[Federal Register Volume 61, Number 242 (Monday, December 16, 1996)]
[Rules and Regulations]
[Pages 65946-65955]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31719]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1 and 602
[TD 8690]
RIN-1545-AS94
Deductibility, Substantiation, and Disclosure of Certain
Charitable Contributions
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final regulations that provide guidance
regarding the allowance of certain charitable contribution deductions,
the substantiation requirements for charitable contributions of $250 or
more, and the disclosure requirements for quid pro quo contributions in
excess of $75. The regulations will affect organizations described in
section 170(c) and individuals and entities that make payments to these
organizations.
EFFECTIVE DATE: These regulations are effective December 16, 1996.
FOR FURTHER INFORMATION CONTACT: Jefferson K. Fox of the Office of
Assistant Chief Counsel (Income Tax and Accounting) at 202-622-4930
(not a toll-free call).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained in these final regulations
has been reviewed and approved by the Office of Management and Budget
in accordance with the requirements of the Paperwork Reduction Act (44
U.S.C. 3507) under control number 1545-1464. Responses to this
collection of information are required for charitable contribution
deductions under section 170.
An agency may not conduct or sponsor, and a person is not required
to respond to, a collection of information unless the collection of
information displays a valid control number.
The estimated annual burden per recordkeeper varies from three
minutes to one hour, depending on individual circumstances, with an
estimated average of six minutes.
Comments concerning the accuracy of this burden estimate and
suggestions for reducing this burden should be sent to the Internal
Revenue Service, Attn: IRS Reports Clearance Officer, PC:FP,
Washington, DC 20224, and to the Office of Management and Budget, Attn:
Desk Officer for the Department of the Treasury, Office of Information
and
[[Page 65947]]
Regulatory Affairs, Washington, DC 20503.
Books or records relating to this collection of information must be
retained as long as their contents may be material in the
administration of any internal revenue law. Generally, tax returns and
tax return information are confidential, as required by 26 U.S.C. 6103.
Background
This document contains amendments to the Income Tax Regulations (26
CFR part 1) that provide guidance relating to (1) the substantiation
rules for charitable contributions under section 170(f)(8) of the
Internal Revenue Code of 1986 (Code), and (2) the disclosure
requirements for quid pro quo contributions under section 6115.
Sections 170(f)(8) and 6115 were added to the Code by sections 13172
and 13173 of the Omnibus Budget Reconciliation Act of 1993, Pub. L.
103-66, 107 Stat. 455, 1993-3 C.B. 43.
Temporary regulations (TD 8544) and a notice of proposed rulemaking
cross-referencing the temporary regulations were published in the
Federal Register for May 27, 1994 (59 FR 27458, 27515). Those
regulations primarily addressed substantiation of charitable
contributions made by payroll deduction and substantiation of payments
to a charitable organization in exchange for goods or services of
insubstantial value. The notice of proposed rulemaking indicated that
comments would be considered both on the issues addressed in the
temporary regulations, and on other issues arising under section
170(f)(8).
A notice of proposed rulemaking (IA-44-94) addressing
substantiation issues under section 170(f)(8) other than contributions
made by payroll deduction was published in the Federal Register for
August 4, 1995 (60 FR 39896). Included in these proposed regulations
were the provisions that had originally appeared in the temporary
regulations published on May 27, 1994, relating to the substantiation
of payments to charitable organizations in exchange for goods or
services of insubstantial value. In drafting these proposed
regulations, the IRS had the benefit of the comments received in
response to the notice of proposed rulemaking published in the Federal
Register for May 27, 1994. Many of the suggestions offered in the
comments were incorporated into the proposed regulations.
Final regulations (TD 8623) relating to the substantiation of
charitable contributions made by payroll deduction were published in
the Federal Register for October 12, 1995 (60 FR 53126). These final
regulations did not include the provisions relating to the
substantiation of payments to charitable organizations in exchange for
goods or services with insubstantial value that had appeared in the
temporary regulations published on May 27, 1994 and were also included
in the proposed regulations published on August 4, 1995. The temporary
regulations published in the Federal Register for May 27, 1994, were
removed. For the convenience of taxpayers, the final regulations
relating to the substantiation of charitable contributions made by
payroll deduction (Sec. 1.170A-13(f)(11) and (12)) that were published
in the Federal Register for May 27, 1994, have been reprinted with the
final regulations adopted by this Treasury Decision.
Comments were received in response to the notice of proposed
rulemaking published on August 4, 1995, and a public hearing was held
on November 1, 1995. After consideration of those comments, together
with the relevant comments received in response to the notice of
proposed rulemaking published on May 27, 1994, the proposed regulations
under sections 170(f)(8) and 6115 are adopted as revised by this
Treasury Decision.
Public Comments
Intent To Make a Charitable Contribution
Section 1.170A-1(h) of the final regulations incorporates the two-
part test adopted by the Supreme Court in United States v. American Bar
Endowment, 477 U.S. 105 (1986), for determining deductibility under
section 170(a) of a payment that is partly in consideration for goods
or services. A deduction is not allowed for a payment to charity in
consideration for goods or services except to the extent the amount of
the payment exceeds the fair market value of the goods or services. In
addition, a deduction is not allowed unless the taxpayer intends to
make a payment in excess of the fair market value of the goods or
services.
Section 1.170A-13(f)(6) provides that a charitable organization
provides goods or services ``in consideration for'' a taxpayer's
payment if, at the time of payment, the taxpayer receives or ``expects
to receive'' goods or services in exchange. One commenter stated that a
charitable organization has no way of knowing what a taxpayer expects
to receive, and that the regulation requires the charity to determine
its donors' states of mind. The commenter suggested that a payment be
treated as made in consideration for goods or services ``if the donee
organization expects to provide and does provide services of which the
donor has been informed.'' Another commenter questioned whether donor
appreciation events, such as banquets honoring contributors, are held
``in consideration for'' charitable contributions. The commenter also
asked whether invitations to occasional events not disclosed to
prospective donors until after they make their contributions are ``in
exchange for'' the contributions.
The regulations follow American Bar Endowment by incorporating a
standard that is based on the facts and circumstances of each
charitable contribution. When a donor's contribution is made in
response to an express promise of a benefit, the donor generally will
have an expectation of a quid pro quo. A donor may also have an
expectation of a quid pro quo when the donor makes a contribution with
knowledge that the charitable donee has conferred a benefit on other
donors making comparable contributions. For example, if a charity has a
history of sponsoring a dinner-dance for donors making substantial
contributions, a donor making a substantial contribution may have an
expectation of receiving an invitation to such an event. The
expectation of a quid pro quo may exist even though the donor is not
aware of the exact nature of the quid pro quo (e.g., a donation to a
charity that sponsors a donor appreciation event of a different type
every year). This standard for determining a donor's expectation of a
quid pro quo disallows deductions in situations where facts and
circumstances indicate that the donor expected, at the time of his or
her payment to charity, that there would be a quid pro quo, even though
there was no explicit promise of one.
