Temporary and proposed regulations on the substantiation of charitable contributions.

• Position: Tax Executives Institute's Federal Tax Committee

On May 26, 1994, the Internal Revenue Service issued temporary and proposed regulations under section 170(f)(8) of the Internal Revenue Code, relating to the substantiation of charitable contributions of $250 or more. The regulations were printed in the May 27, 1994, issue of the Federal Register (59 Fed. Reg. 27458, 27515) and the July 18, 1994, issue of the Internal Revenue Bulletin (1994-29 I.R.B. 7, 39).

During its separate liaison meetings with each of you last February, Tax Executives Institute raised several issues concerning the Code's new contemporaneous documentation requirements for charitable contributions over $250, including the application of the rules to combined-giving campaigns. The temporary regulations address many of our concerns and resolve the issues concerning combined-giving campaigns in a sensible manner. Although TEI believes the temporary regulations can be finetuned, on the whole we believe that the IRS and Treasury have fashioned a workable solution to what could have become a recordkeeping night-mare for charities, employers that participate in combined-giving campaigns, and the government. We commend you for responding so promptly to taxpayer concerns.

Exception for Corprations

TEI remains concerned, however, that an expansive application of the substantiation requirements in other areas could jeopardize corporate contributions. Section 170(f)(8)'s requirement that donees provide donors with written confirmation of contributions in excess of $250 was enacted as part of the Omnibus Budget Reconciliation Act of 1993 (OBRA). The legislative history of OBRA explains that Congress was concerned with quid pro quo "donations" that, while deducted as charitable contributions, in reality constituted a payment for goods and services. See H.R. Rep. No. 103-213, 103d Cong., 1st Sess. 63-64 (Aug. 4, 1993) (hereinafter referred to as the "Conference Report"). Moreover, although the broad language of the statute sweeps in contributions made by corporations, the substantiation requirement was clearly aimed at individuals.(1)

Large corporations often have extensive charitable-giving programs. Contributions by a company can aggregate millions of dollars a year, spread over scores of locations and thousands of different charities throughout the country. The congressional concern that donors may receive goods or services in return for their "contributions" does not resonate in the corporate setting because the purchase of goods or services by a corporation will generally be deductible under section 162.(2) Therefore, compliance with the new substantiation requirements will impose needless recordkeeping burdens on corporations and...