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Saturday January 18, 2020

Article of the Month

Substantiation Requirements for Charitable Contributions, Part I


The Internal Revenue Service requires donors who claim charitable income tax deductions to substantiate the value of their charitable contributions. Donors may not understand the specific substantiation requirements when making charitable donations. The Service's substantiation rules are strict, and if these rules are not closely followed, a donor may lose his or her entire charitable deduction. Advisors should be prepared to explain these requirements, guide their clients through the process of substantiating charitable gifts and work with charities to meet the Service's requirements.

This article series will explore the substantiation rules for charitable contributions. This series will shed light on the substantiation requirements for specific gift types, including donations of real estate, stock and tangible personal property. Part I of this series will review the final regulations regarding substantiation for charitable donations for cash gifts.

This first article will examine the basic rules for substantiation of charitable cash contributions. It will review the various requirements for cash gifts of different values. It will discuss the specific substantiation requirements for cash-type charitable gifts, depending on the method of donation. By understanding the substantiation rules under the final regulations, advisors can help ensure that their clients accurately substantiate their charitable donations.

A Brief History of Charitable Contribution Substantiation

The rules for substantiating charitable contributions have expanded and evolved since their inception in 1917. The most recent round of changes resulted from the American Jobs Creation Act of 2004 and the Pension Protection Act of 2006. The Service incorporated updates from these Acts in proposed regulations.

In REG-140029-07 (6 Aug. 2008), the Service published proposed regulations relating to substantiation of charitable gifts with the intent of reducing valuation abuses for claimed donations. Just shy of 10 years later, the Service published final regulations in T.D. 9836 (27 July 2018). The final regulations for charitable contribution substantiation apply to contributions made after July 30, 2018.

The final regulations for Sec. 170 closely follow most of the proposed regulations. There are, however, some areas in which the final regulations differ. Charities can assist donors by understanding the rules and requirements for substantiation and providing correct receipts. It is important that advisors have an in-depth understanding of the substantiation requirements in order to safeguard charitable income tax deductions for their clients.

Cash gifts

Due Date for Substantiation

A donor must obtain the appropriate substantiation documentation for his or her charitable gifts on or before the earlier of the date the donor files the original tax return or the due date for filing the original tax return for the year in which the contribution was made, including any extensions Sec. 170(f)(8)(C). Reg. 1.170A-13(f)(3). Reg. 1.170A-15(c). This deadline applies to substantiation in all forms, including receipts, records and contemporaneous written acknowledgements.

If a donor fails to obtain the appropriate substantiation, the Internal Revenue Code states "no deduction is allowed." Reg. 1.170A-15. Reg. 1.170A-16. Therefore, it is of the utmost importance for charities to understand the substantiation requirements and provide adequate documentation. Donors rely on charities to provide appropriate receipts to meet the Service's substantiation requirements. Professional advisors should inform their clients of these rules, and the strict nature of their enforcement, in order to safeguard their clients' charitable deductions.

Cash Gifts Under $250

Many donors make gifts of cash to charity. This is a convenient and simple giving option. A donor is required to substantiate a cash gift if a charitable deduction is going to be claimed on an income tax return. Reg. 1.170A-15(a). Donors (including individuals, partnerships and subchapter S corporations) must comply with these rules. Reg. 1.170A-15(f).

Donors may use cash, checks, gift cards redeemable for cash, credit cards, electronic fund transfers, online payment services or payroll deductions to make cash gifts to charity. Reg. 1.170A-15(b)(1). For purposes of charitable deductions and the substantiation rules, these monetary gifts are treated as cash gifts.

For all cash-type gifts, a donor is required to substantiate the deduction with a bank record or a written communication from the charity. The written communication must come from the charitable organization, show the name of the organization, the date of the contribution and the amount of the contribution. Reg. 1.170A-15(a)(1). An email from the organization is sufficient for substantiation purposes. Reg. 1.170A-15(b)(3).

Substantiation in the form of a bank record "includes a statement from a financial institution, an electronic fund transfer receipt, a canceled check, a scanned image of both sides of a canceled check obtained from a bank website or a credit card statement." Reg. 1.170A-15(b)(2). Therefore, a blank pledge card provided from the charitable organization and completed by the donor is insufficient substantiation.

