On the Record: No Substantiation Without Representation

As donors prepare their federal income tax returns this and every year, one question looms: Can their tax-deductible gifts be substantiated?

The Internal Revenue Code has specific provisions under IRC 170 (f)(8) that govern when and how donations must be substantiated. Failure to comply with these rules could prohibit a donor from making a deduction.

While the responsibility to substantiate a charitable gift is placed on the donor, it behooves organizations to ensure that any acknowledgement meets IRC requirements so the donor can claim the gift as a deduction.

The duty to substantiate
A charitable-contribution deduction is not permitted for any gift of $250 or more unless the donor substantiates it with contemporaneous written acknowledgment by the charity. The substantiation must state:

• the amount of cash and a description of property contributed;

• whether the charity provided any goods or services in exchange for the contribution, plus a good-faith estimate of such goods or services; and

• whether the charity provided any intangible religious benefits in exchange for the contribution.

There is no required format for the contemporaneous written acknowledgment; any sort of statement will suffice as long as the requisite information is included.

An acknowledgement is considered “contemporaneous” if a donor obtains it from the charity on or before the date he files his federal income tax return — claiming the charitable deduction — or the due date, including extensions for filing the return.

When substantiation is not required
A donor is not required to substantiate charitable gifts of cash if her total gifts do not exceed $250. In those cases, she can substantiate a contribution of less than $250 by a canceled check or a written receipt of the gift from the charity — showing the organization’s name, date and amount of the contribution.

Absent a canceled check or receipt from the charity, the gift can be substantiated with other reliable written records of the contribution. However, any sort of token or thank-you gift she receives from the charity will not qualify as a receipt, but might serve as evidence of the receipt of a donation.