The following Internal Revenue Codes and Treasury Regulations
pertain to conservation easements:
a. Internal Revenue Code ß 170(h)
b. Treasury Regulation ß 1.170A-13
c. Treasury Regulation ß 1.170A-14
d. IRS Reform Act ß 6007(g), amending IRC ß 2031(c)
e. Internal Revenue Code ß 2031(c)
IRC § 170(h) Qualified Conservation Contribution
(1) In general. For purposes of subsection (f)(3)(B)(iii),
the term "qualified conservation contribution" means
a contribution:
(A) of a qualified real property interest,
(B) to a qualified organization,
(C) exclusively for conservation purposes.
(2) Qualified real property interest. For purposes of
this subsection, the term "qualified real property interest"
means any of the following interests in real property:
(A) the entire interest of the donor other than a qualified mineral
interest,
(B) a remainder interest, and
(C) a restriction (granted in perpetuity) on the use which may
be made of the real property.
(3) Qualified organization. For purposes of paragraph (1),
the term "qualified organization" means an organization
which:
(A) is described in clause (v) or (vi) of subsection (b)(1)(A),
or
(B) is described in section 501(c)(3) and
(i) meets the requirements of section 509(a)(2), or
(ii) meets the requirements of section 509(a)(3) and is controlled
by an organization described in subparagraph (A) or in clause
(i) of this subparagraph.
(4) Conservation purpose defined.
(A) In general. For purposes of this subsection, the term
"conservation purpose" means:
(i) the preservation of land areas for outdoor recreation by,
or the education of, the general public,
(ii) the protection of a relatively natural habitat of fish, wildlife,
or plants, or similar ecosystem,
(iii) the preservation of open space (including farmland and forest
land) where such preservation is:
(I) for the scenic enjoyment of the general public, or
(II) pursuant to a clearly delineated Federal, State, or local
governmental conservation policy,
and will yield a significant public benefit, or
(iv) the preservation of an historically important land area or
a certified historic structure.
(B) Certified historic structure. For purposes of subparagraph
(A)(iv), the term "certified historic structure" means
any building, structure, or land area which:
(i) is listed in the National Register, or
(ii) is located in a registered historic district (as defined
in section 47(c)(3)(B)) and is certified by the Secretary of the
Interior to the Secretary as being of historic significance to
the district.
A building, structure, or land area satisfies the preceding sentence
if it satisfies such sentence either at the time of the transfer
or on the due date (including extensions) for filing the transferor's
return under this chapter for the taxable year in which the transfer
is made.
(5) Exclusively for conservation purposes. For purposes
of this subsection:
(A) Conservation purpose must be protected. A contribution shall
not be treated as exclusively for conservation purposes unless
the conservation purpose is protected in perpetuity.
(B) No surface mining permitted.
(i) In general. Except as provided in clause (ii), in the case
of a contribution of any interest where there is a retention of
a qualified mineral interest, subparagraph (A) shall not be treated
as met if at any time there may be extraction or removal of minerals
by any surface mining method.
[The Taxpayer Relief Act amended subparagraph (ii). For easements
granted on or after January 1, 1998, the following subparagraph
applies.]
(ii) Special rule. With respect to any contribution of property
in which the ownership of the surface estate and mineral interests
has been and remains separated, subparagraph (a) shall be treated
as met if the probability of surface mining occurring on such
property is so remote as to be negligible.
[The Taxpayer Relief Act amended subparagraph (ii). For easements
granted before January 1, 1998, the following subparagraph applies.]
(ii) Special rule. With respect to any contribution of property
in which the ownership of the surface estate and mineral interests
were separated before June 13, 1976, and remain so separated,
subparagraph (A) shall be treated as met if the probability of
surface mining occurring on such property is so remote as to be
negligible.
(6) Qualified mineral interest. For purposes of this subsection,
the term "qualified mineral interest" means:
(A) subsurface oil, gas, or other minerals, and
(B) the right to access to such minerals.
Treas. Reg. § 1.170A-13. Recordkeeping
and Return Requirements for Deductions for Charitable Contributions.
(a) Charitable contributions of money made in taxable years beginning
after December 31, 1982
(1) In general.
If a taxpayer makes a charitable contribution of money in a taxable
year beginning after December 31, 1982, the taxpayer shall maintain
for each contribution one of the following:
(i) A cancelled check.
(ii) A receipt from the donee charitable organization showing
the name of the donee, the date of the contribution, and the amount
of the contribution. A letter or other communication from the
donee charitable organization acknowledging receipt of a contribution
and showing the date and amount of the contribution constitutes
a receipt for purposes of this paragraph (a).
(iii) In the absence of a canceled check or receipt from the donee
charitable organization, other reliable written records showing
the name of the donee, the date of the contribution, and the amount
of the contribution.
(2) Special rules
(i) Reliability of records.
The reliability of the written records described in paragraph
(a)(1)(iii) of this section is to be determined on the basis of
all of the facts and circumstances of a particular case. In all
events, however, the burden shall be on the taxpayer to establish
reliability. Factors indicating that the written records are reliable
include, but are not limited to:
(A) The contemporaneous nature of the writing evidencing the contribution.
(B) The regularity of the taxpayer's recordkeeping procedures.
For example, a contemporaneous diary entry stating the amount
and date of the donation and the name of the donee charitable
organization made by a taxpayer who regularly makes such diary
entries would generally be considered reliable.
(C) In the case of a contribution of a small amount, the existence
of any written or other evidence from the donee charitable organization
evidencing receipt of a donation that would not otherwise constitute
a receipt under paragraph (a)(1)(ii) of this section (including
an emblem, button, or other token traditionally associated with
a charitable organization and regularly given by the organization
to persons making cash donations).
(ii) Information stated in income tax return.
The information required by paragraph (a)(1)(iii) of this section
shall be stated in the taxpayer's income tax return if required
by the return form or its instructions.
(3) Taxpayer option to apply paragraph (d)(1) to pre-1985
contribution.
See paragraph (d)(1) of this section with regard to contributions
of money made on or before December 31, 1984.
(b) Charitable contributions of property other than money made
in taxable years beginning after December 31, 1982
(1) In general. Except in the case of certain charitable contributions
of property made after December 31, 1984, to which paragraph (c)
of this section applies, any taxpayer who makes a charitable contribution
of property other than money in a taxable year beginning after
December 31, 1982, shall maintain for each contribution a receipt
from the donee showing the following information:
(i) The name of the donee.
(ii) The date and location of the contribution.
(iii) A description of the property in detail reasonably sufficient
under the circumstances. Although the fair market value of the
property is one of the circumstances to be taken into account
in determining the amount of detail to be included on the receipt,
such value need not be stated on the receipt. A letter or other
written communication from the donee acknowledging receipt of
the contribution, showing the date of the contribution, and containing
the required description of the property contributed constitutes
a receipt for purposes of this paragraph. A receipt is not required
if the contribution is made in circumstances where it is impractical
to obtain a receipt (e.g., by depositing property at a charity's
unattended drop site). In such cases, however, the taxpayer shall
maintain reliable written records with respect to each item of
donated property that include the information required by paragraph
(b)(2)(ii) of this section.
(2) Special rules
(i) Reliability of records.
The rules described in paragraph (a)(2)(i) of this section also
apply to this paragraph (b) for determining the reliability of
the written records described in paragraph (b)(1) of this section
(ii) Content of records.
The written records described in paragraph (b)(1) of this section
shall include the following information and such information shall
be stated in the taxpayers income tax return if required by the
return form or its instructions:
(A) The name and address of the donee organization to which the
contribution was made.
(B) The date and location of the contribution.
(C) A description of the property in detail reasonable under the
circumstances (including the value of the property), and, in the
case of securities, the name of the issuer, the type of security,
and whether or not such security is regularly traded on a stock
exchange or in an over-the-counter market.
(D) The fair market value of the property at the time the contribution
was made, the method utilized in determining the fair market value,
and, if the valuation was determined by appraisal, a copy of the
signed report of the appraiser.
(E) In the case of property to which section 170(e) applies, the
cost or other basis, adjusted as provided by section 1016, the
reduction by reason of section 170(e)(1) in the amount of the
charitable contribution otherwise taken into account, and the
manner in which such reduction was determined. A taxpayer who
elects under paragraph (d)(2) of section 1.170A-8 to apply section
170(e)(1) to contributions and carryovers of 30 percent capital
gain property shall maintain a written record indicating the years
for which the election was made and showing the contributions
in the current year and carryovers from preceding years to which
it applies. For the definition of the term "30-percent capital
gain property," see paragraph (d)(3) of section 1.170A-8.
(F) If less than the entire interest in the property is contributed
during the taxable year, the total amount claimed as a deduction
for the taxable year due to the contribution of the property,
and the amount claimed as a deduction in any prior year or years
for contributions of other interests in such property, the name
and address of each organization to which any such contribution
was made, the place where any such property which is tangible
property is located or kept, and the name of any person, other
than the organization to which the property giving rise to the
deduction was contributed, having actual possession of the property.
(G) The terms of any agreement or understanding entered into by
or on behalf of the taxpayer which relates to the use, sale, or
other disposition of the property contributed, including for example,
the terms of any agreement or understanding which:
(1) Restricts temporarily or permanently the donee's right to
use or dispose of the donated property,
(2) Reserves to, or confers upon, anyone (other than the donee
organization or an organization participating with the donee organization
in cooperative fund-raising) any right to the income from the
donated property or to the possession of the property, including
the right to vote donated securities, to acquire the property
by purchase or otherwise, or to designate the person having such
income, possession, or right to acquire, or
(3) Earmarks donated property for a particular use.
(4) Deductions in excess of $500 claimed for a charitable contribution
of property other than money
(i) In general.
In addition to the information required under paragraph (b)(2)(ii)
of this section, if a taxpayer makes a charitable contribution
of property other than money in a taxable year beginning after
December 31, 1982, and claims a deduction in excess of $500 in
respect of the contribution of such item, the taxpayer shall maintain
written records that include the following information with respect
to such item of donated property, and shall state such information
in his or her income tax return if required by the return form
or its instructions:
(A) The manner of acquisition, as for example by purchase, gift
bequest, inheritance, or exchange, and the approximate date of
acquisition of the property by the taxpayer or, if the property
was created, produced, or manufactured by or for the taxpayer,
the approximate date the property was substantially completed.
(B) The cost or other basis, adjusted as provided by section 1016,
of property, other than publicly traded securities, held by the
taxpayer for a period of less than 12 months (6 months for property
contributed in taxable years beginning after December 31, 1982,
and on or before June 6, 1988, immediately preceding the date
on which the contribution was made and, when the information is
available, of property, other than publicly traded securities,
held for a period of 12 months or more (6 months or more for property
contributed in taxable years beginning after December 31, 1982,
and on or before June 6, 1988, preceding the date on which the
contribution was made.
(ii) Information on acquisition date or cost basis not available.
If the return form or its instructions require the taxpayer to
provide information on either the acquisition date of the property
or the cost basis as described in paragraph (b)(3)(i) (A) and
(B), respectively, of this section, and the taxpayer has reasonable
cause for not being able to provide such information, the taxpayer
shall attach an explanatory statement to the return. If a taxpayer
has reasonable cause for not being able to provide such information,
the taxpayer shall not be disallowed a charitable contribution
deduction under section 170 for failure to comply with paragraph
(b)(3)(i) (A) and (B) of the section.
(4) Taxpayer option to apply paragraph (d) (1) and (2)
to pre-1985 contributions.
See paragraph (d) (1) and (2) of this section with regard to contributions
of property made on or before December 31, 1984.
(c) Deductions in excess of $5,000 for certain charitable contributions
of property made after December 31, 1984
(1) General Rule
(i) In general.
This paragraph applies to any charitable contribution made after
December 31, 1984, by an individual, closely held corporation,
personal service corporation, partnership, or S corporation of
an item of property (other than money and publicly traded securities
to which section 1.170A-13(c)(7)(xi)(B) does not apply if the
amount claimed or reported as a deduction under section 170 with
respect to such item exceeds $5,000. This paragraph also applies
to charitable contributions by C corporations (as defined in section
1361(a)(2) of the Code) to the extent described in paragraph (c)(2)(ii)
of this section. No deduction under section 170 shall be allowed
with respect to a charitable contribution to which this paragraph
applies unless the substantiation requirements described in paragraph
(c)(2) of this section are met. For purposes of this paragraph
(c), the amount claimed or reported as a deduction for an item
of property is the aggregate amount claimed or reported as a deduction
for a charitable contribution under section 170 for such items
of property and all similar items of property (as defined in paragraph
(c)(7)(iii) of this section) by the same donor for the same taxable
year (whether or not donated to the same donee).