A commenter requested guidance on the proper treatment of a payment
in consideration for a quid pro quo received in a year after the year
of payment. Under section 1.170A-13(f)(6), goods or services provided
by donee organizations in consideration for a donor's payment include
goods or services provided in a year other than the year of payment.
Accordingly, if a donor makes a payment to a charitable organization in
exchange for goods or services, the donor's deductible charitable
contribution for the year of payment is limited to the amount, if any,
by which the payment exceeds the value of those goods or services, even
if they are not available to the donor until a subsequent year.
[[Page 65948]]
Refusal of Benefits
Commenters asked for guidance on the proper manner of
substantiating a contribution by a donor who refuses benefits offered
by a charitable organization. One commenter suggested that the
regulations indicate that when a taxpayer receives a right to quid pro
quo benefits but does not use them, the taxpayer is not necessarily
allowed a charitable contribution deduction in the full amount of the
quid pro quo payment. Another suggested that a taxpayer wishing to
deduct the full amount of a quid pro quo payment could check a box on a
document to be sent to the charity at the time of contribution to show
refusal of the benefit.
These comments are consistent with IRS views. Rev. Rul. 67-246,
1967-2 C.B. 104, provides guidance relating to the refusal of benefits
offered by a charitable organization. The revenue ruling holds that a
taxpayer choosing not to use tickets that were made available to him is
not entitled to a greater contribution than would otherwise be allowed;
i.e., the deduction is limited to the amount paid in excess of the
value of the tickets received in exchange. 1967-2 C.B. 106. A deduction
in the full amount of a taxpayer's payment may be allowed, however, if
the taxpayer properly rejects the right to the tickets. Rev. Rul. 67-
246 contains two examples (Examples 3 and 7) illustrating ways that
donors can effectively reject benefits offered by charitable
organizations. Example 7 illustrates that a check-off box on a form
provided by the charity can be used to reject a ticket at the time of
contribution. A taxpayer who has properly rejected a benefit offered by
a charitable organization may claim a deduction in the full amount of
the payment to the charitable organization, and the contemporaneous
written acknowledgment need not reflect the value of the rejected
benefit.
Certain Goods or Services Disregarded
Goods or Services With Insubstantial Value
Under guidelines set forth in Rev. Proc. 90-12, 1990-1 C.B. 471,
and Rev. Proc. 92-49, 1992-1 C.B. 987, certain goods or services
received in exchange for a payment to a charity are treated as having
insubstantial value and can therefore be disregarded for the purpose of
determining the amount of a taxpayer's payment that is deductible as a
charitable contribution. Under these guidelines, if a taxpayer makes a
payment to a charitable organization in the context of a fundraising
campaign, and receives benefits with a fair market value of not more
than two percent of the amount of the payment (up to a maximum of $67,
for 1996), the benefits received are considered to have insubstantial
value for purposes of determining the amount of the taxpayer's
contribution. (The $67 benefit limitation is adjusted annually for
inflation.)
Further, if a taxpayer makes a payment of $33.50 or more to a
charity and receives only token items in return, the items are
considered to have insubstantial value if they (1) bear the charity's
name or logo, and (2) have an aggregate cost to the charity of $6.70 or
less. (The $33.50 and $6.70 amounts apply to payments made in 1996;
these amounts are adjusted annually for inflation.) In addition,
newsletters not of commercial quality and low-cost items provided for
free without an advance order are considered to have insubstantial
value.
Under section 1.170A-13(f)(8)(i)(A) of the regulations, the same
types of goods and services disregarded under the guidelines of Rev.
Procs. 90-12 and 92-49 can be disregarded for purposes of
substantiation under section 170(f)(8). One commenter asked whether the
contemporaneous written acknowledgment provided to a donor receiving
goods or services of insubstantial value should indicate that no goods
or services were received. When a donee organization provides a donor
only with goods or services having insubstantial value under Rev.
Procs. 90-12 and 92-49, the contemporaneous written acknowledgment may
indicate that no goods or services were provided in exchange for the
donor's payment. See Example 2, Sec. 1.170A-13(f)(8)(ii).
Another commenter stated that the rules in Rev. Procs. 90-12 and
92-49 for goods or services of insubstantial value are unduly
restrictive and prevent charitable organizations from recognizing
longstanding, generous contributors with suitable gifts of
appreciation. Another argued that the costs of token items received by
a taxpayer during the year from a charity should not be aggregated.
Sections 1.170A-13(f)(8)(B) and 1.170A-13(f)(9)(i) provide that certain
membership benefits provided in exchange for a payment of $75 or less
may be disregarded for purposes of determining whether any quids pro
quo were provided to the donor. For purposes of sections 170(f)(8) and
6115, these provisions supplement the categories of goods or services
treated as having insubstantial value under the guidelines of Rev.
Procs. 90-12 and 92-49. The IRS and Treasury believe that application
of the guidelines of Rev. Procs. 90-12 and 92-49, together with the
membership benefit provisions in the final regulations, strikes an
appropriate balance between administrative and compliance concerns
under sections 170(f)(8) and 6115. Accordingly, the guidelines of Rev.
Procs. 90-12 and 92-49 have not been modified.
Membership Benefits
The regulations provide limited relief with respect to certain
types of benefits customarily provided to donors in exchange for
membership payments. Two types of membership benefits offered in
exchange for a payment of $75 or less may be disregarded: (1) Free
admission to members-only events with a per-person cost to the charity
that is no higher than the standard for low- cost articles under
section 513(h)(2)(C) ($6.70 for 1996); and (2) rights or privileges
that can be exercised frequently during the membership period (other
than rights or privileges described in section 170(l), governing rights
to purchase tickets for college athletic events).
Some commenters said that the term frequently, when read in
conjunction with the examples, provided sufficient clarity and
appropriate flexibility. Other commenters expressed concern about use
of the term frequently, stating that it was vague and imprecise. For
smaller organizations, they argued, in determining whether a right of
free admission to a series of events can be frequently exercised,
consideration should be given to the number of events held by the
organization each year. The IRS and Treasury believe that a charity can
make a determination that a right or privilege is frequently
exercisable by reference to the examples that were in the proposed
regulations and are adopted in the final regulations.
A commenter suggested that the $75 payment amount in the special
rules for membership benefits should be indexed for inflation. The IRS
and Treasury believe that it is important for the membership payment
amount to be a number that can be easily remembered by charities and
donors. For this reason, annual inflation adjustments are not
advisable. However, the IRS and Treasury will consider increases to
this $75 figure in the future.
