The Internal Revenue Service sure knows how to get a reaction.
By the Dec. 16 deadline for comment on its proposed gift substantiation regulation that would allow charities to collect and store donors’ personal information, more than 200 nonprofits and thousands of individuals had registered their dismay.
The proposed rules would permit, but not require, nonprofits to file special information with the IRS to substantiate a gift of $250 or more by Feb. 28 of every year. This return would serve as an alternative to a letter sent to a donor by the nonprofit acknowledging the gift.
The information collected by the nonprofit would include donors’ name, address, Social Security or other taxpayer identification number, and the amount of cash or a description of property donated. Nonprofits that use the option would also be required to provide a copy by the February date to each donor listed, revealing information specific to the donor.
In a joint letter to the IRS, 215 nonprofit organizations said, “We have serious concerns that the proposed voluntary reporting regime is inappropriate because it would expose the public to increased risk from identity theft, impose significant costs and burdens on nonprofit organizations, and create public confusion and disincentives for donors to support the work of nonprofits.”
Tim Delaney, president and chief executive of the National Council of Nonprofits, told The NonProfit Times that he was “dumbfounded” by the proposal because the IRS was trying to fix something that wasn’t broken. Delaney, whose organization represents some 25,000 nonprofits, said the process of nonprofits collecting donors’ personal information could open the door for scam artists.
Moreover, he said, charities could not only lose donations from wary contributors, but also would have to increase data security and insurance expenditures in order to handle the additional information. And they might have a tough time recruiting board members because of associated liabilities.