New IRS Case Reminds Everyone to Follow the Rules on #GivingTuesday
With Thanksgiving this week and “Giving Tuesday” following next week, it is a good time to review the lessons from the recent case of IQ Holdings, Inc. v. Comm’r of Internal Revenue, T.C. Memo. 2024-104, filed Nov. 07, 2024. Among other things, IQ Holdings, a Texas C-Corp, claimed tax deductions for charitable contributions made in 2014. The issue with the charitable contributions was whether they were substantiated as required by law. IQ Holdings claimed charitable deductions of equipment, property and cash valued at over $2.9 million. The donation was to a nonprofit, IQ Life Sciences Corp., that was affiliated with IQ Holdings.
The regulations regarding charitable donations focus on two main concepts:
Substantiation of donations of $250 or more; and
Disclosure requirements for goods and services that you may receive as a result of your donation.
The IRS requires that you must have a written acknowledgment from the charity for any charitable deduction of $250 or more. Your canceled check is not sufficient to support your deduction. The gift acknowledgment must include:
The amount of any cash donation;
A description of property (but not the value) of any non-cash gift; and
A statement of whether the charity provided services or goods in consideration for the donation along with a description and good faith estimate of their value.
If a non-cash donation exceeds $5,000 a qualified appraisal of the value of the donation must be obtained and a summary of the appraisal attached to the tax return. If the donation exceeds $500,000 a full copy of the appraisal must be submitted.
In the IQ Holdings case, the acknowledgement letter failed to state whether goods or services were provided in exchange. In addition, IQ Holdings did not obtain an appraisal of property and equipment donations. The IRS disallowed the deductions due to non-compliance and this was upheld by the court. The court rejected a substantial compliance argument by IQ Holdings finding that substantial compliance is not applicable when statutory requirements mandate explicit requirements.
Taking into account the lessons of IQ Holdings, there is no better way to show gratitude for your blessings this time of year, than to share with someone else. #GivingTuesday was started in 2012 as a project of the 92nd Street Y in New York in 2012 and became an independent organization in 2020. The movement has grown into a world-wide network of local organizations that promote giving in their communities. Over the past several years, we have taken the reminder provided by Giving Tuesday to support both local and national organizations that are important to us. We have loved it.
To provide some ideas that you might like as well, we have shared links below to some of the organizations we will be supporting this year, again or for the first time. Giving though is personal, and your giving should support things that you care deeply about. As you give and hopefully volunteer, your heart will be drawn close to the efforts supported by the non-profit.
We would encourage you to take some time this week and ponder what you would like to support and then, no matter how small, GIVE.
Who the Hallocks are supporting:
International Rescue Committee
English Language Center of Cache Valley
Church of Jesus Christ of Latter-Day Saints Humanitarian Aid Fund
This post is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.