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bobinmass
Level 1

Does cash donation to a town need a contemporaneous acknowledgment letter?

Donations to towns are exempted from needing the contemporaneous acknowledgment letter in the case of "Contributions from which you benefit", but don't seem to be excluded in the section on Contributions over $250.  Do cash donations to a town (or other political subdivision of a state) over $250 require support of the contemporaneous acknowledgement letter?

1 Best answer

Accepted Solutions
Mike9241
Level 15

Does cash donation to a town need a contemporaneous acknowledgment letter?

A gift to a local government entity is tax deductible if it is solely for “public purposes." The IRS Code Section 170(c)(1), defines "charitable contribution" (which is tax deductible) to include "a contribution or gift to or for the use of":

A State, a possession of the United States, or any political subdivision of any of the foregoing, or the United States or the District of Columbia, but only if the contribution or gift is made for exclusively public purposes.

A local government – a city, town, county, or special purpose district – is considered to be a “political subdivision” of the state.

So, when would a gift to a local government not be “for exclusively public purposes”?  The Code does not specifically define “public purpose,” but it has been interpreted in part to mean that the contribution or gift must not be intended to benefit any particular individual. 

from e IRS Publication 1771, "Charitable Contributions – Substantiation and Disclosure Requirements."

 

Written Acknowledgment
Requirement
A donor cannot claim a tax deduction for any single contribution of $250 or more unless
the donor obtains a contemporaneous, written acknowledgment of the contribution from
the recipient organization. An organization that does not acknowledge a contribution
incurs no penalty; but, without a written acknowledgment, the donor cannot claim the tax
deduction. Although it’s a donor’s responsibility to obtain a written acknowledgment, an
organization can assist a donor by providing a timely, written statement containing:
1. the name of organization
2. the amount of cash contribution
3. a description (but not the value) of non-cash contribution
4. a statement that no goods or services were provided by the organization in return for the
contribution, if that was the case
5. a description and good faith estimate of the value of goods or services, if any, that an
organization provided in return for the contribution

6. a statement that goods or services, if any, that an organization provided in return for
the contribution consisted entirely of intangible religious benefits (described later in this
publication), if that was the case

IRC SEC 170(f)(8)

(8)Substantiation requirement for certain contributions
(A)General rule
No deduction shall be allowed under subsection (a) for any contribution of $250 or more unless the taxpayer substantiates the contribution by a contemporaneous written acknowledgment of the contribution by the donee organization that meets the requirements of subparagraph (B).

IRC REG 1.170A-13(f)

(f) Substantiation of charitable contributions of $250 or more -

(1) In general. No deduction is allowed under section 170(a) for all or part of any contribution of $250 or more unless the taxpayer substantiates the contribution with a contemporaneous written acknowledgment from the donee organization. A taxpayer who makes more than one contribution of $250 or more to a donee organization in a taxable year may substantiate the contributions with one or more contemporaneous written acknowledgments. Section 170(f)(8) does not apply to a payment of $250 or more if the amount contributed (as determined under § 1.170A-1(h)) is less than $250. Separate contributions of less than $250 are not subject to the requirements of section 170(f)(8), regardless of whether the sum of the contributions made by a taxpayer to a donee organization during a taxable year equals $250 or more.

 

 

there is no exception in the code or regs for not obtaining an acknowledgment from your town.

 

 

View solution in original post

2 Replies
Mike9241
Level 15

Does cash donation to a town need a contemporaneous acknowledgment letter?

A gift to a local government entity is tax deductible if it is solely for “public purposes." The IRS Code Section 170(c)(1), defines "charitable contribution" (which is tax deductible) to include "a contribution or gift to or for the use of":

A State, a possession of the United States, or any political subdivision of any of the foregoing, or the United States or the District of Columbia, but only if the contribution or gift is made for exclusively public purposes.

A local government – a city, town, county, or special purpose district – is considered to be a “political subdivision” of the state.

So, when would a gift to a local government not be “for exclusively public purposes”?  The Code does not specifically define “public purpose,” but it has been interpreted in part to mean that the contribution or gift must not be intended to benefit any particular individual. 

from e IRS Publication 1771, "Charitable Contributions – Substantiation and Disclosure Requirements."

 

Written Acknowledgment
Requirement
A donor cannot claim a tax deduction for any single contribution of $250 or more unless
the donor obtains a contemporaneous, written acknowledgment of the contribution from
the recipient organization. An organization that does not acknowledge a contribution
incurs no penalty; but, without a written acknowledgment, the donor cannot claim the tax
deduction. Although it’s a donor’s responsibility to obtain a written acknowledgment, an
organization can assist a donor by providing a timely, written statement containing:
1. the name of organization
2. the amount of cash contribution
3. a description (but not the value) of non-cash contribution
4. a statement that no goods or services were provided by the organization in return for the
contribution, if that was the case
5. a description and good faith estimate of the value of goods or services, if any, that an
organization provided in return for the contribution

6. a statement that goods or services, if any, that an organization provided in return for
the contribution consisted entirely of intangible religious benefits (described later in this
publication), if that was the case

IRC SEC 170(f)(8)

(8)Substantiation requirement for certain contributions
(A)General rule
No deduction shall be allowed under subsection (a) for any contribution of $250 or more unless the taxpayer substantiates the contribution by a contemporaneous written acknowledgment of the contribution by the donee organization that meets the requirements of subparagraph (B).

IRC REG 1.170A-13(f)

(f) Substantiation of charitable contributions of $250 or more -

(1) In general. No deduction is allowed under section 170(a) for all or part of any contribution of $250 or more unless the taxpayer substantiates the contribution with a contemporaneous written acknowledgment from the donee organization. A taxpayer who makes more than one contribution of $250 or more to a donee organization in a taxable year may substantiate the contributions with one or more contemporaneous written acknowledgments. Section 170(f)(8) does not apply to a payment of $250 or more if the amount contributed (as determined under § 1.170A-1(h)) is less than $250. Separate contributions of less than $250 are not subject to the requirements of section 170(f)(8), regardless of whether the sum of the contributions made by a taxpayer to a donee organization during a taxable year equals $250 or more.

 

 

there is no exception in the code or regs for not obtaining an acknowledgment from your town.

 

 

bobinmass
Level 1

Does cash donation to a town need a contemporaneous acknowledgment letter?

thanks for the quick and thorough answer. The reason for my confusion is this section about towns not having to send a letter for payments that are part donations and part goods and services received. Page 5 of Publication 526: 

Written statement. A qualified organization must give you a written statement if you make a payment of more than $75 that is partly a contribution and partly for goods or services. The statement must say you can deduct only the amount of your payment that is more than the value of the goods or services you received. It must also give you a good faith estimate of the value of those goods or services.

The organization can give you the statement either when it solicits or when it receives the payment from you.

Exception. An organization won't have to give you this statement if one of the following is true.

  1. The organization is:

    a. A governmental organization described in (5) under Types of Qualified Organizations, earlier,

So the town doesn't have to give you that statement, but still has to send the contribution acknowledgement?

 

 

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