A commenter asked whether the rule that allows taxpayers to
disregard certain membership benefits applies to discounts offered by a
donee organization for purchases from retailers working with the
charity to provide discounts to members. These discounts
[[Page 65949]]
are to be treated like any other rights or privileges and, therefore,
may be disregarded for purposes of section 170(f)(8) if they can be
exercised frequently during the membership period.
Goods or Services Provided to a Donor's Employees
Prior to publication of the proposed regulations, several
commenters asked for guidance on the proper method of valuation of
goods or services provided by charitable organizations to employees of
donors. The final regulations follow the proposed regulations and
provide that goods or services provided to a donor's employees can be
disregarded if they consist of the types of benefits that could be
disregarded when provided directly to a donor (i.e., goods or services
with insubstantial value and certain annual membership benefits). For
any other types of goods or services provided to employees of a donor
making a contribution of $250 or more, the contemporaneous written
acknowledgment must describe the goods or services, but need not
include the donee organization's good faith estimate of their fair
market value.
A commenter stated that the special rule for goods or services
provided to employees of a donor should also be available for partners
in a partnership. In the final regulations, the exception for goods or
services provided to a donor's employees has been modified to include
partners in a donor-partnership.
A commenter was concerned about charities that receive funds from a
private foundation established by a business entity. The commenter
suggested that such charities should be permitted to provide benefits
to employees of the business entity without any tax consequences.
Because this suggestion raises issues beyond the scope of this
regulation (including issues relating to the self-dealing rules under
section 4941), this suggestion was not adopted.
A commenter stated that when employees receive benefits as a result
of an employer's charitable contribution, it would be easier for the
charity (rather than the employer) to estimate the fair market value of
the benefits. Another commenter stated that when employees receive
benefits that cannot be disregarded under section 170, the employer/
donor is likely to deduct the value of those benefits as a business
expense under section 162. Because employers may claim the full amount
of their payments to charity--including the value of the benefits--as a
deduction, the commenter suggested that employers should be relieved of
the burden of valuing such benefits, and that the full amount of such
payments should be deductible under section 170.
The IRS and Treasury recognize that in cases where employee
benefits cannot be disregarded for purposes of section 170, employers
may nevertheless seek to deduct their costs pursuant to section 162.
For deductions under section 170, however, United States v. American
Bar Endowment, supra, limits the allowable deduction to the amount of
the employer's payment in excess of the value of employee benefits.
Accordingly, if the employee benefits cannot be disregarded, their
value must be subtracted from the amount of the employer's payment to
determine the correct amount of the charitable contribution deduction.
Although valuation may be difficult, the IRS and Treasury continue to
believe that the employer is in a better position than the charity to
be responsible for valuation of benefits provided to employees.
Payments for the Right To Purchase Tickets to College Athletic Events
A commenter asked for clarification regarding the applicability of
the substantiation requirements to payments for the right to purchase
tickets to college athletic events. Section 170(l) provides that
payments to colleges or universities for the right to purchase tickets
to athletic events are partially (eighty percent) deductible as
charitable contributions. The final regulations have been modified to
clarify how sections 170(f)(8) and 6115 apply to payments described in
section 170(l).
For purposes of section 170(f)(8), twenty percent of the amount
paid for the right to purchase tickets for seating at college or
university athletic events is treated as the fair market value of such
right. When the total payment for the right to purchase tickets to
college athletic events is $312.50 or more, the portion of the payment
treated as a charitable contribution will be $250 or more, and
substantiation will be required under section 170(f)(8). For purposes
of section 6115, twenty percent of the amount paid for the right to
purchase tickets for seating at college or university athletic events
is treated as a good faith estimate of the fair market value of this
right.
Rules Applicable to Corporations
Several commenters suggested that subchapter C corporations (C
corporations) should be relieved of the substantiation requirements.
Some indicated that C corporations should be exempt; others argued for
a de minimis exception for C corporations making substantial
contributions. Under a de minimis exception, deductions for all of a C
corporation's charitable contributions would be allowed if the
corporation had contemporaneous written acknowledgments substantiating
most, or substantially all, of its contributions. These commenters
stated that the substantiation requirements were enacted to deter
individuals--not businesses--that had claimed charitable contribution
deductions for the full amounts of their payments to charitable
organizations, even though they had received quids pro quo in exchange.
They suggested that the IRS exercise the authority provided in section
170(f)(8)(E) and make the substantiation requirements inapplicable to C
corporations. The final regulations do not adopt these suggestions. The
IRS and Treasury believe that exempting C corporations from the
substantiation requirements could, in fact, encourage abuses and would
therefore conflict with the purpose of section 170(f)(8).
Meaning of Contemporaneous
A commenter asked whether a taxpayer may file an amended income tax
return to claim a charitable contribution deduction if the taxpayer
obtained the contemporaneous written acknowledgment for the
contribution after timely filing the original return. Section
170(f)(8)(C) provides that a written acknowledgment is contemporaneous
if obtained on or before the earlier of (1) the date that the taxpayer
files the return for the year in which the contribution was made, or
(2) the due date (including extensions) for filing the return for that
taxable year. A written acknowledgment obtained after a taxpayer files
the original return for the year of the contribution is not
contemporaneous within the meaning of the statute.
Substantiation of Multiple Contributions
Several commenters asked whether the substantiation requirements
apply to multiple contributions totaling $250 or more made to a single
charity during a single year, when each contribution is less than $250.
The conference report accompanying the Omnibus Budget Reconciliation
Act of 1993 indicates that separate payments will be treated as
separate contributions and will not be aggregated for purposes of
applying the $250 threshold. H.R. Conf. Rep. No. 213, 103d Cong., 1st
Sess. 565, n. 29 (1993). If there is no separate payment of $250 or
more, substantiation under section 170(f)(8) is not required, even if
the sum of the separate payments is $250 or
[[Page 65950]]
more. Section 1.170A-13(f)(1) has been modified to clarify this. A
commenter asked whether there must be a separate contemporaneous
written acknowledgment for each contribution of $250 or more. Section
1.170A-13(f)(1) has been modified to clarify that for multiple
contributions of $250 or more to one charity, one acknowledgment that
reflects the total amount of the taxpayer's contributions to the
charity for the year is sufficient.
Form of Substantiation
Commenters asked whether a contemporaneous written acknowledgment
must be in any particular format. As long as it is in writing and
contains the information required by law, a contemporaneous written
acknowledgment may be in any format. One commenter suggested that the
regulations should allow charities to report charitable contributions
directly to the IRS on Form 990 or 990-PF. Section 170(f)(8) authorizes
the Secretary to prescribe regulations allowing donee organizations to
satisfy the requirements of section 170(f)(8) by filing a return that
includes the information described in section 170(f)(8)(B). The IRS and
Treasury have decided not to implement this suggestion at this time.
