasonable to expect that non-profits can take on that task?

After months of comments and feedback from non-profits and organizations like the Association of Fundraising Professionals that mobilized thousands of individual and organization-linked fundraising professionals around the country, the IRS has backed down and withdrawn the substantiation requirements.
[1] Federal Register/Vol. 80 No. 180/ Thursday, September 17, 2015/ Internal Revenue Service: Substantiation Requirement for Certain Contributions. Notice of  proposed rulemaking.