The Internal Revenue Service (IRS) is proposing regulations – titled the Substantiation Requirement for Certain Contributions – that would create a new donor disclosure form for donations over $250. If enacted, the form would require 501(c)(3) organizations, including charities, religious groups, and universities, to collect donors’ Social Security numbers.
Though the form wouldn’t be mandatory initially, the “optional” proposal has many nonprofit leaders extremely concerned. Some believe that once the rule is enacted, it would be easy (and likely) for the form to become mandatory if the IRS determines it’s a preferable means of substantiating contributions.
With the Wednesday deadline to comment on this proposed rule fast approaching, we sat down with the Association of Fundraising Professionals’ General Counsel, Jason Lee, to learn more about it and discuss what members of the nonprofit sector can do to impact policy. Here are excerpts from our interview:
Q. Why is the IRS considering implementing this rule?
A. The IRS has determined that an amended Form 990 is unsuitable for substantiating contributions for taxpayers who are under examination for their claimed charitable contributions deductions. This new form is intended to provide the necessary substantiation in lieu of the contemporaneous written acknowledgement (CWA) already in existence.
Q. How will it impact donors?
A. It’s engrained in all of us to never give out our Social Security number, particularly in today’s climate of rampant identity theft. When an organization asks for it, it’s a red flag; we often assume it’s a possible scam. And, we’re inclined to believe that if we can’t trust Target – a huge corporation that spends billions on cyber security – with our credit card numbers, how can we trust a small, local nonprofit with our Social Security numbers? And our Socials are much more sensitive, because unlike a credit card number, they can’t be changed.
Q. How will it impact nonprofits?
A. Use of the form will initially be optional, so nonprofits may not feel an impact. However, we do have great concerns about the proposed rule because we see the potential of a very significant, negative impact on giving.
If donors are required to provide their Social Security numbers for donations greater than $250, our members are extremely concerned that their donors will either give less, so they fall below the $250 threshold, or decide not to give at all. This could have a huge impact on the sector.
Q. What challenges will it present to nonprofits if adopted?
A. Today, most charities aren’t prepared to collect and house donors’ Social Security numbers. The rule could put a tremendous burden on charities to purchase sophisticated security software to guard against identity theft, and hire and train staff to manage, protect, and report on this highly sensitive data.
Q. Do you have a recommended call to action?
A. Before these proposed regulations are adopted, consideration will be given to any written comments submitted to the IRS by this Wednesday, December 16.
We’re asking AFP members – as well as all fundraisers and those involved in the charitable sector, including donors – to get involved in the public policy process and work to maintain and strengthen the fundraising profession. To encourage people to speak out, we’ve provided sample templates and language on our website, as well as a link to the IRS’s comment page.
You may submit comments electronically via the Federal eRulemaking Portal at http://www.regulations.gov/#!home. Click on the link titled, “Substantiation Requirement for Certain Contributions” under the “What’s Trending” headline to submit your comments, and read what others are saying.
If you’re in the D.C area, you may also hand-deliver written comments between 8 a.m. and 4 p.m. to:
Internal Revenue Service
1111 Constitution Avenue NW.