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IRS Rules on Substantiation of Noncash Charitable Contributions

The recent proposed regulations for substantiation and reporting of charitable contributions implement the changes created by the American Jobs Creation Act of 2004 and the Pension Protection Act of 2006 (PPA).

There are many changes created by the American Jobs Creation Act and PPA in the noncash area. All similar noncash items of a group, whether or not donated to more than one charitable entity or not, are combined for the substantiation requirement noted below. For instance, household items include furniture, furnishings, electronics, appliances, linens and other similar items. Any of these donated items would be considered together for the purposes of the substantiation rules. The following are the substantiation requirements for noncash contributions (based on the fair market value of the donation or group of items):

Less than $250

• Receipt from the donee or other reliable records

$250 or more but not more than $500

• Contemporaneous written acknowledgment from the donee organization

More than $500 but not more than $5,000

• Contemporaneous written acknowledgment from the donee organization
• File a completed Form 8283 (Section A)

More than $5,000

• Contemporaneous written acknowledgment
• A qualified appraisal is generally required (one exception exists for publicly traded stock)
• Either Section A or Section B of Form 8283 (depending on the type of property contributed) must be completed

More than $500,000

• Attach a copy of the qualified appraisal to the return (except for contributed artwork, which has a threshold of over $20,000 and other special requirements).

American Jobs Creation Act and PPA generally limits the deduction for motor vehicles, boats and airplanes contributed to charity for which the claimed value exceeds $500 by making it dependent on the charity's use of the vehicles and imposing higher substantiation requirements. If the charity sells the vehicle without any "significant intervening use" or "material improvement," the donor's charitable deduction generally can't exceed the gross proceeds from the sale.

There are also specific rules for clothing and household items in the proposed regulations. No deduction is allowed for any contribution of clothing or a household item unless it is in good condition or better. This rule does not apply to a contribution of a single item of clothing or a household item for which a donor claims a deduction of more than $500 if the donor submits a qualified appraisal with the return.

A qualified appraisal is an appraisal document that is prepared by a "qualified appraiser" in accordance with generally accepted appraisal standards. The definition of a "qualified appraiser" is an individual with verifiable education and experience valuing the relevant type of property for which the appraisal is performed.

For more information, please contact Kira Wheat at 312-980-3331, Alex Winkworth at 312-980-3251 or your Blackman Kallick representative.

This publication is part of Blackman Kallick’s marketing of professional services, and is not written tax advice directed at the specific facts and circumstances of any person and/or entity. Contents of this publication are of a general nature, and you should not act on this information without obtaining professional advice from your business advisor that is appropriately tailored to your individual needs and circumstances. This written advice is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.