(ii) Special rule for property to which section 170(e) (3) or
(4) applies. For purposes of this paragraph (c), in computing
the amount claimed or reported as a deduction for donated property
to which section 170(e) (3) or (4) applies (pertaining to certain
contributions of inventory and scientific equipment) there shall
be taken into account only the amount claimed or reported as a
deduction in excess of the amount which would have been taken
into account for tax purposes by the donor as costs of goods sold
if the donor had sold the contributed property to the donee. For
example, assume that a donor makes a contribution from inventory
of clothing for the care of the needy to which section 170(e)(3)
applies. The cost of the property to the donor was $5,000, and,
pursuant to section 170(e)(3)(B), the donor claims a charitable
contribution deduction of $8,000 with respect to the property.
Therefore, $3,000 ($8,000-$5,000) is the amount taken into account
for purposes of determining whether the $5,000 threshold of this
paragraph (c)(1) is met.
(2) Substantiation requirements
(i) In general.
Except as provided in paragraph (c)(2)(ii) of this section, a
donor who claims or reports a deduction with respect to a charitable
contribution to which this paragraph (c) applies must comply with
the following three requirements:
(A) Obtain a qualified appraisal (as defined in paragraph (c)
(3) of this section) for such property contributed. If the contributed
property is a partial interest, the appraisal shall be of the
partial interest.
(B) Attach a fully completed appraisal summary (as defined in
paragraph (c) (4) of this section) to the tax return (or, in the
case of a donor that is a partnership or S corporation, the information
return) on which the deduction for the contribution is first claimed
(or reported) by the donor.
(C) Maintain records containing the information required by paragraph
(b) (2) (ii) of this section.
(ii) Special rules for certain nonpublicly traded stock, certain
publicly traded securities, and contributions by certain C corporations.
(A) In cases described in paragraph (c) (2) (ii) (B) of this section,
a qualified appraisal is not required, and only a partially completed
appraisal summary form (as described in paragraph (c) (4) (iv)
(A) of this section) is required to be attached to the tax or
information return specified in paragraph (c)(2)(i)(B) of this
section. However, in all cases donors must maintain records containing
the information required by paragraph (b)(2)(ii) of this section.
(B) This paragraph (c)(2)(ii) applies in each of the following
cases:
(1) The contribution of nonpublicly traded stock, if the amount
claimed or reported as a deduction for the charitable contribution
of such stock is greater than $5,000 but does not exceed $10,000;
(2) The contribution of a security to which paragraph (c) (7)
(xi) (B) of this section applies; and
(3) The contribution of an item of property or of similar items
of property described in paragraph (c)(1) of this section made
after June 6, 1988, by a C corporation (as defined in section
1361(a)(2) of the Code), other than a closely held corporation
or a personal service corporation.
(3) Qualified appraisal
(i) In general. For purposes of this paragraph (c), the term "qualified
appraisal" means an appraisal document that
(A) Relates to an appraisal that is made not earlier than 60 days
prior to the date of contribution of the appraised property nor
later than the date specified in paragraph (c) (3) (iv) (B) of
this section;
(B) Is prepared, signed, and dated by a qualified appraiser (within
the meaning of paragraph (c) (5) of this section);
(C) Includes the information required by paragraph (c)(3)(ii)
of this section; and
(D) Does not involve an appraisal fee prohibited by paragraph
(c) (6) of this section.
(ii) Information included in qualified appraisal.
A qualified appraisal shall include the following information:
(A) A description of the property in sufficient detail for a person
who is not generally familiar with the type of property to ascertain
that the property that was appraised is the property that was
(or will be) contributed;
(B) In the case of tangible property, the physical condition of
the property;
(C) The date (or expected date) of contribution to the donee;
(D) The terms of any agreement or understanding entered into (or
expected to be entered into) by or on behalf of the donor or donee
that relates to the use, sale, or other disposition of the property
contributed, including, for example, the terms of any agreement
or understanding that
(1) Restricts temporarily or permanently a donee's right to use
or dispose of the donated property,
(2) Reserves to, or confers upon, anyone (other than a donee organization
or an organization participating with a donee organization in
cooperative fund-raising) any right to the income from the contributed
property or to the possession of the property, including the right
to vote donated securities, to acquire the property by purchase
or otherwise, or to designate the person having such income, possession,
or right to acquire, or
(3) Earmarks donated property for a particular use;
(E) The name, address, and (if a taxpayer identification number
is otherwise required by section 6109 and the regulations thereunder)
the identifying number of the qualified appraiser; and, if the
qualified appraiser is acting in his or her capacity as a partner
in a partnership, an employee of any person (whether an individual,
corporation, or partnerships), or an independent contractor engaged
by a person other than the donor, the name, address, and taxpayer
identification number (if a number is otherwise required by section
6109 and the regulations thereunder) of the partnership or the
person who employs or engages the qualified appraiser;
(F) The qualifications of the qualified appraiser who signs the
appraisal, including the appraiser's background, experience, education,
and membership, if any, in professional appraisal associations;
(G) A statement that the appraisal was prepared for income tax
purposes;
(H) The date (or dates) on which the property was appraised;
(I) The appraised fair market value (within the meaning of section
1.170A-1 (c) (2)) of the property on the date (or expected date)
of contribution;
(J) The method of valuation used to determine the fair market
value, such as the income approach, the market-data approach,
and the replacement-cost-less-depreciation approach; and
(K) The specific basis for the valuation, such as specific comparable
sales transactions or statistical sampling, including a justification
for using sampling and an explanation of the sampling procedure
employed.
(iii) Effect of signature of the qualified appraiser.
Any appraiser who falsely or fraudulently overstates the value
of the contributed property referred to in a qualified appraisal
or appraisal summary (as defined in paragraphs (c) (3) and (4),
respectively, of this section) that the appraiser has signed may
be subject to a civil penalty under section 6701 for aiding and
abetting an understatement of tax liability and, moreover, may
have appraisals disregarded pursuant to 31 U.S.C. 330(c).
(iv) Special rules
(A) Number of qualified appraisals.
For purposes of paragraph (c) (2) (i) (A) of this section, a separate
qualified appraisal is required for each item of property that
is not included in a group of similar items of property. See paragraph
(c)(7)(iii) of this section for the definition of similar items
of property. Only one qualified appraisal is required for a group
of similar items of property contributed in the same taxable year
of the donor, although a donor may obtain separate qualified appraisals
for each item of property. A qualified appraisal prepared with
respect to a group of similar items of property shall provide
all the information required by paragraph (c)(3)(ii) of this section
for each item of similar property, except that the appraiser may
select any items whose aggregate value is appraised at $100 or
less and provide a group description of such items.
(B) Time of receipt of qualified appraisal.
The qualified appraisal must be received by the donor before the
due date (including extensions) of the return on which a deduction
is first claimed (or reported in the case of a donor that is a
partnership or S corporation) under section 170 with respect to
the donated property, or, in the case of a deduction first claimed
(or reported) on an amended return, the date on which the return
is filed.
(C) Retention of qualified appraisal.
The donor must retain the qualified appraisal in the donor's records
for so long as it may be relevant in the administration of any
internal revenue law.
(D) Appraisal disregarded pursuant to 31 U.S.C. 330(c).
If an appraisal is disregarded pursuant to 31 U.S.C. 330(c) it
shall have no probative effect as to the value of the appraised
property. Such appraisal will, however, otherwise constitute a
"qualified appraisal" for purposes of this paragraph
(c) if the appraisal summary includes the declaration described
in paragraph (c)(4)(ii)(L)(2) and the taxpayer had no knowledge
that such declaration was false as of the time described in paragraph
(c)(4)(i)(B) of this section.
(4) Appraisal summary
(i) In general.
For purposes of this paragraph (c), except as provided in paragraph
(c)(4)(iv)(A) of this section, the term "appraisal summary"
means a summary of a qualified appraisal that
(A) Is made on the form prescribed by the Internal Revenue Service;
(B) Is signed and dated (as described in paragraph (c)(4)(iii)
of this section) by the donee (or presented to the donee for signature
in cases described in paragraph (c)(4)(iv)(C)(2) of this section);
(C) Is signed and dated by the qualified appraiser (within the
meaning of paragraph (c)(5) of this section) who prepared the
qualified appraisal (within the meaning of paragraph (c)(3) of
this section); and
(D) Includes the information required by paragraph (c) (4) (ii)
of this section.
(ii) Information included in an appraisal summary.
An appraisal summary shall include the following information:
(A) The name and taxpayer identification number of the donor (social
security number if the donor is an individual or employer identification
number if the donor is a partnership or corporation);
(B) A description of the property in sufficient detail for a person
who is not generally familiar with the type of property to ascertain
that the property that was appraised is the property that was
contributed;
(C) In the case of tangible property, a brief summary of the overall
physical condition of the property at the time of the contribution;
(D) The manner of acquisition (e.g., purchase, exchange, gift,
or bequest) and the date of acquisition of the property by the
donor, or, if the property was created, produced, or manufactured
by or for the donor, a statement to that effect and the approximate
date the property was substantially completed;
(E) The cost or other basis of the property adjusted as provided
by section 1016;
(F) The name, address, and taxpayer identification number of the
donee;
(G) The date the donee received the property;
(H) For charitable contributions made after June 6, 1988, a statement
explaining whether or not the charitable contribution was made
by means of a bargain sale and the amount of any consideration
received from the donee for the contribution;
(I) The name, address, and (if a taxpayer identification number
is otherwise required by section 6109 and the regulations thereunder)
the identifying number of the qualified appraiser who signs the
appraisal summary and of other persons as required by paragraph
(c)(3)(ii)(E) of this section;
(J) The appraised fair market value of the property on the date
of contribution;
(K) The declaration by the appraiser described in paragraph (c)(5)(i)
of this section;
(L) A declaration by the appraiser stating that
(1) The fee charged for the appraisal is not of a type prohibited
by paragraph (c)(6) of this section; and
(2) Appraisals prepared by the appraiser are not being disregarded
pursuant to 31 U.S.C. 330(c) on the date the appraisal summary
is signed by the appraiser; and
(M) Such other information as may be specified by the form.
(iii) Signature of the original donee.
The person who signs the appraisal summary for the donee shall
be an official authorized to sign the tax or information returns
of the donee, or a person specifically authorized to sign appraisal
summaries by an official authorized to sign the tax or information
returns of such done. In the case of a donee that is a governmental
unit, the person who signs the appraisal summary for such donee
shall be the official authorized by such donee to sign appraisal
summaries. The signature of the donee on the appraisal summary
does not represent concurrence in the appraised value of the contributed
property. Rather, it represents acknowledgment of receipt of the
property described in the appraisal summary on the date specified
in the appraisal summary and that the donee understands the information
reporting requirements imposed by section 6050L and section 1.6050L-1.
In general, section 1.6050L-1 requires the donee to file an information
return with the Internal Revenue Service in the event the donee
sells, exchanges, consumes, or otherwise disposes of the property
(or any portion thereof) described in the appraisal summary within
2 years after the date of the donor's contribution of such property.
(iv) Special rules
(A) Content of appraisal summary required in certain cases.
With respect to contributions of nonpublicly traded stock described
in paragraph (c)(2)(ii)(B)(1) of this section, contributions of
securities described in paragraph (c)(7)(xi)(B) of this section,
and contributions by C corporations described in paragraph (c)(2)(ii)(B)(3)
of this section, the term "appraisal summary" means
a document that
(1) Complies with the requirements of paragraph (c)(4)(i) (A)
and (B) of this section,
(2) Includes the information required by paragraph (c)(4)(ii)
(A) through (H) of this section,
(3) Includes the amount claimed or reported as a charitable contribution
deduction, and
(4) In the case of securities described in paragraph (c)(7)(xi)(B)
of this section, also includes the pertinent average trading price
(as described in paragraph (c)(7)(xi)(B)(2)(iii) of this section).