Thomas wrote a check to Charity in his hometown in the amount of $200. This was a one-time gift to help with a current campaign. He made this gift in addition to his regular gifts to his favorite charities. When tax time rolled around, Thomas wanted to claim his $200 charitable gift as an itemized charitable income tax deduction. Thomas had misplaced his receipt from Charity, but he was able to locate scanned images of both sides of his canceled check through his bank's website. For purposes of claiming a charitable deduction, Thomas obtained sufficient substantiation for his check donation.
Cash Gifts of $250 or More

A donor who makes a cash gift must meet the general substantiation requirements for cash donations, as mentioned above. Reg. 1.170A-15(a)(1). Additional substantiation of a charitable contribution is required if a donor makes a cash gift of $250 or more, if an income tax deduction is going to be claimed. Reg. 1.170A-15(a)(1). The donor is required to obtain a contemporaneous written acknowledgment from the charity. Reg. 1.170A-15(a)(2). One document can be used to satisfy both the general substantiation requirements and the additional requirement for charitable cash gifts over $250. Reg. 1.170A-15(a)(3).

To satisfy the requirements of a contemporaneous written acknowledgement, the charity's receipt must contain a description of the property. The writing must state whether any goods or services were provided in consideration of the property. If goods or services were provided, the document must provide a good faith estimated value of the goods or services. It should be noted that intangible religious benefits are not required to be valued. However, if the charitable organization does provide intangible religious benefits, a brief statement to that effect should be included in the receipt.

Payroll Deduction Gifts

For a donor who uses a payroll deduction to make charitable gifts, special substantiation rules apply. The donor must obtain a pay stub, Form W-2, "Wage and Tax Statement" or other employer-provided document that contains the amount withheld for charity during the taxable year. Reg. 1.170A-15(d)(1)(i). The donor must also provide a pledge card, or other document prepared by or at the direction of the charity, that indicates the name of the organization. Reg. 1.170A-15(d)(1)(ii).

If the donor meets these substantiation requirements, he or she will be able to claim a charitable deduction. Donors satisfying the required substantiation for payroll deduction gifts do not have to meet the general cash substantiation requirements.

Certain Planned Gifts Substantiation

Cash-type gifts to certain trusts do not require satisfaction of all of the substantiation rules. Reg. 1.170A-15(g). If cash-type gifts are made to charitable remainder annuity trusts or charitable remainder unitrusts, Reg. 1.170A-15(a)(1) and (3) are not required to be met, which requires a bank record or written communication and grants permission for one document to contain the substantiation requirements. Reg. 1.170A-15(g). [Editor's note: It is more plausible that the drafters intended the section to read that Reg. 1.170A-12(a)(1) and (2) do not apply, which would mean that donors are not required to retain a bank record or written communication and obtain a contemporaneous written acknowledgment to satisfy the substantiation requirements.]

A charitable remainder trust has a vested remainder to charity, but donors are able to retain control to change the charitable beneficiary. Therefore, no receipt from charity is required. These special substantiation requirements do not apply to cash-type gifts to pooled income funds. Reg. 1.170A-15(g).


Donors rely on their professional advisors to provide guidance and to help safeguard their charitable deductions. It is imperative for professional advisors to understand the substantiation requirements for cash gifts to charity. Advisors must have knowledge of the final regulation requirements for substantiation and help their clients follow these regulations with strict compliance.

It is of the utmost importance for charities to understand their obligations to provide correct receipts for charitable gifts. Charities and professional advisors should work together to ensure that donors obtain the appropriate substantiation in a timely manner.

Published May 1, 2019
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Shelby Harder, 2018
Dr. Irving Auld and Dorothy
Roher Auld Scholarship

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Juliana E. Olsen-Valdez, 2018
Carroll Family Scholarship

"Lawrence University is a great place for students looking to embrace their multi-interested approach to learning. As a Geology major, I have spent many long hours in laboratories. But, I have also had the opportunity to organize and lead students on outdoor backpacking trips, help build a stronger community for International students, participate in dialogues on campus initiatives, attend dozens of musical events, and study abroad in a field-based geology program, all while taking classes in a variety of academic spheres on campus. Lawrence, as an institution and student body, creates a collective of learners, listeners, and leaders who are continuously evolving their understanding of the world around them. I am fortunate to have the support of the Carroll Family Scholarship, so that I can say I am a part of this exceptional community too!"

Weiqi "Vicky" Liang, 2019
Marian H. Cuff Endowed Scholarship

"Lawrence is a special institution with nice people around the campus. I better myself by trying out different things and using new ways to think critically. Even though I am a Philosophy major, I have successfully taken classes in Anthropology, Biology, Economics, and Government. In addition, I still find many great extracurricular opportunities to explore, such as singing with Viking Chorale, even though I am not a music major. While having the great experience of volunteering at the elderly center last year, I became an elder advocacy coordinator at the Volunteer Community Service Center. At Lawrence, I've learned to handle difficult academic problems while looking forward to exploring possible opportunities. I am very grateful to be awarded the Marian H. Cuff Endowed Scholarship for every year I have been here, and appreciate that the scholarship has provided this wonderful Lawrence experience to me."

