2006 Tax Information
by Morgan Shepard
In August Congress enacted the massive Pension Protection Act of 2006. While primarily pension reform law, the Act contains a number of provision pertaining to public charities and charitable contributions. Most notably, it imposes new requirements on the substantiation of charitable contributions. These requirements take effect immediately, and must be understood by church treasurers in order to ensure that donors will be able to deduct their cash contributions.
The Act made an important change in the way that contributions of cash are to be substantiated. It requires that all cash contributions, regardless of amou8nt, be substantiated by either a bank record (such as a cancelled check) or written communication from the donee charity showing the name of the charity, the date of the contribution, an the amount of the contribution.
The recordkeeping requirements may not be satisfied by maintaining “other written records.” In the past, donors could substantiate cash contributions of less than $250 with “other reliable written records showing the name of the donee, the date of the contribution, and the amount of the contribution” if no cancelled check or receipt was available. This is no longer allowed. This change is effective immediately.
Example – a church member makes cash contributions to his church of between $20 and $50 each week. He uses offering envelopes provided by the church, but the church provides no other receipt or statement substantiating the contributions. The member will not be able to claim a charitable contribution deduction for any of these payments (made after August 17, 2006). The Pension Protection Act of 2006 amended the tax code to require all cash contributions, regar4dless of amount, to be substantiated by either a bank record (such as a cancelled check) or a written communication from the donee showing the name of the donee organization, that date of the contribution, and the amount of the contribution.
(Source: Church Treasurer Alert! Christianity Today International; Volume 14, Nubmer 10, October 2006) A monthly review of accounting, financial, and tax developments affecting churches and clergy.
The Act made an important change in the way that contributions of cash are to be substantiated. It requires that all cash contributions, regardless of amou8nt, be substantiated by either a bank record (such as a cancelled check) or written communication from the donee charity showing the name of the charity, the date of the contribution, an the amount of the contribution.
The recordkeeping requirements may not be satisfied by maintaining “other written records.” In the past, donors could substantiate cash contributions of less than $250 with “other reliable written records showing the name of the donee, the date of the contribution, and the amount of the contribution” if no cancelled check or receipt was available. This is no longer allowed. This change is effective immediately.
Example – a church member makes cash contributions to his church of between $20 and $50 each week. He uses offering envelopes provided by the church, but the church provides no other receipt or statement substantiating the contributions. The member will not be able to claim a charitable contribution deduction for any of these payments (made after August 17, 2006). The Pension Protection Act of 2006 amended the tax code to require all cash contributions, regar4dless of amount, to be substantiated by either a bank record (such as a cancelled check) or a written communication from the donee showing the name of the donee organization, that date of the contribution, and the amount of the contribution.
(Source: Church Treasurer Alert! Christianity Today International; Volume 14, Nubmer 10, October 2006) A monthly review of accounting, financial, and tax developments affecting churches and clergy.
posted by Morgan Shepard at
3:02 PM
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