(B) Number of appraisal summaries.
A separate appraisal summary for each item of property described
in paragraph (c)(1) of this section must be attached to the donor's
return. If, during the donor's taxable year, the donor contributes
similar items of property described in paragraph (c)(1) of this
section to more than one donee, the donor shall attach to the
donor's return a separate appraisal summary for each donee. See
paragraph (c)(7)(iii) of this section for the definition of similar
items of property. If, however, during the donor's taxable year,
a donor contributes similar items of property described in paragraph
(c)(1) of this section to the same donee, the donor may attach
to the donor's return a single appraisal summary with respect
to all similar items of property contributed to the same donee.
Such an appraisal summary shall provide all the information required
by paragraph (c)(4)(ii) of this section for each item of property,
except that the appraiser may select any items whose aggregate
value is appraised at $100 or less and provide a group description
for such items.
(C) Manner of acquisition, cost basis and donee's signature.
(1) If a taxpayer has reasonable cause for being unable to provide
the information required by paragraph (c)(4)(ii) (D) and (E) of
this section (relating to the manner of acquisition and basis
of the contributed property), an appropriate explanation should
be attached to the appraisal summary. The taxpayer's deduction
will not be disallowed simply because of the inability (for reasonable
cause) to provide these items of information.
(2) In rare and unusual circumstances in which it is impossible
for the taxpayer to obtain the signature of the donee on the appraisal
summary as required by paragraph (c)(4)(i)(B) of this section,
the taxpayer's deduction will not be disallowed for that reason
provided that the taxpayer attaches a statement to the appraisal
summary explaining, in detail, why it was not possible to obtain
the donee's signature. For example, if the donee ceases to exist
as an entity subsequent to the date of the contribution and prior
to the date when the appraisal summary must be signed, and the
donor acted reasonably in not obtaining the donee's signature
at the time of the contribution, relief under this paragraph (c)(4)(iv)(C)(2)
would generally be appropriate.
(D) Information excluded from certain appraisal summaries.
The information required by paragraph (c)(4)(i)(C), paragraph
(c)(4)(ii) (D), (E), (H) through (M), and paragraph (c)(4)(iv)(A)(3),
and the average trading price referred to in paragraph (c)(4)(iv)(A)(4)
of this section do not have to be included on the appraisal summary
at the time it is signed by the donee or a copy is provided to
the donee pursuant to paragraph (c)(4)(iv)(E) of this section.
(E) Statement to be furnished by donors to donees.
Every donor who presents an appraisal summary to a donee for signature
after June 6, 1988, in order to comply with paragraph (c)(4)(i)(B)
of this section shall furnish a copy of the appraisal summary
to such donee.
(F) Appraisal summary required to be provided to partners and
S corporation shareholders.
If the donor is a partnership or S corporation, the donor shall
provide a copy of the appraisal summary to every partner or shareholder,
respectively, who receives an allocation of a charitable contribution
deduction under section 170 with respect to the property described
in the appraisal summary.
(G) Partners and S corporation shareholders.
A partner of a partnership or shareholder of an S corporation
who receives an allocation of a deduction under section 170 for
a charitable contribution of property to which this paragraph
(c) applies must attach a copy of the partnership's or S corporation's
appraisal summary to the tax return on which the deduction for
the contribution is first claimed. If such appraisal summary is
not attached, the partner's or shareholder's deduction shall not
be allowed except as provided for in paragraph (c)(4)(iv)(H) of
this section.
(H) Failure to attach appraisal summary.
In the event that a donor fails to attach to the donor's return
an appraisal summary as required by paragraph (c)(2)(i)(B) of
this section, the Internal Revenue Service may request that the
donor submit the appraisal summary within 90 days of the request.
If such a request is made and the donor complies with the request
within the 90-day period, the deduction under section 170 shall
not be disallowed for failure to attach the appraisal summary,
provided that the donor's failure to attach the appraisal summary
was a good faith omission and the requirements of paragraph (c)
(3) and (4) of this section are met (including the completion
of the qualified appraisal prior to the date specified in paragraph
(c)(3)(iv)(B) of this section).
(5) Qualified appraiser
(i) In general.
The term "qualified appraiser" means an individual (other
than a person described in paragraph (c)(5)(iv) of this section)
who includes on the appraisal summary (described in paragraph
(c)(4) of this section), a declaration that
(A) The individual either holds himself or herself out to the
public as an appraiser or performs appraisals on a regular basis;
(B) Because of the appraiser's qualifications as described in
the appraisal (pursuant to paragraph (c)(3)(ii)(F) of this section),
the appraiser is qualified to make appraisals of the type of property
being valued;
(C) The appraiser is not one of the persons described in paragraph
(c)(5)(iv) of this section; and
(D) The appraiser understands that an intentionally false or fraudulent
overstatement of the value of the property described in the qualified
appraisal or appraisal summary may subject the appraiser to a
civil penalty under section 6701 for aiding and abetting an understatement
of tax liability, and, moreover, the appraiser may have appraisals
disregarded pursuant to 31 U.S.C. 330(c) (see paragraph (c)(3)(iii)
of this section).
(ii) Exception.
An individual is not a qualified appraiser with respect to a particular
donation, even if the declaration specified in paragraph (c)(5)(i)
of this section is provided in the appraisal summary, if the donor
had knowledge of facts that would cause a reasonable person to
expect the appraiser falsely to overstate the value of the donated
property (e.g., the donor and the appraiser make an agreement
concerning the amount at which the property will be valued and
the donor knows that such amount exceeds the fair market value
of the property).
(iii) Numbers of appraisers.
More than one appraiser may appraise the donated property. If
more than one appraiser appraises the property, the donor does
not have to use each appraiser's appraisal for purposes of substantiating
the charitable contribution deduction pursuant to this paragraph
(c). If the donor uses the appraisal of more than one appraiser,
or if two or more appraisers contribute to a single appraisal,
each appraiser shall comply with the requirements of this paragraph
(c), including signing the qualified appraisal and appraisal summary
as required by paragraphs (c)(3)(i)(B) and (c)(4)(i)(C) of this
section, respectively.
(iv) Qualified appraiser exclusions.
The following persons cannot be qualified appraisers with respect
to particular property:
(A) The donor or the taxpayer who claims or reports a deductions
under section 170 for the contribution of the property that is
being appraised.
(B) A party to the transaction in which the donor acquired the
property being appraised (i.e., the person who sold, exchanged,
or gave the property to the donor, or any person who acted as
an agent for the transferor or for the donor with respect to such
sale, exchange, or gift), unless the property is donated within
2 months of the date of acquisition and its appraised value does
not exceed its acquisition price.
(C) The donee of the property.
(D) Any person employed by any of the foregoing persons (e.g.,
if the donor acquired a painting from an art dealer, neither the
art dealer nor persons employed by the dealer can be qualified
appraisers with respect to that painting).
(E) Any person related to any of the foregoing persons under section
267(b), or, with respect to appraisals made after June 6, 1988,
married to a person who is in a relationship described in section
267(b) with any of the foregoing persons.
(F) An appraiser who is regularly used by any person described
in paragraph (c)(5)(iv) (A), (B), or (C) of this section and who
does not perform a majority of his or her appraisals made during
his or her taxable year for other persons.
(6) Appraisal fees
(i) In general.
Except as otherwise provided in paragraph (c)(6)(ii) of this section,
no part of the fee arrangement for a qualified appraisal can be
based, in effect, on a percentage (or set of percentages) of the
appraised value of the property. If a fee arrangement for an appraisal
is based in whole or in part on the amount of the appraised value
of the property, if any, that is allowed as a deduction under
section 170, after Internal Revenue Service examination or otherwise,
it shall be treated as a fee based on a percentage of the appraised
value of the property. For example, an appraiser's fee that is
subject to reduction by the same percentage as the appraised value
may be reduced by the Internal Revenue Service would be treated
as a fee that violates this paragraph (c)(6).
(ii) Exception.
Paragraph (c)(6)(i) of this section does not apply to a fee paid
to a generally recognized association that regulates appraisers
provided all of the following requirements are met:
(A) The association is not organized for profit and no part of
the net earnings of the association inures to the benefit of any
private shareholder or individual (these terms have the same meaning
as in section 501(c)),
(B) The appraiser does not receive any compensation from the association
or any other persons for making the appraisal, and
(C) The fee arrangement is not based in whole or in part on the
amount of the appraised value of the donated property, if any,
that is allowed as a deduction under section 170 after Internal
Revenue Service examination or otherwise.
(7) Meaning of terms.
For purposes of this paragraph (c)
(i) Closely held corporation.
The term "closely held corporation" means any corporation
(other than an S corporation) with respect to which the stock
ownership requirement of paragraph (2) of section 542(a) of the
Code is met.
(ii) Personal service corporation.
The term "personal service corporation" means any corporation
(other than an S corporation) which is a service organization
(within the meaning of section 414(m)(3) of the Code).
(iii) Similar items of property.
The phrase "similar items of property" means property
of the same generic category or type, such as stamp collections
(including philatelic supplies and books on stamp collecting),
coin collections (including numismatic supplies and books on coin
collecting), lithographs, paintings, photographs, books, nonpublicly
traded stock, nonpublicly traded securities other than nonpublicly
trade stock, land, buildings, clothing, jewelry, furniture, electronic
equipment, household appliances, toys, everyday kitchenware, china,
crystal, or silver. For example, if a donor claims on her return
for the year deductions of $2,000 for books given by her to College
A, $2,500 for books given by her to College B, and $900 for books
given by her to College C, the $5,000 threshold of paragraph (c)(1)
of this section is exceeded. Therefore, the donor must obtain
a qualified appraisal for the books and attach to her return three
appraisal summaries for the books donated to A, B, and C. For
rules regarding the number of qualified appraisals and appraisal
summaries required when similar items of property are contributed,
see paragraphs (c)(3)(iv)(A) and (c)(4)(iv)(B), respectively,
of this section.
(iv) Donor.
The term "donor" means a person or entity (other than
an organization described in section 170(c) to which the donated
property was previously contributed) that makes a charitable contribution
of property.
(v) Donee.
The term "donee" means
(A) Except as provided in paragraph (c)(7)(v) (B) and (C) of this
section, an organization described in section 170(c) to which
property is contributed,
(B) Except as provided in paragraph (c)(7)(v)(C) of this section,
in the case of a charitable contribution of property placed in
trust for the benefit of an organization described in section
170(c), the trust, or
(C) In the case of a charitable contribution of property placed
in trust for the benefit of an organization described in section
170(c) made on or before June 6, 1988, the beneficiary that is
an organization described in section 170(c), or if the trust has
assumed the duties of a donee by signing the appraisal summary
pursuant to paragraph (c)(4)(i)(B) of this section, the trust.
In general, the term, refers only to the original donee. However,
with respect to paragraph (c)(3)(ii)(D), the last sentence of
paragraph (c)(4)(iii), and paragraph (c)(5)(iv)(C) of this section,
the term "donee" means the original donee and all successor
donees in cases where the original donee transfers the contributed
property to a successor donee after July 5, 1988.
(vi) Original donee.
The term "original donee" means the donee to or for
which property is initially donated by a donor.
(vii) Successor donee.
The term "successor donee" means any donee of property
other than its original donee (i.e., a transferee of property
for less than fair market value from an original donee or another
successor donee).
(viii) Fair market value.
For the meaning of the term "fair market value," see
section 1.170A-1(c)(2).
(ix) Nonpublicly traded securities.
The term "nonpublicly traded securities" means securities
(within the meaning of section 165(g)(2) of the Code) which are
not publicly traded securities as defined in paragraph (c)(7)(xi)
of this section.
(x) Nonpublicly traded stock.
The term "nonpublicly traded stock" means any stock
of a corporation (evidence by a stock certificate) which is not
a publicly traded security. The term stock does not include a
debenture or any other evidence of indebtedness.
