IRS REGULATIONS ON CHARITABLE CONTRIBUTIONS

August 12, 2019 - Douglas Myser

IRS regulations on charitable contributions. Ever since the Tax Cuts and Jobs Act, passed by Congress and signed into law by President Trump, multiple new tax laws have created uncertainty and grey areas regarding the treatment of new taxes and old deductions. Some of these new regulations and laws have taken some time to get clarification on. Federal Tax Resolution offers Tax Court Services to clients nationwide who have circumstances where they relied on tax advice from the IRS, to only then have them go back after clarifying new laws, and change the advice they originally gave. Its often a slow process to decipher the exact meaning of what Congress had in mind in writing the legislation. IRS regulations on charitable contributions.

The U.S. Department of the Treasury and the Internal Revenue Service issued regulations that require taxpayers to reduce their charitable contribution deductions by the amount of any state or local tax credits they receive or expect to receive in return. In a notice also issued, the IRS stated that taxpayers may treat payments they make in exchange for these credits as state or local tax payments. This allows some taxpayers to deduct certain of the payments as taxes.

Treasury Decision 9864, available in the Federal Register, finalizes proposed regulations published August 27, 2018, that were designed to clarify the relationship between state and local tax credits and the federal tax rules for charitable contribution deductions. The Treasury Department and the IRS issued the Treasury decision after carefully reviewing the more than 7,700 written comments received during the comment period and 25 comments made at the November 25th, 2018 public hearing. About 70 percent of the comments recommended adopting the proposed regulations without change.

The final regulations, which apply to contributions made after August 27th, 2018, and are effective on August 12, 2019, largely adopt the rules in the proposed regulations. Under the final regulations, a taxpayer making payments to an entity eligible to receive tax-deductible contributions must reduce the federal charitable contribution deduction by the amount of any state or local tax credit.

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