The Internal Revenue Service on Thursday withdrew a proposed regulation that would have allowed nonprofit organizations to report donors’ private information to the agency.
The rule, which would have given charities the option to collect donors’ name, address, Social Security or other taxpayer identification number, and the amount of cash or a description of property donated, drew a withering response from more some 38,000 individuals and charities during the comment period.
The so-called gift substantiation regulation would have applied to those donating more than $250 to charities.
“The proposed framework for donee reporting was intended to minimize the reporting burden on donee organizations by making it voluntary, and to protect donor privacy by not using the Form 990 series,” the IRS said in a document published in the Federal Register.
The document noted that many commenters had questioned the need for donee reporting, and expressed “significant concerns” about nonprofits collecting and maintaining taxpayer identification numbers.
“In response to those comments, the Treasury Department and the IRS have decided against implementing the statutory exception to the [central withholding agreement] requirement, and therefore that exception remains unavailable unless and until final regulations are issued prescribing the method for donee reporting. Accordingly, the notice of proposed rulemaking is being withdrawn.”
Among those expressing satisfaction about the IRS’ decision was Sen. Pat Roberts, R-Kansas, who proposed legislation in December to block the agency’s proposal.
“I am pleased the IRS has listened to reason and has scrapped this plan,” Roberts said in a statement. “The rule would have had a chilling effect on charitable giving and would have added a costly burden to charitable organizations.”
Tim Delaney, head of the National Council of Nonprofits, which had inveighed against the proposal, said his organization was happy that the system had worked.
“I must say, I am also appreciative of the IRS and Treasury for listening,” Delaney said. “We asked them to withdraw it and they did.
“I think it’s a strong statement by them and the nonprofit community that rallied to protect the public in terms of saying ‘no’ to the gathering of Social Security numbers.”
FreedomWorks Foundation — no friend of the IRS — was exultant that its effort to collect more than 9,000 comments opposing the agency’s proposal had paid off.
“Any day you score a huge victory over the IRS is a great day,” the foundation’s chief executive Adam Brandon said in a statement.
“This rule would have had a huge impact on charitable giving, and we’re glad that the IRS has withdrawn it. We hope the backlash over this proposed rule sends a message to bureaucrats that we’ll continue to challenge the disturbing advance of the regulatory state.”
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