(xi) Publicly traded securities
(A) In general. Except as provided in paragraph (c)(7)(xi)(C)
of this section, the term "publicly traded securities"
means securities (within the meaning of section 165(g)(2) of the
Code) for which (as of the date of the contribution) market quotations
are readily available on an established securities market. For
purposes of this section, market quotations are readily available
on an established securities market with respect to a security
if:
(1) The security is listed on the New York Stock Exchange, the
American Stock Exchange, or any city or regional exchange in which
quotations are published on a daily basis, including foreign securities
listed on a recognized foreign, national, or regional exchange
in which quotations are published on a daily basis;
(2) The security is regularly traded in the national or regional
over-the-counter market, for which published quotations are available;
or
(3) The security is a share of an open-end investment company
(commonly known as a mutual fund) registered under the Investment
Company Act of 1940, as amended (15 U.S.C. 80a-1 to 80b-2), for
which quotations are published on a daily basis in a newspaper
of general circulation throughout the United States.
(If the market value of an issue of a security is reflected only
on an interdealer quotation system, the issue shall not be considered
to be publicly traded unless the special rule described in paragraph
(c)(7)(xi)(B) of this section is satisfied.)
(B) Special rule
(1) In General.
An issue of a security that does not satisfy the requirements
of paragraph (c)(7)(xi)(A) (1), (2), or (3) of this section shall
nonetheless be considered to have market quotations readily available
on an established securities market for purposes of paragraph
(c)(7)(xi)(A) of this section if all of the following five requirements
are met:
(i) The issue is regularly traded during the computational period
(as defined in paragraph (c)(7)(xi)(B)(2)(iv) of this section)
in a market that is reflected by the existence of an interdealer
quotation system for the issue,
(ii) The issuer or an agent of the issuer computes the average
trading price (as defined in paragraph (c)(7)(xi)(B)(2)(iii) of
this section) for the issue for the computational period,
(iii) The average trading price and total volume of the issue
during the computational period are published in a newspaper of
general circulation throughout the United States not later than
the last day of the month following the end of the calendar quarter
in which the computational period ends,
(iv) The issuer or its agent keeps books and records that list
for each transaction during the computational period involving
each issue covered by this procedure the date of the settlement
of the transaction, the name and address of the broker or dealer
making the market in which the transaction occurred, and the trading
price and volume, and
(v) The issuer or its agent permits the Internal Revenue Service
to review the books and records described in paragraph (c)(7)(xi)(B)(1)(iv)
of this section with respect to transactions during the computational
period upon giving reasonable notice to the issuer or agent.
(2) Definitions.
For purposes of this paragraph (c)(7)(xi)(B)
(i) Issue of a security.
The term "issue of a security" means a class of debt
securities with the same obligor and identical terms except as
to their relative denominations (amounts) or a class of stock
having identical rights.
(ii) Interdealer quotation system.
The term "interdealer quotation system" means any system
of general circulation to brokers and dealers that regularly disseminates
quotations of obligations by two or more identified brokers or
dealers, who are not related to either the issuer of the security
or to the issuer's agent, who compute the average trading price
of the security. A quotation sheet prepared and distributed by
a broker or dealer in the regular course of its business and containing
only quotations of such broker or dealer is not an interdealer
quotation system.
(iii) Average trading price.
The term "average trading price" means the mean price
of all transactions (weighted by volume), other than original
issue or redemption transactions, conducted through a United States
office of a broker or dealer who maintains a market in the issue
of the security during the computational period. For this purpose,
bid and asked quotations are not taken into account.
(iv) Computational period.
For calendar quarters beginning on or after June 6, 1988, the
term "computational period" means weekly during October
through December (beginning with the first Monday in October and
ending with the first Sunday following the last Monday in December)
and monthly during January through September (beginning January
1). For calendar quarters beginning before June 6, 1988, the term
"computational period" means weekly during October through
December and monthly during January through September.
(C) Exception.
Securities described in paragraph (c)(7)(xi) (A) or (B) of this
section shall not be considered publicly traded securities if
(1) The securities are subject to any restrictions that materially
affect the value of the securities to the donor or prevent the
securities from being freely traded, or
(2) If the amount claimed or reported as a deduction with respect
to the contribution of the securities is different than the amount
listed in the market quotations that are readily available on
an established securities market pursuant to paragraph (c)(7)(xi)
(A) or (B) of this section.
(D) Market quotations and fair market value.
The fair market value of a publicly traded security, as defined
in this paragraph (c)(7)(xi), is not necessarily equal to its
market quotation, its average trading price (as defined in paragraph
(c)(7)(xi)(B)(2)(iii) of this section), or its face value, if
any. See section 1.170A-1(c)(2) for the definition of "fair
market value."
(d) Charitable contributions; information required in support
of deductions for taxable years beginning before January 1, 1983
(1) In general.
This paragraph (d)(1) shall apply to deductions for charitable
contributions made in taxable years beginning before January 1,
1983. At the option of the taxpayer the requirements of this paragraph
(d)(1) shall also apply to all charitable contributions made on
or before December 31, 1984 (in lieu of the requirements of paragraphs
(a) and (b) of this section). In connection with claims for deductions
for charitable contributions, taxpayers shall state in their income
tax returns the name of each organization to which a contribution
was made and the amount and date of the actual payment of each
contribution. If a contribution is made in property other than
money, the taxpayer shall state the kind of property contributed,
for example, used clothing, paintings, or securities, the method
utilized in determining the fair market value of the property
at the time the contribution was made, and whether or not the
amount of the contribution was reduced under section 170(e). If
a taxpayer makes more than one cash contribution to an organization
during the taxable year, then in lieu of listing each cash contribution
and the date of payment the taxpayer may state the total cash
payments made to such organization during the taxable year. A
taxpayer who elects under paragraph (d)(2) of section 1.170A-8
to apply section 170(e)(1) to his contributions and carryovers
of 30-percent capital gain property must file a statement with
his return indicating that he has made the election and showing
the contributions in the current year and carryovers from preceding
years to which it applies. For the definition of the term "30-percent
capital gain property", see paragraph (d)(3) of section 1.170A-8.
(2) Contribution by individual of property other than money.
This paragraph (d)(2) shall apply to deductions for charitable
contributions made in taxable years beginning before January 1,
1983. At the option of the taxpayer, the requirements of this
paragraph (d)(2) shall also apply to contributions of property
made on or before December 31, 1984 (in lieu of the requirements
of paragraph (b) of this section). If an individual taxpayer makes
a charitable contribution of an item of property other than money
and claims a deduction in excess of $200 in respect of his contribution
of such item, he shall attach to his income tax return the following
information with respect to such item:
(i) The name and address of the organization to which the contribution
was made.
(ii) The date of the actual contribution.
(iii) A description of the property in sufficient detail to identify
the particular property contributed, including in the case of
tangible property the physical condition of the property at the
time of contribution, and, in the case of securities, the name
of the issuer, the type of security, and whether or not such security
is regularly traded on a stock exchange or in an over-the-counter
market.
(iv) The manner of acquisition, as, for example, by purchase,
gift, bequest, inheritance, or exchange, and the approximate date
of acquisition of the property by the taxpayer or, if the property
was created, produced, or manufactured by or for the taxpayer,
the approximate date the property was substantially completed.
(v) The fair market value of the property at the time the contribution
was made, the method utilized in determining the fair market value,
and, if the valuation was determined by appraisal, a copy of the
signed report of the appraiser.
(vi) The cost or other basis, adjusted as provided by section
1016, of property, other than securities, held by the taxpayer
for a period of less than 5 years immediately preceding the date
on which the contribution was made and, when the information is
available, of property, other than securities, held for a period
of 5 years or more preceding the date on which the contribution
was made.
(vii) In the case of property to which section 170(e) applies,
the cost or other basis, adjusted as provided by section 1016,
the reduction by reason of section 170(e)(1) in the amount of
the charitable contribution otherwise taken into account, and
the manner in which such reduction was determined.
(viii) The terms of any agreement or understanding entered into
by or on behalf of the taxpayer which relates to the use, sale,
or disposition of the property contributed, as, for example, the
terms of any agreement or understanding which:
(A) Restricts temporarily or permanently the donee's right to
dispose of the donated property,
(B) Reserves to, or confers upon, anyone other than the donee
organization or other than an organization participating with
such organization in cooperative fund-raising, any right to the
income from such property, to the possession of the property,
including the right to vote securities, to acquire such property
by purchase or otherwise, or to designate the person to have such
income, possession, or right to acquire, or
(C) Earmarks contributed property for a particular charitable
use, such as the use of donated furniture in the reading room
of the donee organization's library.
(ix) The total amount claimed as a deduction for the taxable year
due to the contribution of the property and, if less than the
entire interest in the property is contributed during the taxable
year, the amount claimed as a deduction in any prior year or years
for contributions of other interests in such property, the name
and address of each organization to which any such contribution
was made, the place where any such property which is tangible
property is located or kept, and the name of any person, other
than the organization to which the property giving rise to the
deduction was contributed, having actual possession of the property.
(3) Statement from donee organization.
Any deduction for a charitable contribution must be substantiated,
when required by the district director, by a statement from the
organization to which the contribution was made indicating whether
the organization is a domestic organization, the name and address
of the contributor, the amount of the contribution, the date of
actual receipt of the contribution, and such other information
as the district director may deem necessary. If the contribution
includes an item of property, other than money or securities which
are regularly traded on a stock exchange or in an over-the-counter
market, which the donee deems to have a fair market value in excess
of $500 ($200 in the case of a charitable contribution made in
a taxable year beginning before January 1, 1983) at the time of
receipt, such statement shall also indicate for each such item
its location if it is retained by the organization, the amount
received by the organization on any sale of the property and the
date of sale or, in case of any other disposition of the property,
the method of disposition. In the case of any contribution of
tangible personal property, the statement shall indicate the use
of the property by the organization and whether or not it is used
for a purpose or function constituting the basis for the donee
organization's exemption from income tax under section 501 or,
in the case of a governmental unit, whether or not it is used
for exclusively public purposes.
(e) [Reserved]
(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 section 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.
(2) Written acknowledgement.
Except as otherwise provided in paragraphs (f)(8) through (f)(11)
and (f)(13) of this section, a written acknowledgment from a donee
organization must provide the following information:
(i) The amount of any cash the taxpayer paid and a description
(but not necessarily the value) of any property other than cash
the taxpayer transferred to the donee organization;
(ii) A statement of whether or not the donee organization provides
any goods or services in consideration, in whole or in part, for
any of the cash or other property transferred to the donee organization;
(iii) If the donee organization provides any goods or services
other than intangible religious benefits (as described in section
170(f)(8)), a description and good faith estimate of the value
of those goods or services; and
(iv) If the donee organization provides any intangible religious
benefits, a statement to that effect.
(3) Contemporaneous.
A written acknowledgment is contemporaneous if it is obtained
by the taxpayer on or before the earlier of
(i) The date the taxpayer files the original return for the taxable
year in which the contribution was made; or
(ii) The due date (including extensions) for filing the taxpayer's
original return for that year.
(4) Donee organization.
For purposes of this paragraph (f), a donee organization is an
organization described in section 170(c).
5) Goods or services.
Goods or services means cash, property, services, benefits, and
privileges.
(6) In consideration for.
A donee organization provides goods or services in consideration
for a taxpayer's payment if, at the time the taxpayer makes the
payment to the donee organization, the taxpayer receives or expects
to receive goods or services in exchange for that payment. Goods
or services a donee organization provides in consideration for
a payment by a taxpayer include goods or services provided in
a year other than the year in which the taxpayer makes the payment
to the donee organization.
(7) Good faith estimate.
For purposes of this section, good faith estimate means a donee
organization's estimate of the fair market value of any goods
or services, without regard to the manner in which the organization
in fact made that estimate. See section 1.170A-1(h)(4) for rules
regarding when a taxpayer may treat a donee organization's estimate
of the value of goods or services as the fair market value.
(8) Certain goods or services disregarded:
(i) In general.
