New Federal Requirement for Taxpayers Making Charitable Donations
Conference Report (H. Rept. 108-755) -- (House of Representatives - October 07, 2004)
(Now Public Law No: 108-357)
“SEC. 883. INCREASED REPORTING FOR NONCASH CHARITABLE CONTRIBUTIONS.
(a) IN GENERAL.--Subsection (f) of section 170 (relating to disallowance of deduction in certain cases and special rules) is amended by adding after paragraph (10) the following new paragraph:
``(11) QUALIFIED APPRAISAL AND OTHER DOCUMENTATION FOR CERTAIN CONTRIBUTIONS.--
``(A) IN GENERAL.--
``(i) DENIAL OF DEDUCTION.--In the case of an individual, partnership, or corporation, no deduction shall be allowed under subsection (a) for any contribution of property for which a deduction of more than $500 is claimed unless such person meets the requirements of subparagraphs (B), (C), and (D), as the case may be, with respect to such contribution.
``(ii) EXCEPTIONS.--
``(I) READILY VALUED PROPERTY.--Subparagraphs (C) and (D) shall not apply to cash, property described in section 1221(a)(1), publicly traded securities (as defined in section 6050L(a)(2)(B)), and any qualified vehicle described in paragraph (12)(A)(ii) for which an acknowledgement under paragraph (12)(B)(iii) is provided.
``(II) REASONABLE CAUSE.--Clause (i) shall not apply if it is shown that the failure to meet such requirements is due to reasonable cause and not to willful neglect.
``(B) PROPERTY DESCRIPTION FOR CONTRIBUTIONS OF MORE THAN $500.--In the case of contributions of property for which a deduction of more than $500 is claimed, the requirements of this subparagraph are met if the individual, partnership or corporation includes with the return for the taxable year in which the contribution is made a description of such property and such other information as the Secretary may require. The requirements of this subparagraph shall not apply to a C corporation which is not a personal service corporation or a closely held C corporation.
``(C) QUALIFIED APPRAISAL FOR CONTRIBUTIONS OF MORE THAN $5,000.--In the case of contributions of property for which a deduction of more than $5,000 is claimed, the requirements of this subparagraph are met if the individual, partnership, or corporation obtains a qualified appraisal of such property and attaches to the return for the taxable year in which such contribution is made such information regarding such property and such appraisal as the Secretary may require.
``(D) SUBSTANTIATION FOR CONTRIBUTIONS OF MORE THAN $500,000.--In the case of contributions of property for which a deduction of more than $500,000 is claimed, the requirements of this subparagraph are met if the individual, partnership, or corporation attaches to the return for the taxable year a qualified appraisal of such property.
``(E) QUALIFIED APPRAISAL.--For purposes of this paragraph, the term `qualified appraisal' means, with respect to any property, an appraisal of such property which is treated for purposes of this paragraph as a qualified appraisal under regulations or other guidance prescribed by the Secretary.
``(F) AGGREGATION OF SIMILAR ITEMS OF PROPERTY.--For purposes of determining thresholds under this paragraph, property and all similar items of property donated to 1 or more donees shall be treated as 1 property.
``(G) SPECIAL RULE FOR PASS-THRU ENTITIES.--In the case of a partnership or S corporation, this paragraph shall be applied at the entity level, except that the deduction shall be denied at the partner or shareholder level.
``(H) REGULATIONS.--The Secretary may prescribe such regulations as may be necessary or appropriate to carry out the purposes of this paragraph, including regulations that may provide that some or all of the requirements of this paragraph do not apply in appropriate cases.''.
(b) EFFECTIVE DATE.--The amendment made by this section shall apply to contributions made after June 3, 2004.”
LEGISLATIVE HISTORY
– THE FOLLOWING IS THE TEXT OF THE COMMITTEE REPORT ON THE
PRECEDING PROVISION OF LAW
3. Require increased
reporting for noncash charitable contributions (sec. 683 of the
House bill and sec. 170 of the Code)
PRESENT LAW
In general, a deduction
is permitted for charitable contributions, subject to certain limitations
that depend on the type of taxpayer, the property contributed, and
the donee organization. 839
[Footnote] In the case of non-cash contributions, the amount of
the deduction generally equals the fair market value of the contributed
property on the date of the contribution.
[Footnote 839: Charitable deductions are provided for income, estate,
and gift tax purposes. Secs. 170, 2055, and 2522, respectively.]
