Protect the Deductibility of Charitable Contributions

The IRS is more stringently enforcing the technicalities of charitable contribution documentation resulting in disallowed tax deductions.  David and Veronda Durden had written checks totaling $25,171 as contributions to their church during the year.  Their church sent them a year-end acknowledgement of receipt of the contributions.  So why did the Tax Court agree with the IRS and disallow the deduction?

The IRS has defined very specific steps that a taxpayer must take to document a donation.  First, the taxpayer must have a contemporaneous written acknowledgement of the donation from the charity.  The year-end statement from the church would normally have served as such an acknowledgement.

The IRS also requires that the acknowledgement include the cash contributed or a description of the goods donated and the value of any goods or services provided by the charity to the donor.  For example, if the donor paid $250 to attend a dinner, the charity should tell the donor the cost of the dinner received.  Additionally, if no goods or services other than intangible religious benefits were provided to the donor, the acknowledgement must include an affirmative statement to that effect.

In the Durden case, the church failed to include a statement that the Durdens had not received any goods or services from the church in exchange for their contribution.  The Tax Court held that the lack of such an affirmative statement failed to fulfill the IRS requirement and therefore the deduction was disallowed.  The Durdens did obtain such an assurance from the church after the IRS challenged the deduction, but the Tax Court held that the later acknowledgement had not been provided contemporaneously.

Protect the deductibility of your charitable contributions.  If annual acknowledgements received from your church or other groups to whom you contribute do not include a statement such as “The donor did not receive any goods or services in exchange for this contribution”, contact the organization and request a new acknowledgement that includes such language.