For purposes of section 170(f)(8), the following goods or services
are disregarded:
(A) Goods or services that have insubstantial value under the
guidelines provided in Revenue Procedures 90-12, 1990-1 C.B. 471,
92- 49, 1992-1 C.B. 987, and any successor documents. (See section
601.601(d)(2)(ii) of the Statement of Procedural Rules, 26 CFR
part 601.); and
(B) Annual membership benefits offered to a taxpayer in exchange
for a payment of $75 or less per year that consist of
(1) Any rights or privileges, other than those described in section
170(l), that the taxpayer can exercise frequently during the membership
period. Examples of such rights and privileges may include, but
are not limited to, free or discounted admission to the organization's
facilities or events, free or discounted parking, preferred access
to goods or services, and discounts on the purchase of goods or
services; and
(2) Admission to events during the membership period that are
open only to members of a donee organization and for which the
donee organization reasonably projects that the cost per person
(excluding any allocable overhead) attending each such event is
within the limits established for "low cost articles"
under section 513(h)(2). The projected cost to the donee organization
is determined at the time the organization first offers its membership
package for the year (using section 3.07 of Revenue Procedure
90-12, or any successor documents, to determine the cost of any
items or services that are donated).
(ii) Examples.
The following examples illustrate the rules of this paragraph
(f)(8).
Example 1. Membership benefits disregarded.
Performing Arts Center E is an organization described in section
170(c). In return for a payment of $75, E offers a package of
basic membership benefits that includes the right to purchase
tickets to performances one week before they go on sale to the
general public, free parking in E's garage during evening and
weekend performances, and a 10% discount on merchandise sold in
E's gift shop. In return for a payment of $150, E offers a package
of preferred membership benefits that includes all of the benefits
in the $75 package as well as a poster that is sold in E's gift
shop for $20. The basic membership and the preferred membership
are each valid for twelve months, and there are approximately
50 performances of various productions at E during a twelve-month
period. E's gift shop is open for several hours each week and
at performance times. F, a patron of the arts, is solicited by
E to make a contribution. E offers F the preferred membership
benefits in return for a payment of $150 or more. F makes a payment
of $300 to E. F can satisfy the substantiation requirement of
section 170(f)(8) by obtaining a contemporaneous written acknowledgment
from E that includes a description of the poster and a good faith
estimate of its fair market value ($20) and disregards the remaining
membership benefits.
Example 2. Contemporaneous written acknowledgement need
not mention rights or privileges that can be disregarded.
The facts are the same as in Example 1, except that F made a payment
of $300 and received only a basic membership. F can satisfy the
section 170(f)(8) substantiation requirement with a contemporaneous
written acknowledgment stating that no goods or services were
provided.
Example 3. Rights or privileges that cannot be exercised
frequently.
Community Theater Group G is an organization described in section
170(c). Every summer, G performs four different plays. Each play
is performed two times. In return for a membership fee of $60,
G offers its members free admission to any of its performances.
Non-members may purchase tickets on a performance by performance
basis for $15 a ticket. H, an individual who is a sponsor of the
theater, is solicited by G to make a contribution. G tells H that
the membership benefit will be provided in return for any payment
of $60 or more. H chooses to make a payment of $350 to G and receives
in return the membership benefit. G's membership benefit of free
admission is not described in paragraph (f)(8)(i)(B) of this section
because it is not a privilege that can be exercised frequently
(due to the limited number of performances offered by G). Therefore,
to meet the requirements of section 170(f)(8), a contemporaneous
written acknowledgment of H's $350 payment must include a description
of the free admission benefit and a good faith estimate of its
value.
Example 4. Multiple memberships.
In December of each year, K, an individual, gives each of her
six grandchildren a junior membership in Dinosaur Museum, an organization
described in section 170(c). Each junior membership costs $50,
and K makes a single payment of $300 for all six memberships.
A junior member is entitled to free admission to the museum and
to weekly films, slide shows, and lectures about dinosaurs. In
addition, each junior member receives a bi-monthly, non-commercial
quality newsletter with information about dinosaurs and upcoming
events. K's contemporaneous written acknowledgment from Dinosaur
Museum may state that no goods or services were provided in exchange
for K's payment.
(9) Goods or services provided to employees or partners
of donors:
(i) Certain goods or services disregarded.
For purposes of section 170(f)(8), goods or services provided
by a donee organization to employees of a donor, or to partners
of a partnership that is a donor, in return for a payment to the
organization may be disregarded to the extent that the goods or
services provided to each employee or partner are the same as
those described in paragraph (f)(8)(i) of this section.
(ii) No good faith estimate required for other goods or services.
If a taxpayer makes a contribution of $250 or more to a donee
organization and, in return, the donee organization offers the
taxpayer's employees or partners goods or services other than
those described in paragraph (f)(9)(i) of this section, the contemporaneous
written acknowledgment of the taxpayer's contribution is not required
to include a good faith estimate of the value of such goods or
services but must include a description of those goods or services.
(iii) Example.
The following example illustrates the rules of this paragraph
(f)(9).
Example. Museum J is an organization described in section 170(c).
For a payment of $40, J offers a package of basic membership benefits
that includes free admission and a 10% discount on merchandise
sold in J's gift shop. J's other membership categories are for
supporters who contribute $100 or more. Corporation K makes a
payment of $50,000 to J and, in return, J offers K's employees
free admission for one year, a tee-shirt with J's logo that costs
J $4.50, and a gift shop discount of 25% for one year. The free
admission for K's employees is the same as the benefit made available
to holders of the $40 membership and is otherwise described in
paragraph (f)(8)(i)(B) of this section. The tee-shirt given to
each of K's employees is described in paragraph (f)(8)(i)(A) of
this section. Therefore, the contemporaneous written acknowledgment
of K's payment is not required to include a description or good
faith estimate of the value of the free admission or the tee-shirts.
However, because the gift shop discount offered to K's employees
is different than that offered to those who purchase the $40 membership,
the discount is not described in paragraph (f)(8)(i) of this section.
Therefore, the contemporaneous written acknowledgment of K's payment
is required to include a description of the 25% discount offered
to K's employees.
(10) Substantiation of out-of-pocket expenses.
A taxpayer who incurs unreimbursed expenditures incident to the
rendition of services, within the meaning of section 1.170A-1(g),
is treated as having obtained a contemporaneous written acknowledgment
of those expenditures if the taxpayer:
(i) Has adequate records under paragraph (a) of this section to
substantiate the amount of the expenditures; and
(ii) Obtains by the date prescribed in paragraph (f)(3) of this
section a statement prepared by the donee organization containing
(A) A description of the services provided by the taxpayer;
(B) A statement of whether or not the donee organization provides
any goods or services in consideration, in whole or in part, for
the unreimbursed expenditures; and
(C) The information required by paragraphs (f)(2)(iii) and (iv)
of this section.
(11) Contributions made by payroll deduction:
(i) Form of substantiation.
A contribution made by means of withholding from a taxpayer's
wages and payment by the taxpayer's employer to a donee organization
may be substantiated, for purposes of section 170(f)(8), by both:
(A) A pay stub, Form W-2, or other document furnished by the employer
that sets forth the amount withheld by the employer for the purpose
of payment to a donee organization; and
(B) A pledge card or other document prepared by or at the direction
of the donee organization that includes a statement to the effect
that the organization does not provide goods or services in whole
or partial consideration for any contributions made to the organization
by payroll deduction.
(ii) Application of $250 threshold.
For the purpose of applying the $250 threshold provided in section
170(f)(8)(A) to contributions made by the means described in paragraph
(f)(11)(i) of this section, the amount withheld from each payment
of wages to a taxpayer is treated as a separate contribution.
(12) Distributing organizations as donees.
An organization described in section 170(c), or an organization
described in 5 CFR 950.105 (a Principal Combined Fund Organization
for purposes of the Combined Federal Campaign) and acting in that
capacity, that receives a payment made as a contribution is treated
as a donee organization solely for purposes of section 170(f)(8),
even if the organization (pursuant to the donor's instructions
or otherwise) distributes the amount received to one or more organizations
described in section 170(c). This paragraph (f)(12) does not apply,
however, to a case in which the distributee organization provides
goods or services as part of a transaction structured with a view
to avoid taking the goods or services into account in determining
the amount of the deduction to which the donor is entitled under
section 170.
(13) Transfers to certain trusts.
Section 170(f)(8) does not apply to a transfer of property to
a trust described in section 170(f)(2)(B), a charitable remainder
annuity trust (as defined in section 664(d)(1)), or a charitable
remainder unitrust (as defined in section 664(d)(2) or (d)(3)
or section 1.664(3)(a)(1)(i)(b)). Section 170(f)(8) does apply,
however, to a transfer to a pooled income fund (as defined in
section 642(c)(5)); for such a transfer, the contemporaneous written
acknowledgment must state that the contribution was transferred
to the donee organization's pooled income fund and indicate whether
any goods or services (in addition to an income interest in the
fund) were provided in exchange for the transfer. The contemporaneous
written acknowledgment is not required to include a good faith
estimate of the income interest.
(14) Substantiation of payments to a college or university
for the right to purchase tickets to athletic events.
For purposes of paragraph (f)(2)(iii) of this section, the right
to purchase tickets for seating at an athletic event in exchange
for a payment described in section 170(l) is treated as having
a value equal to twenty percent of such payment. For example,
when a taxpayer makes a payment of $312.50 for the right to purchase
tickets for seating at an athletic event, the right to purchase
tickets is treated as having a value of $62.50. The remaining
$250 is treated as a charitable contribution, which the taxpayer
must substantiate in accordance with the requirements of this
section.
(15) Substantiation of charitable contributions made
by a partnership or an s corporation.
If a partnership or an S corporation makes a charitable contribution
of $250 or more, the partnership or S corporation will be treated
as the taxpayer for purposes of section 170(f)(8). Therefore,
the partnership or S corporation must substantiate the contribution
with a contemporaneous written acknowledgment from the donee organization
before reporting the contribution on its income tax return for
the year in which the contribution was made and must maintain
the contemporaneous written acknowledgment in its records. A partner
of a partnership or a shareholder of an S corporation is not required
to obtain any additional substantiation for his or her share of
the partnership's or S corporation's charitable contribution.
(16) Purchase of an annuity.
If a taxpayer purchases an annuity from a charitable organization
and claims a charitable contribution deduction of $250 or more
for the excess of the amount paid over the value of the annuity,
the contemporaneous written acknowledgment must state whether
any goods or services in addition to the annuity were provided
to the taxpayer. The contemporaneous written acknowledgment is
not required to include a good faith estimate of the value of
the annuity. See section 1.170A1(d)(2) for guidance in determining
the value of the annuity.
(17) Substantiation of matched payments:
(i) In general.
For purposes of section 170, if a taxpayer's payment to a donee
organization is matched, in whole or in part, by another payor,
and the taxpayer receives goods or services in consideration for
its payment and some or all of the matching payment, those goods
or services will be treated as provided in consideration for the
taxpayer's payment and not in consideration for the matching payment.
(ii) Example.
The following example illustrates the rules of this paragraph
(f)(17).
Example. Taxpayer makes a $400 payment to Charity L, a donee organization.
Pursuant to a matching payment plan, Taxpayer's employer matches
Taxpayer's $400 payment with an additional payment of $400. In
consideration for the combined payments of $800, L gives Taxpayer
an item that it estimates has a fair market value of $100. L does
not give the employer any goods or services in consideration for
its contribution. The contemporaneous written acknowledgment provided
to the employer must include a statement that no goods or services
were provided in consideration for the employer's $400 payment.
The contemporaneous written acknowledgment provided to Taxpayer
must include a statement of the amount of Taxpayer's payment,
a description of the item received by Taxpayer, and a statement
that L's good faith estimate of the value of the item received
by Taxpayer is $100.
(18) Effective date.
This paragraph (f) applies to contributions made on or after December
16, 1996. However, taxpayers may rely on the rules of this paragraph
(f) for contributions made on or after January 1, 1994.
Preamble to the Final Regulations on Substantiation of Contributions
T.D. 8690 (Dec. 16, 1996)
Agency: Internal Revenue Service (IRS), Treasury.
Action: Final regulations.
Summary: This document contains final regulations that
provide guidance regarding the allowance of certain charitable
contribution deductions, the substantiation requirements for charitable
contributions of $250 or more, and the disclosure requirements
for quid pro quo contributions in excess of $75. The regulations
will affect organizations described in section 170(c) and individuals
and entities that make payments to these organizations.
Effective Date: These regulations are effective December
16, 1996.
For Further Information Contact: Jefferson K. Fox of the
Office of Assistant Chief Counsel (Income Tax and Accounting)
at 202622-4930 (not a toll-free call).