However, in an effort to reduce paperwork and taxpayer burdens, the IRS
will examine whether any existing IRS forms can be modified to assist
in their use in substantiating charitable contributions.
A commenter asked for guidance on the proper method of
substantiating payments by corporations that agree to match employee
contributions to charity. When an employee makes a charitable
contribution that is eligible for a corporate matching payment, some
charities routinely send the participating corporation a letter,
notifying the corporation of the employee's gift and thanking it in
advance for the matching payment the charity expects to receive.
Commenters suggested that this letter be treated as meeting the
corporation's requirements under section 170(f)(8). This suggestion has
not been adopted, because letters sent in advance of a contribution do
not substantiate the contribution. The acknowledgment under section
170(f)(8) must include information about what has been ``contributed.''
The acknowledgment cannot be completed until after the charitable
contribution has been made. (See section 1.170A-1(b), which states that
ordinarily a contribution is made at the time delivery is effected.)
Out-of-Pocket Expenses
The proposed regulations allowed volunteers who incurred
unreimbursed out-of-pocket expenses while performing services for a
charity to substantiate their contributions with a statement that
described the services and the date they were performed. The
acknowledgment was not required to list the amount of the unreimbursed
expense. Several commenters suggested an exemption from the
substantiation requirements for unreimbursed out-of-pocket expenses
incurred incident to the rendition of services to a donee organization.
Exemption is appropriate, they argued, because the requirements are
burdensome, particularly since a donee organization is often unaware of
the amount and nature of expenses incurred by volunteers performing
services on behalf of the charity, or the exact dates on which the
volunteer services were performed. The final regulations eliminate the
requirement that the contemporaneous written acknowledgment include the
date on which services were performed for the charity. However, to
carry out the purposes of the statute, volunteers claiming a charitable
contribution deduction for an unreimbursed expense of $250 or more are
still required to obtain substantiation confirming the type of services
they performed for the charity.
Good Faith Estimate
Section 170(f)(8) requires a written acknowledgment furnished by a
charity to a donor to include a good faith estimate of the value of any
goods or services provided to the donor. Section 6115(a)(2) similarly
requires a written disclosure statement provided to a donor making a
quid pro quo contribution of more than $75 to include a good faith
estimate of the value of goods or services provided to the donor. The
regulations define a good faith estimate as an estimate of the fair
market value of the goods or services. A taxpayer can generally rely on
the good faith estimate provided by a charity.
A commenter stated that the regulations should contain an example
illustrating how charities can compute the fair market value of goods
or services. We have not adopted this suggestion. There is no single
correct way to determine fair market value; a charitable organization
may use any reasonable methodology (e.g., comparison with comparable
retail prices, markup from wholesale cost) to determine the fair market
value. Examples 1 and 2 of section 1.6115-1(a)(3) illustrate this rule.
A commenter recommended that the regulations state that a donor
does not have to use the good faith estimate provided by a charitable
organization if the donor believes another estimate is more accurate.
The regulations do not mandate that a donor use the estimate provided
by a donee organization in calculating the deductible amount. Indeed,
when a taxpayer knows or has reason to know that an estimate is
inaccurate, the taxpayer may not treat the donee organization's
estimate as the fair market value.
A commenter suggested that the regulations indicate that
recognition items, such as plaques or trophies with an honoree's name
inscribed, should be considered to have little, if any, fair market
value. This suggestion has not been adopted. Inscribed plaques and
trophies may have some value, even though the value may be less than
cost. In addition, see Sec. 1.170A-13(f)(8)(i)(A) regarding goods or
services with insubstantial value.
Another commenter asked whether the listing of a donor's name in a
program at a charity-sponsored event has a substantial value. An
acknowledgment in such a program, which identifies--rather than
promotes--a donor, is an inconsequential benefit with no significant
value. See Rev. Rul. 68-432, 1968-2 C.B. 104, 105, holding that
``[s]uch privileges as being associated with or being known as a
benefactor of the [charitable] organization are not significant return
benefits that have monetary value.''
Contributions to a Split-Interest Trust
Section 1.170A-13(f)(13) of the proposed regulations provides that
section 170(f)(8) does not apply to a transfer of property to a
charitable remainder unitrust (as defined in section 664(d)(2)). A
commenter observed that there are two other types of unitrusts in
addition to the type described in section 664(d)(2), and that these
unitrusts should be treated similarly. The final regulations have been
modified to provide that the substantiation requirements of section
170(f)(8) do not apply to transfers to unitrusts described in section
664(d)(3) or section 1.664-3(a)(1)(i)(b), as well as to unitrusts
described in section 664(d)(2).
Section 1.170A-13(f)(13) of the proposed regulations provides that
section 170(f)(8) applies to a transfer to a pooled income fund.
Commenters requested further guidance on the proper way to substantiate
contributions to pooled income funds. The final regulations have been
modified to
[[Page 65951]]
require, in the case of a transfer of cash or other property to a
pooled income fund, that the written acknowledgment of the charitable
organization maintaining the fund include a statement that the cash or
other property was transferred to the organization's pooled income fund
and state whether any goods or services, in addition to the income
interest in the fund, were provided to the transferor. The
contemporaneous written acknowledgment need not include an estimate of
the value of the income interest in the pooled income fund. The final
regulations also provide guidance on the proper method of
substantiating a deduction claimed by a taxpayer who has purchased an
annuity from a charitable organization.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a costbenefit analysis is not required. It also has been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these regulations, and because the
notice of proposed rulemaking preceding the regulations was issued
prior to March 29, 1996, the Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. See 5 U.S.C. section 601, Pub. L. 104-121
section 245. Pursuant to section 7805(f) of the Internal Revenue Code,
the notice of proposed rulemaking preceding these regulations was
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on the impact of the proposed regulations on
small businesses.
Drafting Information
The principal author of these regulations is Jefferson K. Fox,
Office of the Assistant Chief Counsel (Income Tax and Accounting),
Internal Revenue Service. However, other personnel from the IRS and the
Treasury Department participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR parts 1 and 602 are amended as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 is amended by adding
a new entry in numerical order for Section 1.170A-1 and revising the
entry for Section 1.170A-13 to read as follows:
Authority: 26 U.S.C. 7805.
Section 1.170A-1 also issued under 26 U.S.C. 170(a).