Anthony Cardella, 2018
Ansorge Family Scholarship

"I am so excited that I am able to attend Lawrence University. I know that I will make great progress studying piano with Dr. Michael Mizrahi. Since being at Lawrence I've already made a lot of progress and I really love it here. I am so grateful for the Ansorge Family Scholarship that made it possible for me to come to Lawrence because without it, I might not have been able to afford the cost of attending a school that is a great fit for me and a place where I will learn so much and go so far."

Milwaukee-Downer Scholarships and Professorships

Some of the many recipients of Milwaukee-Downer scholarships gather for a photo with Carolyn King Stephens M-D'62 and Marlene Crupi-Widen M-D'55 in January 2014 at the annual scholarship luncheon.

Rosamund Victoria Bille Adler Scholarship
Dr. Charles E. Albright Scholarship
Helen Daniels Bader Scholarship
James G. and Ethel M. Barber Scholarship
Catharine Beecher Endowed Fund for Downer Women
Bessie A. Bell Scholarship
Berk Scholarship
Frederick C. Best Scholarship
Beta Study Club Scholarship
Lynde Bradley Scholarship
Lucia R. Briggs-Alumnae Scholarship
Edith Lange Brooks Scholarship
Anne Barman Caldwell Scholarship
Alice Miller Chester Scholarship
City of Milwaukee Student Funds Scholarship
Milwaukee-Downer Class of 1940 Fund
Milwaukee-Downer Class of 1942 Fund
College Endowment Association Scholarship
Janet Cope Crawford Scholarship
Jessie Mabbott Daniels Scholarship
F. T. Day Scholarship
Rufus Dodge Scholarship
Julia P. Ely and Hannah R. Vedder Memorial Scholarship
General Endowed Scholarship - M-D College
Dr. Alfred W. and Mrs. Ada F. Gray Scholarship
Berenice E. Hess Scholarship Endowment
Lucille Ray Hibbard Scholarship
Belle Austin Jacobs Scholarship
Helen McDermott Jurack and Ronald J. Mason Scholarship
Marjorie S. Logan Scholarship
Nellie Maxwell Scholarship
S. Annabelle & Paul McGuire Scholarship
Memorial Scholarship Fund - Milwaukee-Downer
Milwaukee-Downer Class of 1953 Scholarship
Milwaukee-Downer Class of 1955 Scholarship
Milwaukee-Downer Class of 1956 Scholarship
Milwaukee-Downer Class of 1957 Scholarship
Milwaukee-Downer Class of 1958 and 1959 50th Reunion Scholarship
Milwaukee-Downer Club Scholarship
Milwaukee-Downer/Lawrence College Consolidation 50th Anniversary Scholarship
Francis Evelyn Kelley Morgan Memorial Scholarship
O'Neill-Anderson Family Scholarship Endowment
Elizabeth A. Olson Scholarship
Gilbert Haven Peirce, Sr. and Emma Elizabeth Manor Peirce Milwaukee-Downer Scholarship
Aleida J. Pieters Scholarship
Matilda Siefert Puelicher Scholarship
Elizabeth Ann Richardson Scholarship
William M. Ross Memorial Scholarship
Elizabeth Rossberg Scholarship
Charles Frederic Sammond Scholarship
Mildred L. Schroeder Scholarship
Sivyer Educational Fund for Women
Marion Merrill Smith Scholarship
Dr. Elizabeth A. Steffen Scholarship
W. Mead and Elizabeth McKone Stillman Scholarship
Strzelczyk Family Scholarship
Clare Scherf Sweetman Scholarship
Raymond H. and Jane K. Taylor Scholarship
Jerline E. Walfoort Memorial Scholarship
Barbara E. Wehr Fund
Harmony Weissbach Scholarship
Martha and Frances Wheelock Scholarship
James G. and Ethel M. Barber Professorship of Theatre and Drama
T. A. Chapman Professorship in Music
Alice G. Chapman Professorship in Physics
Alice G. Chapman Librarianship
Milwaukee-Downer College and College Endowment Association Professorship

Angela Small Fry Intia, 2019
Maurine Campbell Scholarship

"Thanks to the Maurine Campbell scholarship, I have been able to attend the amazing school that is Lawrence University. With the help from this scholarship, I have been able to pursue my dream career in chemistry working with the outstanding and extremely helpful faculty here. Even outside of chemistry I take the time for exploration into my interests and want to give back through my work as a resident life advisor, stock room assistant, and student supervisor at Bon Appetit. Everything I have learned here, academically or not has forever molded the person I am today."

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