Supplementary Information:
Paperwork Reduction Act
The collection of information contained in these final regulations
has been reviewed and approved by the Office of Management and
Budget in accordance with the requirements of the Paperwork Reduction
Act (44 U.S.C. 3507) under control number 1545- 1464. Responses
to this collection of information are required for charitable
contribution deductions under section 170.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless the collection
of information displays a valid control number.
The estimated annual burden per recordkeeper varies from three
minutes to one hour, depending on individual circumstances, with
an estimated average of average of six minutes. The estimated
annual burden per respondent is two and a half hours.
Comments concerning the accuracy of this burden estimate and suggestions
for reducing this burden should be sent to the Internal Revenue
Service, Attn: IRS Reports Clearance Officer, T:FP, Washington,
DC 20224, and to the Office of Management and Budget, Attn: Desk
Officer for the Department of the Treasury, Office of Information
and Regulatory Affairs, Washington, DC 20503.
Books or records relating to this collection of information must
be retained as long as their contents may be material in the administration
of any internal revenue law. Generally, tax returns and tax return
information are confidential, as required by 26 U.S.C. 6103.
Background
This document contains amendments to the Income Tax Regulations
(26 CFR part 1) that provide guidance relating to (1) the substantiation
rules for charitable contributions under section 170(f)(8) of
the Internal Revenue Code of 1986 (Code), and (2) the disclosure
requirements for quid pro quo contributions under section 6115.
Sections 170(f)(8) and 6115 were added to the Code by sections
13172 and 13173 of the Omnibus Budget Reconciliation Act of 1993,
Pub. L. No. 103-66, 107 Stat. 455, 1993-3 C.B. 43.
Temporary regulations (TD 8544) and a notice of proposed rulemaking
cross-referencing the temporary regulations were published in
the Federal Register for May 27, 1994 (59 FR 27458, 27515). Those
regulations primarily addressed substantiation of charitable contributions
made by payroll deduction and substantiation of payments to a
charitable organization in exchange for goods or services of insubstantial
value. The notice of proposed rulemaking indicated that comments
would be considered both on the issues addressed in the temporary
regulations, and on other issues arising under section 170(f)(8).
A notice of proposed rulemaking (IA-44-94) addressing substantiation
issues under section 170(f)(8) other than contributions made by
payroll deduction was published in the Federal Register for August
4, 1995 (60 FR 39896). Included in these proposed regulations
were the provisions that had originally appeared in the temporary
regulations published on May 27, 1994, relating to the substantiation
of payments to charitable organizations in exchange for goods
or services of insubstantial value. In drafting these proposed
regulations, the IRS had the benefit of the comments received
in response to the notice of proposed rulemaking published in
the Federal Register for May 27, 1994. Many of the suggestions
offered in the comments were incorporated into the proposed regulations.
Final regulations (TD 8623) relating to the substantiation of
charitable contributions made by payroll deduction were published
in the Federal Register for October 12, 1995 (60 FR 53126). These
final regulations did not include the provisions relating to the
substantiation of payments to charitable organizations in exchange
for goods or services with insubstantial value that had appeared
in the temporary regulations published on May 27, 1994 and were
also included in the proposed regulations published on August
4, 1995. The temporary regulations published in the Federal Register
for May 27, 1994, were removed. For the convenience of taxpayers,
the final regulations relating to the substantiation of charitable
contributions made by payroll deduction (section 1.170A-13(f)(11)
and (12)) that were published in the Federal Register for May
27, 1994, have been reprinted with the final regulations adopted
by this Treasury Decision.
Comments were received in response to the notice of proposed rulemaking
published on August 4, 1995, and a public hearing was held on
November 1, 1995. After consideration of those comments, together
with the relevant comments received in response to the notice
of proposed rulemaking published on May 27, 1994, the proposed
regulations under sections 170(f)(8) and 6115 are adopted as revised
by this Treasury Decision.
Public Comments
Intent to Make a Charitable Contribution
Section 1.170A-1(h) of the final regulations incorporates the
two-part test adopted by the Supreme Court in United States v.
American Bar Endowment, 477 U.S. 105 (1986), for determining deductibility
under section 170(a) of a payment that is partly in consideration
for goods or services. A deduction is not allowed for a payment
to charity in consideration for goods or services except to the
extent the amount of the payment exceeds the fair market value
of the goods or services. In addition, a deduction is not allowed
unless the taxpayer intends to make a payment in excess of the
fair market value of the goods or services.
Section 1.170A-13(f)(6) provides that a charitable organization
provides goods or services "in consideration for" a
taxpayer's payment if, at the time of payment, the taxpayer receives
or "expects to receive" goods or services in exchange.
One commenter stated that a charitable organization has no way
of knowing what a taxpayer expects to receive, and that the regulation
requires the charity to determine its donors' states of mind.
The commenter suggested that a payment be treated as made in consideration
for goods or services "if the donee organization expects
to provide and does provide services of which the donor has been
informed." Another commenter questioned whether donor appreciation
events, such as banquets honoring contributors, are held "in
consideration for" charitable contributions. The commenter
also asked whether invitations to occasional events not disclosed
to prospective donors until after they make their contributions
are "in exchange for" the contributions.
The regulations follow American Bar Endowment by incorporating
a standard that is based on the facts and circumstances of each
charitable contribution. When a donor's contribution is made in
response to an express promise of a benefit, the donor generally
will have an expectation of a quid pro quo. A donor may also have
an expectation of a quid pro quo when the donor makes a contribution
with knowledge that the charitable donee has conferred a benefit
on other donors making comparable contributions. For example,
if a charity has a history of sponsoring a dinner-dance for donors
making substantial contributions, a donor making a substantial
contribution may have an expectation of receiving an invitation
to such an event. The expectation of a quid pro quo may exist
even though the donor is not aware of the exact nature of the
quid pro quo (e.g., a donation to a charity that sponsors a donor
appreciation event of a different type every year). This standard
for determining a donor's expectation of a quid pro quo disallows
deductions in situations where facts and circumstances indicate
that the donor expected, at the time of his or her payment to
charity, that there would be a quid pro quo, even though there
was no explicit promise of one.
A commenter requested guidance on the proper treatment of a payment
in consideration for a quid pro quo received in a year after the
year of payment. Under section 1.170A-13(f)(6), goods or services
provided by donee organizations in consideration for a donor's
payment include goods or services provided in a year other than
the year of payment. Accordingly, if a donor makes a payment to
a charitable organization in exchange for goods or services, the
donor's deductible charitable contribution for the year of payment
is limited to the amount, if any, by which the payment exceeds
the value of those goods or services, even if they are not available
to the donor until a subsequent year.
Refusal of Benefits
Commenters asked for guidance on the proper manner of substantiating
a contribution by a donor who refuses benefits offered by a charitable
organization. One commenter suggested that the regulations indicate
that when a taxpayer receives a right to quid pro quo benefits
but does not use them, the taxpayer is not necessarily allowed
a charitable contribution deduction in the full amount of the
quid pro quo payment. Another suggested that a taxpayer wishing
to deduct the full amount of a quid pro quo payment could check
a box on a document to be sent to the charity at the time of contribution
to show refusal of the benefit.
These comments are consistent with IRS views. Rev. Rul. 67-246,
1967-2 C.B. 104, provides guidance relating to the refusal of
benefits offered by a charitable organization. The revenue ruling
holds that a taxpayer choosing not to use tickets that were made
available to him is not entitled to a greater contribution than
would otherwise be allowed; i.e., the deduction is limited to
the amount paid in excess of the value of the tickets received
in exchange. 1967-2 C.B. 106. A deduction in the full amount of
a taxpayer's payment may be allowed, however, if the taxpayer
properly rejects the right to the tickets. Rev. Rul. 67-246 contains
two examples (Examples 3 and 7) illustrating ways that donors
can effectively reject benefits offered by charitable organizations.
Example 7 illustrates that a check-off box on a form provided
by the charity can be used to reject a ticket at the time of contribution.
A taxpayer who has properly rejected a benefit offered by a charitable
organization may claim a deduction in the full amount of the payment
to the charitable organization, and the contemporaneous written
acknowledgment need not reflect the value of the rejected benefit.
Certain Goods or Services Disregarded
Goods or services with insubstantial value
Under guidelines set forth in Rev. Proc. 90-12, 1990-1 C.B.
471, and Rev. Proc. 92-49, 1992-1 C.B. 987, certain goods or services
received in exchange for a payment to a charity are treated as
having insubstantial value and can therefore be disregarded for
the purpose of determining the amount of a taxpayer's payment
that is deductible as a charitable contribution. Under these guidelines,
if a taxpayer makes a payment to a charitable organization in
the context of a fundraising campaign, and receives benefits with
a fair market value of not more than two percent of the amount
of the payment (up to a maximum of $67, for 1996), the benefits
received are considered to have insubstantial value for purposes
of determining the amount of the taxpayer's contribution. (The
$67 benefit limitation is adjusted annually for inflation.)
Further, if a taxpayer makes a payment of $33.50 or more to a
charity and receives only token items in return, the items are
considered to have insubstantial value if they (1) bear the charity's
name or logo, and (2) have an aggregate cost to the charity of
$6.70 or less. (The $33.50 and $6.70 amounts apply to payments
made in 1996; these amounts are adjusted annually for inflation.
In addition, newsletters not of commercial quality and low-cost
items provided for free without an advance order are considered
to have insubstantial value.
Under section 1.170A-13(f)(8)(i)(A) of the regulations, the same
types of goods and services disregarded under the guidelines of
Rev. Procs. 90-12 and 92-49 can be disregarded for purposes of
substantiation under section 170(f)(8). One commenter asked whether
the contemporaneous written acknowledgment provided to a donor
receiving goods or services of insubstantial value should indicate
that no goods or services were received. When a donee organization
provides a donor only with goods or services having insubstantial
value under Rev. Procs. 90-12 and 92-49, the contemporaneous written
acknowledgment may indicate that no goods or services were provided
in exchange for the donor's payment. See Example 2, section 1.170A-
13(f)(8)(ii).
Another commenter stated that the rules in Rev. Procs. 90-12 and
92-49 for goods or services of insubstantial value are unduly
restrictive and prevent charitable organizations from recognizing
longstanding, generous contributors with suitable gifts of appreciation.
Another argued that the costs of token items received by a taxpayer
during the year from a charity should not be aggregated. Sections
1.170A-13(f)(8)(B) and 1.170A13(f)(9)(i) provide that certain
membership benefits provided in exchange for a payment of $75
or less may be disregarded for purposes of determining whether
any quids pro quo were provided to the donor. For purposes of
sections 170(f)(8) and 6115, these provisions supplement the categories
of goods or services treated as having insubstantial value under
the guidelines of Rev. Procs. 90-12 and 92-49. The IRS and Treasury
believe that application of the guidelines of Rev. Procs. 90-12
and 92-49, together with the membership benefit provisions in
the final regulations, strikes an appropriate balance between
administrative and compliance concerns under sections 170(f)(8)
and 6115. Accordingly, the guidelines of Rev. Procs. 90-12 and
92-49 have not been modified.
Membership benefits
The regulations provide limited relief with respect to certain
types of benefits customarily provided to donors in exchange for
membership payments. Two types of membership benefits offered
in exchange for a payment of $75 or less may be disregarded: (1)
free admission to members-only events with a per-person cost to
the charity that is no higher than the standard for low-cost articles
under section 513(h)(2)(C) ($6.70 for 1996); and (2) rights or
privileges that can be exercised frequently during the membership
period (other than rights or privileges described in section 170(l),
governing rights to purchase tickets for college athletic events).
Some commenters said that the term FREQUENTLY, when read in conjunction
with the examples, provided sufficient clarity and appropriate
flexibility. Other commenters expressed concern about use of the
term FREQUENTLY, stating that it was vague and imprecise. For
smaller organizations, they argued, in determining whether a right
of free admission to a series of events can be frequently exercised,
consideration should be given to the number of events held by
the organization each year. The IRS and Treasury believe that
a charity can make a determination that a right or privilege is
frequently exercisable by reference to the examples that were
in the proposed regulations and are adopted in the final regulations.
A commenter suggested that the $75 payment amount in the special
rules for membership benefits should be indexed for inflation.