Section 1.170A-13 also issued under 26 U.S.C. 170(f)(8). * * *
Par. 2. Section 1.170A-1 is amended as follows:
1. Paragraph (h) is redesignated as paragraph (j).
2. Paragraph (i) is redesignated as paragraph (k) and is revised.
3. Paragraph (h) is added.
4. Paragraph (i) is added and reserved.
The additions and revisions read as follows:
Sec. 1.170A-1 Charitable, etc., contributions and gifts; allowance of
deduction.
* * * * *
(h) Payment in exchange for consideration--(1) Burden on taxpayer
to show that all or part of payment is a charitable contribution or
gift. No part of a payment that a taxpayer makes to or for the use of
an organization described in section 170(c) that is in consideration
for (as defined in Sec. 1.170A-13(f)(6)) goods or services (as defined
in Sec. 1.170A-13(f)(5)) is a contribution or gift within the meaning
of section 170(c) unless the taxpayer--
(i) Intends to make a payment in an amount that exceeds the fair
market value of the goods or services; and
(ii) Makes a payment in an amount that exceeds the fair market
value of the goods or services.
(2) Limitation on amount deductible--(i) In general. The charitable
contribution deduction under section 170(a) for a payment a taxpayer
makes partly in consideration for goods or services may not exceed the
excess of--
(A) The amount of any cash paid and the fair market value of any
property (other than cash) transferred by the taxpayer to an
organization described in section 170(c); over
(B) The fair market value of the goods or services the organization
provides in return.
(ii) Special rules. For special limits on the deduction for
charitable contributions of ordinary income and capital gain property,
see section 170(e) and Secs. 1.170A-4 and 1.170A-4A.
(3) Certain goods or services disregarded. For purposes of section
170(a) and paragraphs (h)(1) and (h)(2) of this section, goods or
services described in Sec. 1.170A-13(f)(8)(i) or Sec. 1.170A-
13(f)(9)(i) are disregarded.
(4) Donee estimates of the value of goods or services may be
treated as fair market value--(i) In general. For purposes of section
170(a), a taxpayer may rely on either a contemporaneous written
acknowledgment provided under section 170(f)(8) and Sec. 1.170A-13(f)
or a written disclosure statement provided under section 6115 for the
fair market value of any goods or services provided to the taxpayer by
the donee organization.
(ii) Exception. A taxpayer may not treat an estimate of the value
of goods or services as their fair market value if the taxpayer knows,
or has reason to know, that such treatment is unreasonable. For
example, if a taxpayer knows, or has reason to know, that there is an
error in an estimate provided by an organization described in section
170(c) pertaining to goods or services that have a readily
ascertainable value, it is unreasonable for the taxpayer to treat the
estimate as the fair market value of the goods or services. Similarly,
if a taxpayer is a dealer in the type of goods or services provided in
consideration for the taxpayer's payment and knows, or has reason to
know, that the estimate is in error, it is unreasonable for the
taxpayer to treat the estimate as the fair market value of the goods or
services.
(5) Examples. The following examples illustrate the rules of this
paragraph (h).
Example 1. Certain goods or services disregarded. Taxpayer makes
a $50 payment to Charity B, an organization described in section
170(c), in exchange for a family membership. The family membership
entitles Taxpayer and members of Taxpayer's family to certain
benefits. These benefits include free admission to weekly poetry
readings, discounts on merchandise sold by B in its gift shop or by
mail order, and invitations to special events for members only, such
as lectures or informal receptions. When B first offers its
membership package for the year, B reasonably projects that each
special event for members will have a cost to B, excluding any
allocable overhead, of $5 or less per person attending the event.
Because the family membership benefits are disregarded pursuant to
Sec. 1.170A-13(f)(8)(i), Taxpayer may treat the $50 payment as a
contribution or gift within the meaning of section 170(c),
regardless of Taxpayer's intent and whether or not the payment
exceeds the fair market value of the goods or services. Furthermore,
any charitable contribution deduction available to Taxpayer may be
calculated without regard to the membership benefits.
Example 2. Treatment of good faith estimate at auction as the
fair market value. Taxpayer attends an auction held by Charity C, an
organization described in section 170(c). Prior to the auction, C
publishes a catalog that meets the requirements for a written
disclosure statement under section 6115(a) (including C's good faith
estimate of the value of items that will be available for
[[Page 65952]]
bidding). A representative of C gives a copy of the catalog to each
individual (including Taxpayer) who attends the auction. Taxpayer
notes that in the catalog C's estimate of the value of a vase is
$100. Taxpayer has no reason to doubt the accuracy of this estimate.
Taxpayer successfully bids and pays $500 for the vase. Because
Taxpayer knew, prior to making her payment, that the estimate in the
catalog was less than the amount of her payment, Taxpayer satisfies
the requirement of paragraph (h)(1)(i) of this section. Because
Taxpayer makes a payment in an amount that exceeds that estimate,
Taxpayer satisfies the requirements of paragraph (h)(1)(ii) of this
section. Taxpayer may treat C's estimate of the value of the vase as
its fair market value in determining the amount of her charitable
contribution deduction.
Example 3. Good faith estimate not in error. Taxpayer makes a
$200 payment to Charity D, an organization described in section
170(c). In return for Taxpayer's payment, D gives Taxpayer a book
that Taxpayer could buy at retail prices typically ranging from $18
to $25. D provides Taxpayer with a good faith estimate, in a written
disclosure statement under section 6115(a), of $20 for the value of
the book. Because the estimate is within the range of typical retail
prices for the book, the estimate contained in the written
disclosure statement is not in error. Although Taxpayer knows that
the book is sold for as much as $25, Taxpayer may treat the estimate
of $20 as the fair market value of the book in determining the
amount of his charitable contribution deduction.
(i) [Reserved]
* * * * *
(k) Effective date. In general this section applies to
contributions made in taxable years beginning after December 31, 1969.
Paragraph (j)(11) of this section, however, applies only to out-of-
pocket expenditures made in taxable years beginning after December 31,
1976. In addition, paragraph (h) of this section applies only to
payments made on or after December 16, 1996. However, taxpayers may
rely on the rules of paragraph (h) of this section for payments made on
or after January 1, 1994.
Par. 3. Section 1.170A-13 is amended by revising paragraph (f) to
read as follows:
Sec. 1.170A-13 Recordkeeping and return requirements for deductions
for charitable contributions.
* * * * *
(f) Substantiation of charitable contributions of $250 or more--(1)
In general. No deduction is allowed under section 170(a) for all or
part of any contribution of $250 or more unless the taxpayer
substantiates the contribution with a contemporaneous written
acknowledgment from the donee organization. A taxpayer who makes more
than one contribution of $250 or more to a donee organization in a
taxable year may substantiate the contributions with one or more
contemporaneous written acknowledgments. Section 170(f)(8) does not
apply to a payment of $250 or more if the amount contributed (as
determined under Sec. 1.170A-1(h)) is less than $250. Separate
contributions of less than $250 are not subject to the requirements of
section 170(f)(8), regardless of whether the sum of the contributions
made by a taxpayer to a donee organization during a taxable year equals
$250 or more.
