March 16,2007

Grassley Expresses Concern Over Unsubstantiated Noncash Charitable Contributions

M E M O R A N D U M


To:    Reporters and Editors

Re:    Report on noncash charitable contributions

Da:    Friday, March 16, 2007


Sen. Chuck Grassley, ranking member of the Committee on Finance, today made the following comment on a new report from the Treasury Inspector General for Tax Administration (TIGTA), “The Internal Revenue Service Needs to Improve Procedures to Identify Noncompliance With the Reporting Requirements for Noncash Charitable Contributions,” report number 2007-30- 049. The report is being publicly released and posted today at www.tigta.gov.


“The report shows there are still very real problems with noncash charitable contributions and that these problems contribute significantly to the tax gap. TIGTA found that in a recent nine- month time period, 101,000 taxpayers could have claimed $1.8 billion in unsubstantiated noncash contributions. That’s amazing. Equally as bad is that 20 percent of taxpayers or their preparers failed to comply with reporting requirements for non-cash contributions. Honest taxpayers shouldn’t have to shoulder the burden of those who want to play fast and loose with the tax laws meant to encourage charitable giving. I hope the IRS will follow the report’s recommendations and make clear to taxpayers what’s acceptable. Also, the IRS and Treasury need to make a priority of issuing guidance on non-cash donations, based on anti-abuse legislation that I proposed and that Congress enacted last year.”


The Pension Protection Act enacted last year contains a series of Grassley provisions on charities, including charitable giving incentives and provisions to shut down abuse of non-profit organizations’ tax-exempt status. For more information, please see JCX-38-06:Technical Explanation Of H.R. 4, The "Pension Protection Act Of 2006," As Passed By The House On July 28, 2006, And As Considered By The Senate On August 3, 2006, http://www.house.gov/jct/x-38- 06.pdf. A list of the provisions follows for quick reference.


TITLE XII: PROVISIONS RELATING TO EXEMPT ORGANIZATIONS ...................... 263

A. Charitable Giving Incentives ...................................................................................... 263

1. Tax-free distributions from individual retirement plans for charitable purposes (secs. 408, 6034, 6104, and 6652 of the Code)...................................................... 263
2. Charitable deduction for contributions of food inventory (sec. 170 of the Code)...................................................................................................................... 269

3. Basis adjustment to stock of s corporation contributing property
(sec. 1367 of the Code) .......................................................................................... 271

4. Charitable deduction for contributions of book inventory (sec. 170 of the Code)...................................................................................................................... 272

5. Modify tax treatment of certain payments to controlling exempt organizations (secs. 512 and 6033 of the Code)........................................................................... 273

6. Encourage contributions of real property made for conservation purposes
(sec. 170 of the Code) ............................................................................................ 274

7. Excise tax exemptions for blood collector organizations (secs. 4041, 4221, 4253, 4483, 6416, and 7701 of the Code).............................................................. 277

B. Reforming Exempt Organizations .............................................................................. 283

1. Reporting on certain acquisitions of interests in insurance contracts in which
certain exempt organizations hold interests (new sec. 6050V of the Code).......... 283

2. Increase the amounts of excise taxes imposed relating to public charities, social welfare organizations, and private foundations (secs. 4941, 4942, 4943, 4944, 4945, and 4958 of the Code)........................................................................ 286

3. Reform rules for charitable contributions of easements in registered historic districts and take account of rehabilitation credit in easement donations
(sec. 170 of the Code) ............................................................................................ 291

4. Reform rules relating to charitable contributions of taxidermy (sec. 170 of the Code) ............................................................................................ 296

5. Recapture of tax benefit on property not used for an exempt use
(secs. 170, 6050L, and new sec. 6720B of the Code)............................................ 298

6. Limit charitable deduction for contributions of clothing and household items (sec. 170 of the Code) ............................................................................................ 302

7. Modify recordkeeping and substantiation requirements for certain charitable contributions (sec. 170 of the Code) ...................................................................... 305

8. Contributions of fractional interests in tangible personal property
(secs. 170, 2055, and 2522 of the Code)................................................................ 306 viii

9. Proposals relating to appraisers and substantial and gross overstatement of valuations of property (secs. 170, 6662, 6664, 6696 and new sec. 6695A of the Code)...................................................................................................................... 308

10. Establish additional exemption standards for credit counseling organizations (secs. 501 and 513 of the Code) 312
11. Expand the base of the tax on private foundation net investment income (and sec. 4940 of the Code) ................................................................................... 320

12. Definition of convention or association of churches (sec. 7701 of the Code)....... 324

13. Notification requirement for exempt entities not currently required to file an annual information return (secs. 6033, 6652, and 7428 of the Code).................... 325

14. Disclosure to State officials relating to section 501(c) organizations (secs. 6103, 6104, 7213, 7213A, and 7431 of the Code)....................................... 327

15. Require that unrelated business income tax returns of section 501(c)(3) organizations be made publicly available (sec. 6104 of the Code)........................ 329

16. Treasury study on donor advised funds and supporting organizations.................. 330

17. Improve accountability of donor advised funds (secs. 170, 508, 2055, 2522, 4958, 6033 and new secs. 4966 and 4967 of the Code)......................................... 334

18. Improve accountability of supporting organizations (secs. 509, 4942, 4943, 4945, 4958, and 6033 of the Code)........................................................................ 351


-30-