In general, if the total charitable deduction claimed for non-cash
property exceeds $500, the taxpayer must file IRS Form 8283 (Noncash
Charitable Contributions) with the IRS. C corporations (other than
personal service corporations and closely-held corporations) are
required to file Form 8283 only if the deduction claimed exceeds
$5,000.
Taxpayers are required to obtain a qualified appraisal for donated
property (other than money and publicly traded securities) with
a value of more than $5,000. 840
[Footnote] Corporations (other than a closely-held corporation,
a personal service corporation, or an S corporation) are not required
to obtain a qualified appraisal. Taxpayers are not required to attach
a qualified appraisal to the taxpayer's return, except in the case
of contributed art-work valued at more than $20,000. Under Treasury
regulations, a qualified appraisal means an appraisal document that,
among other things, (1) relates to an appraisal that is made not
earlier than 60 days prior to the date of contribution of the appraised
property and not later than the due date (including extensions)
of the return on which a deduction is first claimed under section
170; 841
[Footnote] (2) is prepared, signed, and dated by a qualified appraiser;
(3) includes (a) a description of the property appraised; (b) the
fair market value of such property on the date of contribution and
the specific basis for the valuation; (c) a statement that such
appraisal was prepared for income tax purposes; (d) the qualifications
of the qualified appraiser; and (e) the signature and taxpayer identification
number of such appraiser; and (4) does not involve an appraisal
fee that violates certain prescribed rules. 842
[Footnote]
[Footnote 840: Pub. L. No. 98-369, sec. 155(a)(1) through (6) (1984)
(providing that not later than December 31, 1984, the Secretary
shall prescribe regulations requiring an individual, a closely held
corporation, or a personal service corporation claiming a charitable
deduction for property (other than publicly tranded securities)
to obtain a qualified appraisal of the property contributed and
attach an appraisal summary to the taxpayer's return if the claimed
value of such property (plus the claimed value of all similar items
of property donated to one or more donees) exceeds $5,000). Under
Pub. L. No. 98-369, a qualified appraisal means an appraisal prepared
by a qualified appraiser that includes, among other things, (1)
a description of the property appraised; (2) the fair market value
of such property on the date of contribution and the specific basis
for the valuation; (3) a statement that such appraisal was prepared
for income tax purposes; (4) the qualifications of the qualified
appraiser; (5) the signature and taxpayer identification number
of such appraiser; and (6) such additional information as the Secretary
prescribes in such regulations.]
[Footnote 841: In the case of a deduction first claimed or reported
on an amended return, the deadline is the date on which the amended
return is filed.]
[Footnote 842: Treas. Reg. sec. 1.170A-13(c)(3).]
HOUSE BILL
The provision requires increased donor reporting for certain charitable
contributions of property other than cash, inventory, or publicly
traded securities. The provision extends to all C corporations the
present law requirement, applicable to an individual, closely-held
corporation, personal service corporation, partnership, or S corporation,
that the donor must obtain a qualified appraisal of the property
if the amount of the deduction claimed exceeds $5,000. The
provision also provides that if the amount of the contribution of
property other than cash, inventory, or publicly traded securities
exceeds $500,000, then the donor (whether an individual, partnership,
or corporation) must attach the qualified appraisal to the donor's
tax return. For purposes of the dollar thresholds under the
provision, property and all similar items of property donated to
one or more donees are treated as one property.
The provision provides that a donor that fails to substantiate a
charitable contribution of property, as required by the Secretary,
is denied a charitable contribution deduction. If the donor is a
partnership or S corporation, the deduction is denied at the partner
or shareholder level. The denial of the deduction does not apply
if it is shown that such failure is due to reasonable cause and
not to willful neglect.
The provision provides that the Secretary may prescribe such regulations
as may be necessary or appropriate to carry out the purposes of
the provision, including regulations that may provide that some
or all of the requirements of the provision do not apply in appropriate
cases.
Effective date.--Effective for contributions made after June 3,
2004.
SENATE AMENDMENT
No provision.
CONFERENCE AGREEMENT
The conference agreement
follows the House bill, except that appraisals are not required
for charitable contributions of certain vehicles that are sold by
the donee organization without a significant intervening use or
material improvement of the vehicle by such organization, and for
which the organization provides an acknowledgement to the donor
containing a certification that the vehicle was sold in an arm's
length transaction between unrelated parties, and providing the
gross sales proceeds from the sale, and a statement that the donor's
deductible amount may not exceed the amount of such gross proceeds.
Effective date.--Effective for contributions made after
June 3, 2004.