The IRS and Treasury believe that it is important for the membership
payment amount to be a number that can be easily remembered by
charities and donors. For this reason, annual inflation adjustments
are not advisable. However, the IRS and Treasury will consider
increases to this $75 figure in the future.
A commenter asked whether the rule that allows taxpayers to disregard
certain membership benefits applies to discounts offered by a
donee organization for purchases from retailers working with the
charity to provide discounts to members. These discounts are to
be treated like any other rights or privileges and, therefore,
may be disregarded for purposes of section 170(f)(8) if they can
be exercised frequently during the membership period.
Goods or services provided to a donor's employees
Prior to publication of the proposed regulations, several commenters
asked for guidance on the proper method of valuation of goods
or services provided by charitable organizations to employees
of donors. The final regulations follow the proposed regulations
and provide that goods or services provided to a donor's employees
can be disregarded if they consist of the types of benefits that
could be disregarded when provided directly to a donor (i.e.,
goods or services with insubstantial value and certain annual
membership benefits). For any other types of goods or services
provided to employees of a donor making a contribution of $250
or more, the contemporaneous written acknowledgment must describe
the goods or services, but need not include the donee organization's
good faith estimate of their fair market value.
A commenter stated that the special rule for goods or services
provided to employees of a donor should also be available for
partners in a partnership. In the final regulations, the exception
for goods or services provided to a donor's employees has been
modified to include partners in a donor-partnership.
A commenter was concerned about charities that receive funds from
a private foundation established by a business entity. The commenter
suggested that such charities should be permitted to provide benefits
to employees of the business entity without any tax consequences.
Because this suggestion raises issues beyond the scope of this
regulation (including issues relating to the self-dealing rules
under section 4941), this suggestion was not adopted.
A commenter stated that when employees receive benefits as a result
of an employer's charitable contribution, it would be easier for
the charity (rather than the employer) to estimate the fair market
value of the benefits. Another commenter stated that when employees
receive benefits that cannot be disregarded under section 170,
the employer/donor is likely to deduct the value of those benefits
as a business expense under section 162. Because employers may
claim the full amount of their payments to charity -- including
the value of the benefits -- as a deduction, the commenter suggested
that employers should be relieved of the burden of valuing such
benefits, and that the full amount of such payments should be
deductible under section 170.
The IRS and Treasury recognize that in cases where employee benefits
cannot be disregarded for purposes of section 170, employers may
nevertheless seek to deduct their costs pursuant to section 162.
For deductions under section 170, however, United States v. American
Bar Endowment, supra, limits the allowable deduction to the amount
of the employer's payment in excess of the value of employee benefits.
Accordingly, if the employee benefits cannot be disregarded, their
value must be subtracted from the amount of the employer's payment
to determine the correct amount of the charitable contribution
deduction. Although valuation may be difficult, the IRS and Treasury
continue to believe that the employer is in a better position
than the charity to be responsible for valuation of benefits provided
to employees.
Payments for the right to purchase tickets to college athletic
events
A commenter asked for clarification regarding the applicability
of the substantiation requirements to payments for the right to
purchase tickets to college athletic events. Section 170(l) provides
that payments to colleges or universities for the right to purchase
tickets to athletic events are partially (eighty percent) deductible
as charitable contributions. The final regulations have been modified
to clarify how sections 170(f)(8) and 6115 apply to payments described
in section 170(l).
For purposes of section 170(f)(8), twenty percent of the amount
paid for the right to purchase tickets for seating at college
or university athletic events is treated as the fair market value
of such right. When the total payment for the right to purchase
tickets to college athletic events is $312.50 or more, the portion
of the payment treated as a charitable contribution will be $250
or more, and substantiation will be required under section 170(f)(8).
For purposes of section 6115, twenty percent of the amount paid
for the right to purchase tickets for seating at college or university
athletic events is treated as a good faith estimate of the fair
market value of this right.
Rules Applicable to Corporations
Several commenters suggested that subchapter C corporations (C
corporations) should be relieved of the substantiation requirements.
Some indicated that C corporations should be exempt; others argued
for a de minimis exception for C corporations making substantial
contributions. Under a de minimis exception, deductions for all
of a C corporation's charitable contributions would be allowed
if the corporation had contemporaneous written acknowledgments
substantiating most, or substantially all, of its contributions.
These commenters stated that the substantiation requirements were
enacted to deter individuals--not businesses--that had claimed
charitable contribution deductions for the full amounts of their
payments to charitable organizations, even though they had received
quids pro quo in exchange. They suggested that the IRS exercise
the authority provided in section 170(f)(8)(E) and make the substantiation
requirements inapplicable to C corporations. The final regulations
do not adopt these suggestions. The IRS and Treasury believe that
exempting C corporations from the substantiation requirements
could, in fact, encourage abuses and would therefore conflict
with the purpose of section 170(f)(8).
Meaning of Contemporaneous
A commenter asked whether a taxpayer may file an amended income
tax return to claim a charitable contribution deduction if the
taxpayer obtained the contemporaneous written acknowledgment for
the contribution after timely filing the original return. Section
170(f)(8)(C) provides that a written acknowledgment is contemporaneous
if obtained on or before the earlier of (1) the date that the
taxpayer files the return for the year in which the contribution
was made, or (2) the due date (including extensions) for filing
the return for that taxable year. A written acknowledgment obtained
after a taxpayer files the original return for the year of the
contribution is not contemporaneous within the meaning of the
statute.
Substantiation of Multiple Contributions
Several commenters asked whether the substantiation requirements
apply to multiple contributions totaling $250 or more made to
a single charity during a single year, when each contribution
is less than $250. The conference report accompanying the Omnibus
Budget Reconciliation Act of 1993 indicates that separate payments
will be treated as separate contributions and will not be aggregated
for purposes of applying the $250 threshold. H.R. Conf. Rep. No.
213, 103d Cong., 1st Sess. 565, n. 29 (1993). If there is no separate
payment of $250 or more, substantiation under section 170(f)(8)
is not required, even if the sum of the separate payments is $250
or more. Section 1.170A-13(f)(1) has been modified to clarify
this. A commenter asked whether there must be a separate contemporaneous
written acknowledgment for each contribution of $250 or more.
Section 1.170A-13(f)(1) has been modified to clarify that for
multiple contributions of $250 or more to one charity, one acknowledgment
that reflects the total amount of the taxpayer's contributions
to the charity for the year is sufficient.
Form of Substantiation
Commenters asked whether a contemporaneous written acknowledgment
must be in any particular format. As long as it is in writing
and contains the information required by law, a contemporaneous
written acknowledgment may be in any format. One commenter suggested
that the regulations should allow charities to report charitable
contributions directly to the IRS on Form 990 or 990-PF. Section
170(f)(8) authorizes the Secretary to prescribe regulations allowing
donee organizations to satisfy the requirements of section 170(f)(8)
by filing a return that includes the information described in
section 170(f)(8)(B). The IRS and Treasury have decided not to
implement this suggestion at this time. However, in an effort
to reduce paperwork and taxpayer burdens, the IRS will examine
whether any existing IRS forms can be modified to assist in their
use in substantiating charitable contributions.
A commenter asked for guidance on the proper method of substantiating
payments by corporations that agree to match employee contributions
to charity. When an employee makes a charitable contribution that
is eligible for a corporate matching payment, some charities routinely
send the participating corporation a letter, notifying the corporation
of the employee's gift and thanking it in advance for the matching
payment the charity expects to receive. Commenters suggested that
this letter be treated as meeting the corporation's requirements
under section 170(f)(8). This suggestion has not been adopted,
because letters sent in advance of a contribution do not substantiate
the contribution. The acknowledgment under section 170(f)(8) must
include information about what has been "contributed."
The acknowledgment cannot be completed until after the charitable
contribution has been made. (See section 1.170A-1(b), which states
that ordinarily a contribution is made at the time delivery is
effected.)
Out-of-Pocket Expenses
The proposed regulations allowed volunteers who incurred unreimbursed
out-of-pocket expenses while performing services for a charity
to substantiate their contributions with a statement that described
the services and the date they were performed. The acknowledgment
was not required to list the amount of the unreimbursed expense.
Several commenters suggested an exemption from the substantiation
requirements for unreimbursed out-of-pocket expenses incurred
incident to the rendition of services to a donee organization.
Exemption is appropriate, they argued, because the requirements
are burdensome, particularly since a donee organization is often
unaware of the amount and nature of expenses incurred by volunteers
performing services on behalf of the charity, or the exact dates
on which the volunteer services were performed. The final regulations
eliminate the requirement that the contemporaneous written acknowledgment
include the date on which services were performed for the charity.
However, to carry out the purposes of the statute, volunteers
claiming a charitable contribution deduction for an unreimbursed
expense of $250 or more are still required to obtain substantiation
confirming the type of services they performed for the charity.
Good Faith Estimate
Section 170(f)(8) requires a written acknowledgment furnished
by a charity to a donor to include a good faith estimate of the
value of any goods or services provided to the donor. Section
6115(a)(2) similarly requires a written disclosure statement provided
to a donor making a quid pro quo contribution of more than $75
to include a good faith estimate of the value of goods or services
provided to the donor. The regulations define a good faith estimate
as an estimate of the fair market value of the goods or services.
A taxpayer can generally rely on the good faith estimate provided
by a charity.
A commenter stated that the regulations should contain an example
illustrating how charities can compute the fair market value of
goods or services. We have not adopted this suggestion. There
is no single correct way to determine fair market value; a charitable
organization may use any reasonable methodology (e.g., comparison
with comparable retail prices, mark-up from wholesale cost) to
determine the fair market value. Examples 1 and 2 of section 1.6115-
1(a)(3) illustrate this rule.
A commenter recommended that the regulations state that a donor
does not have to use the good faith estimate provided by a charitable
organization if the donor believes another estimate is more accurate.
The regulations do not mandate that a donor use the estimate provided
by a donee organization in calculating the deductible amount.
Indeed, when a taxpayer knows or has reason to know that an estimate
is inaccurate, the taxpayer may not treat the donee organization's
estimate as the fair market value.
A commenter suggested that the regulations indicate that recognition
items, such as plaques or trophies with an honoree's name inscribed,
should be considered to have little, if any, fair market value.
This suggestion has not been adopted. Inscribed plaques and trophies
may have some value, even though the value may be less than cost.
In addition, see section 1.170A-13(f)(8)(i)(A) regarding goods
or services with insubstantial value.
Another commenter asked whether the listing of a donor's name
in a program at a charity-sponsored event has a substantial value.
An acknowledgment in such a program, which identifies-rather than
promotes--a donor, is an inconsequential benefit with no significant
value. See Rev. Rul. 68-432, 1968-2 C.B. 104, 105, holding that
"[s]uch privileges as being associated with or being known
as a benefactor of the [charitable] organization are not significant
return benefits that have monetary value."
Contributions to a Split-Interest Trust
Section 1.170A-13(f)(13) of the proposed regulations provides
that section 170(f)(8) does not apply to a transfer of property
to a charitable remainder unitrust (as defined in section 664(d)(2)).
A commenter observed that there are two other types of unitrusts
in addition to the type described in section 664(d)(2), and that
these unitrusts should be treated similarly. The final regulations
have been modified to provide that the substantiation requirements
of section 170(f)(8) do not apply to transfers to unitrusts described
in section 664(d)(3) or section 1.664- 3(a)(1)(i)(b), as well
as to unitrusts described in section 664(d)(2).
Section 1.170A-13(f)(13) of the proposed regulations provides
that section 170(f)(8) applies to a transfer to a pooled income
fund. Commenters requested further guidance on the proper way
to substantiate contributions to pooled income funds. The final
regulations have been modified to require, in the case of a transfer
of cash or other property to a pooled income fund, that the written
acknowledgment of the charitable organization maintaining the
fund include a statement that the cash or other property was transferred
to the organization's pooled income fund and state whether any
goods or services, in addition to the income interest in the fund,
were provided to the transferor. The contemporaneous written acknowledgment
need not include an estimate of the value of the income interest
in the pooled income fund. The final regulations also provide
guidance on the proper method of substantiating a deduction claimed
by a taxpayer who has purchased an annuity from a charitable organization.