(2) Written acknowledgment. Except as otherwise provided in
paragraphs (f)(8) through (f)(11) and (f)(13) of this section, a
written acknowledgment from a donee organization must provide the
following information--
(i) The amount of any cash the taxpayer paid and a description (but
not necessarily the value) of any property other than cash the taxpayer
transferred to the donee organization;
(ii) A statement of whether or not the donee organization provides
any goods or services in consideration, in whole or in part, for any of
the cash or other property transferred to the donee organization;
(iii) If the donee organization provides any goods or services
other than intangible religious benefits (as described in section
170(f)(8)), a description and good faith estimate of the value of those
goods or services; and
(iv) If the donee organization provides any intangible religious
benefits, a statement to that effect.
(3) Contemporaneous. A written acknowledgment is contemporaneous if
it is obtained by the taxpayer on or before the earlier of--
(i) The date the taxpayer files the original return for the taxable
year in which the contribution was made; or
(ii) The due date (including extensions) for filing the taxpayer's
original return for that year.
(4) Donee organization. For purposes of this paragraph (f), a donee
organization is an organization described in section 170(c).
(5) Goods or services. Goods or services means cash, property,
services, benefits, and privileges.
(6) In consideration for. A donee organization provides goods or
services in consideration for a taxpayer's payment if, at the time the
taxpayer makes the payment to the donee organization, the taxpayer
receives or expects to receive goods or services in exchange for that
payment. Goods or services a donee organization provides in
consideration for a payment by a taxpayer include goods or services
provided in a year other than the year in which the taxpayer makes the
payment to the donee organization.
(7) Good faith estimate. For purposes of this section, good faith
estimate means a donee organization's estimate of the fair market value
of any goods or services, without regard to the manner in which the
organization in fact made that estimate. See Sec. 1.170A-1(h)(4) for
rules regarding when a taxpayer may treat a donee organization's
estimate of the value of goods or services as the fair market value.
(8) Certain goods or services disregarded--(i) In general. For
purposes of section 170(f)(8), the following goods or services are
disregarded--
(A) Goods or services that have insubstantial value under the
guidelines provided in Revenue Procedures 90-12, 1990-1 C.B. 471, 92-
49, 1992-1 C.B. 987, and any successor documents. (See
Sec. 601.601(d)(2)(ii) of the Statement of Procedural Rules, 26 CFR
part 601.); and
(B) Annual membership benefits offered to a taxpayer in exchange
for a payment of $75 or less per year that consist of--
(1) Any rights or privileges, other than those described in section
170(l), that the taxpayer can exercise frequently during the membership
period. Examples of such rights and privileges may include, but are not
limited to, free or discounted admission to the organization's
facilities or events, free or discounted parking, preferred access to
goods or services, and discounts on the purchase of goods or services;
and
(2) Admission to events during the membership period that are open
only to members of a donee organization and for which the donee
organization reasonably projects that the cost per person (excluding
any allocable overhead) attending each such event is within the limits
established for ``low cost articles'' under section 513(h)(2). The
projected cost to the donee organization is determined at the time the
organization first offers its membership package for the year (using
section 3.07 of Revenue Procedure 90-12, or any successor documents, to
determine the cost of any items or services that are donated).
(ii) Examples. The following examples illustrate the rules of this
paragraph (f)(8).
Example 1. Membership benefits disregarded. Performing Arts
Center E is an organization described in section 170(c). In return
for a payment of $75, E offers a package of basic membership
benefits that includes the right to purchase tickets to performances
one week before they go on sale to the general public, free parking
in E's
[[Page 65953]]
garage during evening and weekend performances, and a 10% discount
on merchandise sold in E's gift shop. In return for a payment of
$150, E offers a package of preferred membership benefits that
includes all of the benefits in the $75 package as well as a poster
that is sold in E's gift shop for $20. The basic membership and the
preferred membership are each valid for twelve months, and there are
approximately 50 performances of various productions at E during a
twelve-month period. E's gift shop is open for several hours each
week and at performance times. F, a patron of the arts, is solicited
by E to make a contribution. E offers F the preferred membership
benefits in return for a payment of $150 or more. F makes a payment
of $300 to E. F can satisfy the substantiation requirement of
section 170(f)(8) by obtaining a contemporaneous written
acknowledgment from E that includes a description of the poster and
a good faith estimate of its fair market value ($20) and disregards
the remaining membership benefits.
Example 2. Contemporaneous written acknowledgment need not
mention rights or privileges that can be disregarded. The facts are
the same as in Example 1, except that F made a payment of $300 and
received only a basic membership. F can satisfy the section
170(f)(8) substantiation requirement with a contemporaneous written
acknowledgment stating that no goods or services were provided.
Example 3. Rights or privileges that cannot be exercised
frequently. Community Theater Group G is an organization described
in section 170(c). Every summer, G performs four different plays.
Each play is performed two times. In return for a membership fee of
$60, G offers its members free admission to any of its performances.
Non-members may purchase tickets on a performance by performance
basis for $15 a ticket. H, an individual who is a sponsor of the
theater, is solicited by G to make a contribution. G tells H that
the membership benefit will be provided in return for any payment of
$60 or more. H chooses to make a payment of $350 to G and receives
in return the membership benefit. G's membership benefit of free
admission is not described in paragraph (f)(8)(i)(B) of this section
because it is not a privilege that can be exercised frequently (due
to the limited number of performances offered by G). Therefore, to
meet the requirements of section 170(f)(8), a contemporaneous
written acknowledgment of H's $350 payment must include a
description of the free admission benefit and a good faith estimate
of its value.
Example 4. Multiple memberships. In December of each year, K, an
individual, gives each of her six grandchildren a junior membership
in Dinosaur Museum, an organization described in section 170(c).
Each junior membership costs $50, and K makes a single payment of
$300 for all six memberships. A junior member is entitled to free
admission to the museum and to weekly films, slide shows, and
lectures about dinosaurs. In addition, each junior member receives a
bi-monthly, non-commercial quality newsletter with information about
dinosaurs and upcoming events. K's contemporaneous written
acknowledgment from Dinosaur Museum may state that no goods or
services were provided in exchange for K's payment.
(9) Goods or services provided to employees or partners of donors--
(i) Certain goods or services disregarded. For purposes of section
170(f)(8), goods or services provided by a donee organization to
employees of a donor, or to partners of a partnership that is a donor,
in return for a payment to the organization may be disregarded to the
extent that the goods or services provided to each employee or partner
are the same as those described in paragraph (f)(8)(i) of this section.
