PPA '06 addresses more than pensions.

• Author: Leggiero, Heather J.
• Position: Pension Protection Act of 2006

Although touted as the first comprehensive pension legislation in more than 30 years, the Pension Protection Act of 2006 (PPA '06), signed by President Bush on Aug. 17, 2006, includes many other provisions addressing charitable giving and tax-exempt entities. About half of the legislation deals with traditional defined-benefit pension plans, but other parts discuss the more popular defined-contribution plans and IRAs, which affect more taxpayers than do the traditional pension rules. Also included are several provisions on charitable contributions and exempt organizations, and rules making permanent several Economic Growth and Tax Relief Reconciliation Act of 2001 changes that otherwise would have expired after 2010. This item will focus on the charitable contribution and exempt organization changes made by the PPA '06.

Donations of Cash, Clothing and Household Items

PPA '06 Section 1216(a) tightens the rules for donations of cash, clothing and household items. This provision comes after a 2004 change designed to deter vehicle contribution abuses. The new provisions indicate Congress's concern over lost tax dollars in the charitable donation area, which in 2003 amounted to $36.9 billion in noncash donations; see "Donors Gave $36.9 Billion In Non-Cash Gifts," The NonProfit Times (8/21/06), at www. nptimes.com/enews/Aug06/news082106_1.html.

Monetary gifts: For 2007 and later, PPA '06 Section 1217(a) requires cash gifts by calendar-year taxpayers to be substantiated, regardless of dollar amount, by a bank record or a written communication from the charity acknowledging the amount and date of the contribution and the charity's name. In other words, no deduction will be allowed for any cash, check or other monetary gift (e.g., debit-card transaction) unless the donor can show a bank record or a written communication from the charity. Self-created records (such as a logbook) will not be accepted.

This change affects not only taxpayers, but charities themselves, increasing the need to generate receipts to receive charitable donations. Many taxpayers may be reluctant to give a cash gift if a receipt is not given (no matter the dollar amount). This may dramatically increase charities' administrative duties.

Material goads: Clothing and household goods will generate a deduction for a taxpayer only if the items are in at least "good" used condition, a term the legislation does not define. This change is effective for donations made after Aug. 17...