IRS Pulls New Overreach That Threatened Charitable Giving

For many Americans, January is a time to plan for the year.  This includes reviewing annual charitable giving and preparing for the often-dreaded task of filing tax forms.  In yet another overreach, the Internal Revenue Service (IRS) could have made all of this even more problematic.  That is why I have joined with my Senate Finance Committee colleague Pat Roberts (R-Kansas), who has introduced S. 2370, legislation that would stop a new, IRS-proposed regulation that would have subjected Americans to increased security risk of their sensitive information and saddled charitable organizations with additional cybersecurity, reporting and other costs.  Thankfully, the IRS recently withdrew the proposed new regulation.

In September, the IRS issued a proposed regulationcalling on charitable organizations to send the IRS the name, address, Social Security number or tax identification number of any donor who makes a contribution of $250 or more.  This reporting would have been in addition to the current practice of charitable organizations providing written confirmation of donations to the donor that the taxpayer can then use to substantiate tax deductions. 

This IRS overreach would have created another avenue that risks Americans' sensitive information.  The rising number of data breaches in which hackers have stolen personal information from so-called, secure databases provide zero confidence that the Social Security numbers and other sensitive information can be stored securely.  The Administration has not even been able to secure the sensitive information of many current and former federal employees.  Just last year, the Administration indicated that sensitive information, including the Social Security numbers of more than 20 million Americans, was stolen from background investigation databases.  This is just one of the increasing number of breaches of sensitive information from both government and non-government databases. 

In the proposed rule, the U.S. Treasury Department acknowledged that, "The Treasury Department and the IRS are concerned about the potential risk for identity theft involved with donee reporting given that donees will be collecting donors' taxpayer identification numbers and maintaining those numbers for some period of time."  This threat of disclosure could have created a disincentive for charitable giving, with donors not wanting to subject themselves to increased risk of identity theft.  

I heard from a number of Idaho nonprofits with concerns about the rule, which led me to agree to co-sponsor S. 2370, the Protecting Charitable Contributions Act.  The measure would stop the proposed rule, maintain current IRS rules governing the substantiation of charitable contributions and prohibit the IRS from issuing, revising or completing any new regulation that would alter the existing rules.  Similar legislation was introduced in the U.S. House of Representatives.

In December, the IRS closed the comment period for the proposed rule.  Then, on January 7, the Treasury Department announced the rule's withdrawal, writingthat it decided to withdraw the rule after receiving many comments that questioned the need for the reporting and expressed significant concerns about charitable organizations collecting and maintaining the information. 

Creating another opportunity for fraudulent actors to gain sensitive information of millions of Americans is unwise, and the withdrawal of this rule is a positive step.  The IRS was proposing the collection of information as a voluntary option for charitable organizations, but the rule would have put pressure on charitable organizations to conform, and was a possible step toward a mandatory requirement.  Although the rule has been stopped, I encourage all those interested in this issue to continue to engage and help stop the reemergence of this rule and other IRS overreaches.  

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