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3. Non-cash donations. If you are receiving in-kind donations of clothing, household goods and the like, there is a new requirement that the donor must receive an acknowledgement from the charity that the material was received in “good used condition, or better” which shall inject further subjectivity to the process but should discourage the donation of old socks and hole-y T-shirts. This has received a high mark from some organizations, but since the IRS has not promulgated regulations, the impact is difficult to predict.
4. Receipting for cash gifts. According to the new law, which is in effect for gifts in 2007 for the most part, no deduction will be permitted unless the donor can substantiate it through a bank record or acknowledgement by the donee. This will have a dramatic impact on organizations that will be asked to provide such acknowledgement. Although it is estimated that 75 percent of tax filers do not itemize their deductions, that still means millions of donors.
There are other provisions that now the Treasury Department admits it is struggling to understand and implement. One such provision requires organizations with revenues of less than $25,000 a year to submit a yearly statement to the IRS notifying it of their status. Although this would only include a current address, names of leaders and any change to status, the IRS must now figure out how to notify 650,000 organizations of the change.
Recent pronouncements by congressional staffers indicate that they wish to pursue further changes, including issues on executive compensation, and the role of 501(c)3 and (c)4 organizations in politics. Senate Finance Chairman Charles Grassley most recently has been focusing his attention on nonprofit hospitals and any needed reforms in that area, since he is of the belief they are not operating as charitable organizations in terms of providing care for the underprivileged.