(ii) No good faith estimate required for other goods or services.
If a taxpayer makes a contribution of $250 or more to a donee
organization and, in return, the donee organization offers the
taxpayer's employees or partners goods or services other than those
described in paragraph (f)(9)(i) of this section, the contemporaneous
written acknowledgment of the taxpayer's contribution is not required
to include a good faith estimate of the value of such goods or services
but must include a description of those goods or services.
(iii) Example. The following example illustrates the rules of this
paragraph (f)(9).
Example. Museum J is an organization described in section
170(c). For a payment of $40, J offers a package of basic membership
benefits that includes free admission and a 10% discount on
merchandise sold in J's gift shop. J's other membership categories
are for supporters who contribute $100 or more. Corporation K makes
a payment of $50,000 to J and, in return, J offers K's employees
free admission for one year, a tee-shirt with J's logo that costs J
$4.50, and a gift shop discount of 25% for one year. The free
admission for K's employees is the same as the benefit made
available to holders of the $40 membership and is otherwise
described in paragraph (f)(8)(i)(B) of this section. The tee-shirt
given to each of K's employees is described in paragraph
(f)(8)(i)(A) of this section. Therefore, the contemporaneous written
acknowledgment of K's payment is not required to include a
description or good faith estimate of the value of the free
admission or the tee-shirts. However, because the gift shop discount
offered to K's employees is different than that offered to those who
purchase the $40 membership, the discount is not described in
paragraph (f)(8)(i) of this section. Therefore, the contemporaneous
written acknowledgment of K's payment is required to include a
description of the 25% discount offered to K's employees.
(10) Substantiation of out-of-pocket expenses. A taxpayer who
incurs unreimbursed expenditures incident to the rendition of services,
within the meaning of Sec. 1.170A-1(g), is treated as having obtained a
contemporaneous written acknowledgment of those expenditures if the
taxpayer--
(i) Has adequate records under paragraph (a) of this section to
substantiate the amount of the expenditures; and
(ii) Obtains by the date prescribed in paragraph (f)(3) of this
section a statement prepared by the donee organization containing--
(A) A description of the services provided by the taxpayer;
(B) A statement of whether or not the donee organization provides
any goods or services in consideration, in whole or in part, for the
unreimbursed expenditures; and
(C) The information required by paragraphs (f)(2) (iii) and (iv) of
this section.
(11) Contributions made by payroll deduction--(i) Form of
substantiation. A contribution made by means of withholding from a
taxpayer's wages and payment by the taxpayer's employer to a donee
organization may be substantiated, for purposes of section 170(f)(8),
by both--
(A) A pay stub, Form W-2, or other document furnished by the
employer that sets forth the amount withheld by the employer for the
purpose of payment to a donee organization; and
(B) A pledge card or other document prepared by or at the direction
of the donee organization that includes a statement to the effect that
the organization does not provide goods or services in whole or partial
consideration for any contributions made to the organization by payroll
deduction.
(ii) Application of $250 threshold. For the purpose of applying the
$250 threshold provided in section 170(f)(8)(A) to contributions made
by the means described in paragraph (f)(11)(i) of this section, the
amount withheld from each payment of wages to a taxpayer is treated as
a separate contribution.
(12) Distributing organizations as donees. An organization
described in section 170(c), or an organization described in 5 CFR
950.105 (a Principal Combined Fund Organization for purposes of the
Combined Federal Campaign) and acting in that capacity, that receives a
payment made as a contribution is treated as a donee organization
solely for purposes of section 170(f)(8), even if the organization
(pursuant to the donor's instructions or otherwise) distributes the
amount received to one or more organizations described in section
170(c). This paragraph (f)(12) does not apply, however, to a case in
which the
[[Page 65954]]
distributee organization provides goods or services as part of a
transaction structured with a view to avoid taking the goods or
services into account in determining the amount of the deduction to
which the donor is entitled under section 170.
(13) Transfers to certain trusts. Section 170(f)(8) does not apply
to a transfer of property to a trust described in section 170(f)(2)(B),
a charitable remainder annuity trust (as defined in section 664(d)(1)),
or a charitable remainder unitrust (as defined in section 664(d)(2) or
(d)(3) or Sec. 1.664(3)(a)(1)(i)(b)). Section 170(f)(8) does apply,
however, to a transfer to a pooled income fund (as defined in section
642(c)(5)); for such a transfer, the contemporaneous written
acknowledgment must state that the contribution was transferred to the
donee organization's pooled income fund and indicate whether any goods
or services (in addition to an income interest in the fund) were
provided in exchange for the transfer. The contemporaneous written
acknowledgment is not required to include a good faith estimate of the
income interest.
(14) Substantiation of payments to a college or university for the
right to purchase tickets to athletic events. For purposes of paragraph
(f)(2)(iii) of this section, the right to purchase tickets for seating
at an athletic event in exchange for a payment described in section
170(l) is treated as having a value equal to twenty percent of such
payment. For example, when a taxpayer makes a payment of $312.50 for
the right to purchase tickets for seating at an athletic event, the
right to purchase tickets is treated as having a value of $62.50. The
remaining $250 is treated as a charitable contribution, which the
taxpayer must substantiate in accordance with the requirements of this
section.
(15) Substantiation of charitable contributions made by a
partnership or an S corporation. If a partnership or an S corporation
makes a charitable contribution of $250 or more, the partnership or S
corporation will be treated as the taxpayer for purposes of section
170(f)(8). Therefore, the partnership or S corporation must
substantiate the contribution with a contemporaneous written
acknowledgment from the donee organization before reporting the
contribution on its income tax return for the year in which the
contribution was made and must maintain the contemporaneous written
acknowledgment in its records. A partner of a partnership or a
shareholder of an S corporation is not required to obtain any
additional substantiation for his or her share of the partnership's or
S corporation's charitable contribution.
(16) Purchase of an annuity. If a taxpayer purchases an annuity
from a charitable organization and claims a charitable contribution
deduction of $250 or more for the excess of the amount paid over the
value of the annuity, the contemporaneous written acknowledgment must
state whether any goods or services in addition to the annuity were
provided to the taxpayer. The contemporaneous written acknowledgment is
not required to include a good faith estimate of the value of the
annuity. See Sec. 1.170A-1(d)(2) for guidance in determining the value
of the annuity.
(17) Substantiation of matched payments--(i) In general. For
purposes of section 170, if a taxpayer's payment to a donee
organization is matched, in whole or in part, by another payor, and the
taxpayer receives goods or services in consideration for its payment
and some or all of the matching payment, those goods or services will
be treated as provided in consideration for the taxpayer's payment and
not in consideration for the matching payment.
