For a federal agency that’s
been bombarded with criticism, the IRS seems incapable of avoiding controversy.
Now, the IRS wants
charitable organizations to collect the Social Security number of any donor who
gives more than $250. The proposed new rule has sparked a firestorm of
criticism from charities who say it would substantially discourage giving.
amounts to a “well-intentioned but misguided attempt by the IRS to help lax
donors get tax receipts for charitable tax deductions.”
So far, during the ongoing public
comment process, the agency has received 12,000 comments. One commenter reportedly said
that asking donors for their Social Security number would be “the kiss of death”
for nonprofits.
The plan “needlessly
introduces the risks of fraud, identity theft, and decreased donations ,” warned
the National Council of Nonprofits in a position paper.
Miller said many charities with the standard 501(c)(3) designation in her
district (northern Macomb County and the Thumb Area) have expressed grave
concerns about the proposal.
“This proposed rule, intended to
streamline the tax process for donations made to 501(c)(3) organizations, will
undoubtedly have an adverse impact on these charitable organizations’ ability
to raise money,” Miller said. “Since
the IRS released this proposed rule in September, I have heard from nonprofit
organizations in my district, who are rightfully concerned over this proposal’s
impact on their ability to continue to serve members of their communities
most in need.”
IRS Commissioner John Koskinen that said:
“This exposes organizations and individuals alike to a
significant risk for hacking and identity theft, in addition to creating a
sense of public confusion over an organization’s participation in this practice
and the security of a donor’s personal information therein.
“These risks would place additional burdens on the slim
operating budgets of nonprofit organizations – large and small – as many do not
currently possess the data security systems or staff resources necessary to
securely process and store such sensitive personal information as donors’ Social
Security numbers (SSNs).”
limit the effectiveness of the new rule, but charitable organizations believe
the next step by the IRS would be to make it mandatory.
“The proposed rules would
permit a charity to file a special ‘information return’ that a donor could use
to substantiate a charitable contribution of $250 or more—in lieu of the
standard letter charities issue acknowledging donations. The new form, which
would be sent to the donor—and to the IRS–by February 28 of the year after
the gift, would include the donor’s social security number, along with details
of the gift.
prompted the IRS proposal? Some big donors made gifts, and on audit they didn’t
have a receipt (no receipt, no deduction), so they invoked a never-enacted
regulatory exception to the receipt rule: a receipt isn’t required if the
charity files a return to the IRS listing the donation on a special form. Who
cares that no such form exists! The donors argued that an amended Form 990
(that’s the annual reporting form charities file with the IRS) should count,
even years later. But the IRS maintains that Form 990 is not suitable.”
