Charitable donations: new Pension law affects charitable donors and donees.

• Author: Josephs, Stuart R.
• Position: Federaltax

The following are highlights of selected charitable donation provisions in the 2006 Pension Protection Act (PPA) signed into law Aug. 17.

STRICTER REQUIREMENTS FOR MONEY DONATIONS

Old and Existing Law: A donor claiming a charitable donation deduction must maintain reliable written records regarding the donation--regardless of the donation's value or amount.

For money donations, the donor generally must maintain one of the following:

1. A cancelled check;

2. A receipt (or other written communication) from the donee showing the donee's name, the donation's date and amount; or

3. Other reliable written records showing the information in "2" immediately above.

   In addition, for donations of $250 or more, no deduction is allowed unless substantiated by a contemporaneous written acknowledgment by the donee--which must include the amount of money donated; whether the donee provided any goods or services in consideration for the donation; and a good faith estimate of their value.

   Also, if a charitable organization (except a governmental unit) receives a quid pro quo donation exceeding $75, the organization must provide a written statement informing the donor that the donation is deductible only to the extent it exceeds the value of goods or services provided by the organization and a good faith estimate of their value.

   A quid pro quo donation is a payment made partly as a donation and partly as consideration for goods or services--except a payment to an organization, organized exclusively for religious purposes, for only an intangible religious benefit that generally is not sold in a commercial transaction outside the donative context.

   New Law: For money donations, regardless of amount, the record keeping requirements are satisfied only if the donor maintains as a record of the donation a bank record or a written communication from the donee showing the donee's name, the donation's date and amount.

   These requirements cannot be satisfied by other written records. The Joint Committee on Taxation's Technical Explanation states, "It is noted that currently, taxpayers are required to have a contemporaneous record of contributions of money, but that many taxpayers may not be aware of the requirement and do not keep a log of such contributions. The provision is intended to provide greater certainty, both to taxpayers and to the Secretary, in determining what may be deducted as a charitable contribution."

   Comment: Money donations should be made by check...