Yes, this is dry, and tedious. But it’s also pretty important. Stay with WC on this one.
Our friends at the I.R.S. are worried that you may be claiming a charitable deduction you didn’t make. So it is proposing to ratchet up the reporting requirements for donors who want a tax deduction for their contributions to charities. If you make charitable contributions of $250 or more, or if you work for a charity, or simply care about charity work, then you need to know about this.
Right now, if you make a contribution of $250 or more to a charity – a §501(c)(3) organization – the organization is required to give you a written receipt before the end of the tax year. The I.R.S. calls it a “contemporaneous written acknowledgement,” although it doesn’t have to be “contemporaneous. The I.R.S., in the manner of bureaucracies everywhere, further obscures the receipt requirement as “CWA.”
But the I.R.S. worries that the CWA requirement isn’t enough, that there should be an alternative. And the alternative the I.R.S. has proposed would have the charity obtain your social security number as well as your name and address, and then have the charity submit all of the information to the I.R.S. as an alternative to the CWA.
So the I.R.S. wants you to give your social security number – let’s add another acronym, “SSN” – to every charity to whom you give $250 or more.
Note that at the donee level, at the charity making the report, this is an option, not a requirement. Under the proposed regulation, a charity could continue to give donors the CWA and ignore the SSN requirement. Some of the conservative political action charities have worked themselves into a froth over this. It’s pretty unlikely that a conservative political group would do the SSN option and not the CWA option.
WC thinks there are at least four things wrong with this idea.
First, it contradicts the I.R.S.’s own directive that taxpayers not share their SSN if they can avoid it. The SSN isn’t intended to be identification outside of taxes, health care and social security. It has been co-opted by the credit industry, though, and far too many creditors and vendors attempt to use it as an easy means of identification.
Second, it creates a terrific new opportunity for identity theft. Think of all of those SSNs, names and addresses stored on computer systems, just waiting for digital thieves to come and steal them. And for dishonest employees of charities to steal the SSNs and sell them to crooks. If you think your average church or youth sports organization has adequate security on its web site WC envies you the rosy, warm world in which you live. But as a lawyer who represents charities, a decision to go the SSN route, followed by a data breach, is going to be an extremely, possibly fatal, mistake.
Third, it creates a wonderful new scam for the less than scrupulous business sector. A telephone call soliciting a charitable contribution for a bogus charity is bad enough. Now the scammer has the opportunity to steal your SSN and identity, as well. Joy.
Fourth, it has the potential to discourage charitable donations. To the extent that a charitable organization uses this option, and asks for an SSN, it’s going to make donors and potential donors unhappy. WC is certain his reaction would be to refuse to make a donation. Each such refusal hurts the charity and, to some extent, charities in general if the would-be donor generalizes his or her reaction to all charities, even those who use CWAs.
WC thinks the I.R.S. should withdraw this proposed regulation. It’s a disaster. If you agree, you can comment yourself. WC has. Help the government be slightly less stupid. Help the I.R.S. avoid tying its bootlaces together on this one.