Special Analyses
It has been determined that this Treasury decision is not a significant
regulatory action as defined in Executive Order 12866. Therefore,
a cost-benefit analysis is not required. It also has been determined
that section 553(b) of the Administrative Procedure Act (5 U.S.C.
chapter 5) does not apply to these regulations, and because the
notice of proposed rulemaking preceding the regulations was issued
prior to March 29, 1996, the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. See 5 U.S.C. section 601, Pub. L. No.
104-121 section 245. Pursuant to section 7805(f) of the Internal
Revenue Code, the notice of proposed rulemaking preceding these
regulations was submitted to the Chief Counsel for Advocacy of
the Small Business Administration for comment on the impact of
the proposed regulations on small businesses.
Drafting Information
The principal author of these regulations is Jefferson K. Fox,
Office of the Assistant Chief Counsel (Income Tax and Accounting),
Internal Revenue Service. However, other personnel from the IRS
and the Treasury Department participated in their development.
Treas. Reg. § 1.170A-14 Qualified
Conservation Contributions
(a) Qualified conservation contributions. A deduction under
section 170 is generally not allowed for a charitable contribution
of any interest in property that consists of less than the donor's
entire interest in the property other than certain transfers in
trust (see section 1.170A-6 relating to charitable contributions
in trust and section 1.170A-7 relating to contributions not in
trust of partial interests in property). However, a deduction
may be allowed under section 170(f)(3)(B)(iii) for the value of
a qualified conservation contribution if the requirements of this
section are met. A qualified conservation contribution is the
contribution of a qualified real property interest to a qualified
organization exclusively for conservation purposes. To be eligible
for a deduction under this section, the conservation purpose must
be protected in perpetuity.
(b) Qualified real property interest:
(1) Entire interest of donor other than qualified mineral
interest.
(i) The entire interest of the donor other than a qualified mineral
interest is a qualified real property interest. A qualified mineral
interest is the donor's interest in subsurface oil, gas, or other
minerals and the right of access to such minerals.
(ii) A real property interest shall not be treated as an entire
interest other than a qualified mineral interest by reason of
section 170(h)(2)(A) and this paragraph (b)(1) if the property
in which the donor's interest exists was divided prior to the
contribution in order to enable the donor to retain control of
more than a qualified mineral interest or to reduce the real property
interest donated. See Treasury regulations section 1.170A-7(a)(2)(i).
An entire interest in real property may consist of an undivided
interest in the property. But see section 170(h)(5)(A) and the
regulations thereunder (relating to the requirement that the conservation
purpose which is the subject of the donation must be protected
in perpetuity). Minor interests, such as rights-of-way, that will
not interfere with the conservation purposes of the donation,
may be transferred prior to the conservation contribution without
affecting the treatment of a property interest as a qualified
real property interest under this paragraph (b)(1).
(2) Perpetual conservation restriction. A perpetual conservation
restriction is a qualified real property interest. A "perpetual
conservation restriction" is a restriction granted in perpetuity
on the use which may be made of real property--including, an easement
or other interest in real property that under state law has attributes
similar to an easement (e.g., a restrictive covenant or equitable
servitude). For purposes of this section, the terms "easement",
"conservation restriction", and "perpetual conservation
restriction" have the same meaning. The definition of "perpetual
conservation restriction" under this paragraph (b)(2) is
not intended to preclude the deductibility of a donation of affirmative
rights to use a land or water area under section 1.170A-13(d)(2).
Any rights reserved by the donor in the donation of a perpetual
conservation restriction must conform to the requirements of this
section. See e.g., paragraph (d)(4)(ii), (d)(5)(i), (e)(3), and
(g)(4) of this section.
(c) Qualified organization:
(1) Eligible donee. To be considered an eligible donee under
this section, an organization must be a qualified organization,
have a commitment to protect the conservation purposes of the
donation, and have the resources to enforce the restrictions.
A conservation group organized or operated primarily or substantially
for one of the conservation purposes specified in section 170(h)(4)(A)
will be considered to have the commitment required by the preceding
sentence. A qualified organization need not set aside funds to
enforce the restrictions that are the subject of the contribution.
For purposes of this section, the term "qualified organization"
means:
(i) A governmental unit described in section 170(b)(1)(A)(v);
(ii) An organization described in section 170(b)(1)(A)(vi);
(iii) A charitable organization described in section 501(c)(3)
that meets the public support test of section 509(a)(2);
(iv) A charitable organization described in section 501(c)(3)
that meets the requirements of section 509(a)(3) and is controlled
by an organization described in paragraphs (c)(1) (i), (ii), or
(iii) of this section.
(2) Transfers by donee. A deduction shall be allowed for a contribution
under this section only if in the instrument of conveyance the
donor prohibits the donee from subsequently transferring the easement
(or, in the case of a remainder interest or the reservation of
a qualified mineral interest, the property), whether or not for
consideration, unless the donee organization, as a condition of
the subsequent transfer, requires that the conservation purposes
which the contribution was originally intended to advance continue
to be carried out. Moreover, subsequent transfers must be restricted
to organizations qualifying, at the time of the subsequent transfer,
as an eligible donee under paragraph (c)(1) of this section. When
a later unexpected change in the conditions surrounding the property
that is the subject of a donation under paragraph (b)(1), (2),
or (3) of this section makes impossible or impractical the continued
use of the property for conservation purposes, the requirement
of this paragraph will be met if the property is sold or exchanged
and any proceeds are used by the donee organization in a manner
consistent with the conservation purposes of the original contribution.
In the case of a donation under paragraph (b)(3) of this section
to which the preceding sentence applies, see also paragraph (g)(5)(ii)
of this section.
(d) Conservation purposes:
(1) In general. For purposes of section 170(h) and this section,
the term "conservation purposes" means:
(i) The preservation of land areas for outdoor recreation by,
or the education of, the general public, within the meaning of
paragraph (d)(2) of this section,
(ii) The protection of a relatively natural habitat of fish, wildlife,
or plants, or similar ecosystem, within the meaning of paragraph
(d)(3) of this section,
(iii) The preservation of certain open space (including farmland
and forest land) within the meaning of paragraph (d)(4) of this
section, or
(iv) The preservation of a historically important land area or
a certified historic structure, within the meaning of paragraph
(d)(5) of this section.
(2) Recreation or education:
(i) In general. The donation of a qualified real property interest
to preserve land areas for the outdoor recreation of the general
public or for the education of the general public will meet the
conservation purposes test of this section. Thus, conservation
purposes would include, for example, the preservation of a water
area for the use of the public for boating or fishing, or a nature
or hiking trail for the use of the public.
(ii) Access. The preservation of land areas for recreation or
education will not meet the test of this section unless the recreation
or education is for the substantial and regular use of the general
public.
(3) Protection of environmental system:
(i) In general. The donation of a qualified real property interest
to protect a significant relatively natural habitat in which a
fish, wildlife, or plant community, or similar ecosystem normally
lives will meet the conservation purposes test of this section.
The fact that the habitat or environment has been altered to some
extent by human activity will not result in a deduction being
denied under this section if the fish, wildlife, or plants continue
to exist there in a relatively natural state. For example, the
preservation of a lake formed by a man-made dam or a salt pond
formed by a man-made dike would meet the conservation purposes
test if the lake or pond were a nature feeding area for a wildlife
community that included rare, endangered, or threatened native
species.
(ii) Significant habitat or ecosystem. Significant habitats and
ecosystems include, but are not limited to, habitats for rare,
endangered, or threatened species of animal, fish, or plants;
natural areas that represent high quality examples of a terrestrial
community or aquatic community, such as islands that are undeveloped
or not intensely developed where the coastal ecosystem is relatively
intact; and natural areas which are included in, or which contribute
to, the ecological viability of a local, state, or national park,
nature preserve, wildlife refuge, wilderness area, or other similar
conservation area.
(iii) Access. Limitations on public access to property that is
the subject of a donation under this paragraph (d)(3) shall not
render the donation nondeductible. For example, a restriction
on all public access to the habitat of a threatened native animal
species protected by a donation under this paragraph (d)(3) would
not cause the donation to be nondeductible.
(4) Preservation of open space:
(i) In general. The donation of a qualified real property interest
to preserve open space (including farmland and forest land) will
meet the conservation purposes test of this section if such preservation
is:
(A) Pursuant to a clearly delineated Federal, state, or local
governmental conservation policy and will yield a significant
public benefit, or
(B) For the scenic enjoyment of the general public and will yield
a significant public benefit.
An open space easement donated on or after December 18, 1980,
must meet the requirements of section 170(h) in order to be deductible.
(ii) Scenic enjoyment:
(A) Factors. A contribution made for the preservation of open
space may be for the scenic enjoyment of the general public. Preservation
of land may be for the scenic enjoyment of the general public
if development of the property would impair the scenic character
of the local rural or urban landscape or would interfere with
a scenic panorama that can be enjoyed from a park, nature preserve,
road, waterbody, trail, or historic structure or land area, and
such area or transportation way is open to, or utilized by, the
public. "Scenic enjoyment" will be evaluated by considering
all pertinent facts and circumstances germane to the contribution.
Regional variations in topography, geology, biology, and cultural
and economic conditions require flexibility in the application
of this test, but do not lessen the burden on the taxpayer to
demonstrate the scenic characteristics of a donation under this
paragraph. The application of a particular objective factor to
help define a view as "scenic" in one setting may in
fact be entirely inappropriate in another setting. Among the factors
to be considered are:
(1) The compatibility of the land use with other land in the vicinity;
(2) The degree of contrast and variety provided by the visual
scene;
(3) The openness of the land (which would be a more significant
factor in an urban or densely populated setting or in a heavily
wooded area);
(4) Relief from urban closeness;
(5) The harmonious variety of shapes and textures;
(6) The degree to which the land use maintains the scale and character
of the urban landscape to preserve open space, visual enjoyment,
and sunlight for the surrounding area;
(7) The consistency of the proposed scenic view with a methodical
state scenic identification program, such as a state landscape
inventory; and
(8) The consistency of the proposed scenic view with a regional
or local landscape inventory made pursuant to a sufficiently rigorous
review process, especially if the donation is endorsed by an appropriate
state or local governmental agency.
(B) Access. To satisfy the requirement of scenic enjoyment by
the general public, visual (rather than physical) access to or
across the property by the general public is sufficient. Under
the terms of an open space easement on scenic property, the entire
property need not be visible to the public for a donation to qualify
under this section, although the public benefit from the donation
may be insufficient to qualify for a deduction if only a small
portion of the property is visible to the public.
(iii) Governmental conservation policy:
(A) In general. The requirement that the preservation of open
space be pursuant to a clearly delineated Federal, state, or local
governmental policy is intended to protect the types of property
identified by representatives of the general public as worthy
of preservation or conservation. A general declaration of conservation
goals by a single official or legislative body is not sufficient.
However, a governmental conservation policy need not be a certification
program that identifies particular lots or small parcels of individually
owned property. This requirement will be met by donations that
further a specific, identified conservation project, such as the
preservation of land within a state or local landmark district
that is locally recognized as being significant to that district;
the preservation of a wild or scenic river, the preservation of
farmland pursuant to a state program for flood prevention and
control; or the protection of the scenic, ecological, or historic
character of land that is contiguous to, or an integral part of,
the surroundings of existing recreation or conservation sites.
For example, the donation of a perpetual conservation restriction
to a qualified organization pursuant to a formal resolution or
certification by a local governmental agency established under
state law specifically identifying the subject property as worthy
of protection for conservation purposes will meet the requirement
of this paragraph. A program need not be funded to satisfy this
requirement, but the program must involve a significant commitment
by the government with respect to the conservation project. For
example, a governmental program according preferential tax assessment
or preferential zoning for certain property deemed worthy of protection
for conservation purposes would constitute a significant commitment
by the government.
(B) Effect of acceptance by governmental agency. Acceptance of
an easement by an agency of the Federal Government or by an agency
of a state or local government (or by a commission, authority,
or similar body duly constituted by the state or local government
and acting on behalf of the state or local government) tends to
establish the requisite clearly delineated governmental policy,
although such acceptance, without more, is not sufficient. The
more rigorous the review process by the governmental agency, the
more the acceptance of the easement tends to establish the requisite
clearly delineated governmental policy. For example, in a state
where