The IRS lays out specific requirements and qualifications in order to properly take the charitable contribution deduction. For taxpayers, including individuals, partnerships, and corporations who want to take a deduction for noncash charitable contributions over $500, they must file Form 8283. Form 8283 should accompany the taxpayer’s return for the year they contributed the property and take the deduction. If a taxpayer fails to attach Form 8283 to his return, then the IRS will typically disallow the charitable contribution deduction completely and readjust the tax liability.
Who qualifies as a recipient of a charitable contribution in order to take the deduction?
One must keep in mind that contributions to an individual are not deductible. Rather, charitable contributions are only deductible if made to a qualified organization. According to the IRS and § 170(c), qualified organizations include a government possession, a corporation, trust, fund or foundation organized or created in the US, church or other religious organization, veteran’s organization, nonprofit fire company, civil defense organization, domestic fraternal society, or a nonprofit cemetery.
What else do I need to include with Form 8283?
According to § 170(f)(8)(A), in addition to filing Form 8283, a taxpayer must include a contemporaneous written acknowledgement of the contribution by the donee organization in order to take a deduction. An acknowledgement is contemporaneous if the taxpayer obtains the acknowledgement on or before the date when the taxpayer files a return for the taxable year in which the contribution was made or the due date for the return.
What information do I need to include on the contemporaneous written acknowledgment?
The contemporaneous written acknowledgement, according to § 170(f)(8)(B), must also contain certain information including the amount of cash and a description of the property contributed, whether the donee organization provided any goods or services in consideration, and an estimate of the value of the goods or services if any were provided.
Typically, more attention is paid to the appraisal procedure and requirements than other aspects of the charitable contribution deduction because the appraisal actually quantifies amount of the deduction. However, the contemporaneous requirement is just as stringent as the appraisal because the tax code specifically lays out each requirement that is procedurally necessary to take the deduction, as discussed below in detail.
What if I fail to comply with the contemporaneous written acknowledgment requirements?
Taxpayers who fail to comply with the contemporaneous written acknowledgement requirements may try to use the “substance over form” argument, but this is unlikely to prevail since the specific elements are clear in the code.
One exception to this argument stems from the case Bond v. Commissioner . Here, the taxpayers technically did not meet all the requirements necessary to obtain the charitable contribution deduction because while they attached Form 8283, they failed to attach the appraisal report to the return. Therefore, the taxpayers argued that they substantially complied with the tax code and were entitled to the deduction. The court applied a “directory and not mandatory” standard and found that by nature of the requirements, the taxpayers were in fact entitled to a deduction because they actually provided all the necessary information but simply failed to attach the document. The court referenced Taylor v. Commissioner in order to highlight the fact that this substantial compliance applies when the taxpayer satisfies the elements necessary that relate to the substance or essence of the law.
In contrast, the court in French v. Commissioner of Internal Revenue acknowledged the importance of following the strict requirements of the tax code. The court in French noted that a taxpayer is not excused from compliance with contemporaneous acknowledgement even if he substantially complied with the law because the requirements are so clearly stated in § 170(f)(8). The fact that the tax code identifies these requirements illustrates the importance of the rule.
In French, the taxpayers failed to attach a required letter at the time the amended return was due. Unlike the taxpayer in Bond where the actual appraisal had been completed, the taxpayers here did not even obtain the letter until nearly two months after the return was due. The key distinction is that the taxpayers in Bond actually performed the requirements whereas the taxpayers in French did not complete the necessary steps in the appropriate amount of time. Therefore, the court in French found that the taxpayers were not entitled to the charitable contribution deduction because they failed to meet the strict requirements of a contemporaneous acknowledgment.
This article was prepared by a tax attorney at The McGuire Law Firm. If you have any questions related to charitable contributions, Form 8283 or other tax matters, please feel free to contact our firm to speak with a tax attorney.