National Taxpayer Advocate: Congress Should Remove the Contemporaneous Aspect of Written Acknowledgements for Charitable Contributions

One nightmare of donors and tax advisors alike is having a sizeable charitable contribution deduction disallowed for failure to meet the substantiation requirements imposed by Congress, which the IRS and the courts strictly construe. Often these errors arise for complex reasons, such as a failure to obtain a an required appraisal that is “qualified” (see, for example, the recent U.S. Tax Court memorandum opinion in Lim v. Commissioner). But these errors also sometimes arise for a simple failure to obtain the  Code section 170(f)(8) “contemporaneous written acknowledgement” (CWA) from the recipient charity that both has the required information and is obtained by the taxpayer by the earlier of the date they file the relevant return or the due date of that return.

Now the National Taxpayer Advocate is urging Congress to relax the contemporaneous aspect of the CWA requirement in her 2023 Purple Book: Compilation of Legislative Recommendations to Strengthen Taxpayer Rights and Improve Tax Administration. Legislative Recommendation #58 recommends that Congress “[e]liminate the ‘contemporaneous written acknowledgment’ requirement and replace it with an ‘adequate written documentation’ requirement.” The new AWD requirement would be the same as the CWA requirement with respect to the information required, but the timing aspect would be removed. This would allow a charity to issue the required acknowledgement, or correct a defective acknowledgement, at any time, including presumably after the IRS on audit identified the absence or deficiency.

Hat tip: EO Tax Journal.

Lloyd Mayer