(ii) Example. The following example illustrates the rules of this
paragraph (f)(17).
Example. Taxpayer makes a $400 payment to Charity L, a donee
organization. Pursuant to a matching payment plan, Taxpayer's
employer matches Taxpayer's $400 payment with an additional payment
of $400. In consideration for the combined payments of $800, L gives
Taxpayer an item that it estimates has a fair market value of $100.
L does not give the employer any goods or services in consideration
for its contribution. The contemporaneous written acknowledgment
provided to the employer must include a statement that no goods or
services were provided in consideration for the employer's $400
payment. The contemporaneous written acknowledgment provided to
Taxpayer must include a statement of the amount of Taxpayer's
payment, a description of the item received by Taxpayer, and a
statement that L's good faith estimate of the value of the item
received by Taxpayer is $100.
(18) Effective date. This paragraph (f) applies to contributions
made on or after December 16, 1996. However, taxpayers may rely on the
rules of this paragraph (f) for contributions made on or after January
1, 1994.
Par. 4. Section 1.6115-1 is added under the undesignated
centerheading
Miscellaneous Provisions to read as follows:
Sec. 1.6115-1 Disclosure requirements for quid pro quo contributions.
(a) Good faith estimate defined--(1) In general. A good faith
estimate of the value of goods or services provided by an organization
described in section 170(c) in consideration for a taxpayer's payment
to that organization is an estimate of the fair market value, within
the meaning of Sec. 1.170A-1(c)(2), of the goods or services. The
organization may use any reasonable methodology in making a good faith
estimate, provided it applies the methodology in good faith. If the
organization fails to apply the methodology in good faith, the
organization will be treated as not having met the requirements of
section 6115. See section 6714 for the penalties that apply for failure
to meet the requirements of section 6115.
(2) Good faith estimate for goods or services that are not
commercially available. A good faith estimate of the value of goods or
services that are not generally available in a commercial transaction
may be determined by reference to the fair market value of similar or
comparable goods or services. Goods or services may be similar or
comparable even though they do not have the unique qualities of the
goods or services that are being valued.
(3) Examples. The following examples illustrate the rules of this
paragraph (a).
Example 1. Facility not available on a commercial basis. Museum
M, an organization described in section 170(c), is located in
Community N. In return for a payment of $50,000 or more, M allows a
donor to hold a private event in a room located in M. Private events
other than those held by such donors are not permitted to be held in
M. In Community N, there are four hotels, O, P, Q, and R, that have
ballrooms with the same capacity as the room in M. Of these hotels,
only O and P have ballrooms that offer amenities and atmosphere that
are similar to the amenities and atmosphere of the room in M
(although O and P lack the unique collection of art that is
displayed in the room in M). Because the capacity, amenities, and
atmosphere of ballrooms in O and P are comparable to the capacity,
amenities, and atmosphere of the room in M, a good faith estimate of
the benefits received from M may be determined by reference to the
cost of renting either the ballroom in O or the ballroom in P. The
cost of renting the ballroom in O is $2500 and, therefore, a good
faith estimate of the fair market value of the right to host a
private event in the room at M is $2500. In this example, the
ballrooms in O and P are considered similar and comparable
facilities to the room in M for valuation purposes, notwithstanding
the fact that the room in M displays a unique collection of art.
Example 2. Services available on a commercial basis. Charity S
is an organization described in section 170(c). S offers to provide
a one-hour tennis lesson
[[Page 65955]]
with Tennis Professional T in return for the first payment of $500
or more that it receives. T provides one-hour tennis lessons on a
commercial basis for $100. Taxpayer pays $500 to S and in return
receives the tennis lesson with T. A good faith estimate of the fair
market value of the lesson provided in exchange for Taxpayer's
payment is $100.
Example 3. Celebrity presence. Charity U is an organization
described in section 170(c). In return for the first payment of
$1000 or more that it receives, U will provide a dinner for two
followed by an evening tour of Museum V conducted by Artist W, whose
most recent works are on display at V. W does not provide tours of V
on a commercial basis. Typically, tours of V are free to the public.
Taxpayer pays $1000 to U and in return receives a dinner valued at
$100 and an evening tour of V conducted by W. Because tours of V are
typically free to the public, a good faith estimate of the value of
the evening tour conducted by W is $0. In this example, the fact
that Taxpayer's tour of V is conducted by W rather than V's regular
tour guides does not render the tours dissimilar or incomparable for
valuation purposes.
(b) Certain goods or services disregarded. For purposes of section
6115, an organization described in section 170(c) may disregard goods
or services described in Sec. 1.170A-13(f)(8)(i).
(c) Value of the right to purchase tickets to college or university
athletic events. For purposes of section 6115, the right to purchase
tickets for seating at an athletic event in exchange for a payment
described in section 170(l) is treated as having a value equal to
twenty percent of such payment.
(d) Goods or services provided to employees or partners of donors--
(1) Certain goods or services disregarded. For purposes of section
6115, goods or services provided by an organization described in
section 170(c) to employees of a donor or to partners of a partnership
that is a donor in return for a payment to the donee organization may
be disregarded to the extent that the goods or services provided to
each employee or partner are the same as those described in
Sec. 1.170A-13(f)(8)(i).
(2) Description permitted in lieu of good faith estimate for other
goods or services. The written disclosure statement required by section
6115 may include a description of goods or services, in lieu of a good
faith estimate of their value, if the donor is--
(i) An employer and, in return for the donor's quid pro quo
contribution, an organization described in section 170(c) provides the
donor's employees with goods or services other than those described in
paragraph (d)(1) of this section; or
(ii) A partnership and, in return for its quid pro quo
contribution, the organization provides partners in the partnership
with goods or services other than those described in paragraph (d)(1)
of this section.
(e) Effective date. This section applies to contributions made on
or after December 16, 1996. However, taxpayers may rely on the rules of
this section for contributions made on or after January 1, 1994.
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
Par. 5. The authority citation for part 602 continues to read as
follows:
Authority: 26 U.S.C. 7805.
Par. 6. Section 602.101(c) is amended by adding the following
entries in numerical order to the table:
Sec. 602.101 OMB Control numbers.
* * * * *
(c) * * *
------------------------------------------------------------------------
Current OMB
CFR part or section where identified and described control No.
------------------------------------------------------------------------
* * * * *
Section 1.170A-13(f)....................................... 1545-1464
* * * * *
Section 1.6115-1........................................... 1545-1464
* * * * *
------------------------------------------------------------------------
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved: November 27, 1996.
Donald C. Lubick,
Acting Assistant Secretary of the Treasury.
[FR Doc. 96-31719 Filed 12-13-96; 8:45 am]
BILLING CODE 4830-01-U
