Collection Plate Accounting: Are Your Charitable Contributions Properly Documented?

Texas Tax Lawyers Helping Contributors Get Proper Credit for Charitable Donations

Charitable contributions are as American as baseball or apple pie. Indeed, according to a report released by the National Philanthropic Trust, Americans from Texas and other states gave almost $375 billion in charitable contributions during 2015, an increase of four percent over 2014. Most of the giving – approximately 71 percent – comes from individuals.

Attention to the Cause Requires Attention to Detail

Charitable giving feels good and, after all, it’s deductible, right? Well, the surprising answer is: Maybe yes, maybe no. It often depends upon how well the giving is documented. Internal Revenue Code § 170(f) contains some strict guidelines that are all too often ignored by donors and charities (and particularly churches).

Substantiation Requirements in Documentation

For contributions of less than $250, the IRS does not impose any significant substantiation requirements. A cancelled check, for example, is usually sufficient under IRC § 170(f)(17). For donations of $250 or more, however, § 170(f)(8) requires much greater substantiation detail. The donor must obtain a contemporaneous written acknowledgment for cash donations of $250 or more, stating:

  • The amount of the contribution,
  • Whether the charity or church provided goods or services in consideration for the donation, in whole or in part, and
  • A good-faith estimate of the value of any goods or services the charitable organization provided.

If the goods or services received consist solely of intangible religious benefits, the contemporaneous documentation must contain a statement to that effect.

Recent Case from Texas Shows How Givers Can Miss the Mark

A 2016 case involving a Texas citizen shows how easy it is to miss the mark. In the Durden case, the Tax Court took a literal approach to the language of § 170(f)(8) and it cost the Durdens a charitable contribution deduction of $22,517 for cash contributions to their church. As it often does, the IRS kicked the Durden’s return out of the pile for audit because of their generosity. They had cancelled checks for the entire $22,517 amount and they also produced a letter from their church that acknowledged their generous giving.

The IRS declined to accept the letter, saying that it did not contain the required statement under Sec. 170(f)(8)(B) regarding whether goods or services were received in consideration for the contributions. The Durdens subsequently submitted another letter with the required language, but the IRS disregarded it, saying it was not contemporaneous with the gifts. The Tax Court sided with the IRS and disallowed the deduction.

Do Your Contributions Meet the Durden Test?

Attention to detail and careful planning are required to steer safe passage through the winding stream of tax law. High net worth families are particularly susceptible to IRS scrutiny because their contributions tend to be generous in amount. Many Texans find coordinating their charitable giving through a skilled attorney helps them dovetail their giving with their other financial goals.

Romano & Sumner: Skilled, Caring Legal Advisors

Texas BarToday Top Ten BadgeAlign yourself with a group of proven experts in the field of philanthropic giving, estate planning, wealth management, and tax-oriented planning. The attorneys at Romano & Sumner have more than 20 years of combined experience providing expert legal assistance to clients in all types of complex issues, including the best means to employ for charitable giving, wealth management, and asset preservation. At Romano & Sumner, we pride ourselves not only upon our professionalism, but also upon our client service. We know that each situation is unique. We return phone calls within one business day. We keep clients informed. We complete the work within the allotted time frame. Call us at 281-242-0995 or complete our online contact form.

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    Romano & Sumner, PLLC

    Romano & Sumner, PLLC