In an abrupt about-face, the IRS has announced that it has withdrawn its controversial proposal to permit 501(c)(3) nonprofit organizations to report the details of charitable contributions directly to the federal government. If the proposal had been adopted, nonprofit organizations that decided to report contribution information to the IRS would have been required to obtain taxpayer identification numbers (Social Security numbers) from donors and include them in the reports to the IRS.
As we reported in our Special Alert dated December 15, 2015, the IRS’s proposal met with significant controversy. Numerous nonprofit leaders and others expressed serious concerns that such a proposal would put donor identity information at risk and would make donors less willing to give to charities.
As a result of the massive criticism it received, the IRS issued an announcement that included the following statement:
The Treasury Department and the IRS received a substantial number of public comments in response to the notice of proposed rulemaking. Many of these public comments questioned the need for donee reporting, and many comments expressed significant concerns about donee organizations collecting and maintaining taxpayer identification numbers for purposes of the specific-use information return…Accordingly, the notice of proposed rulemaking is being withdrawn.