IRS Reverses Course on Controversial Donor-Data Proposal

The Internal Revenue Service today withdrew a controversial proposed regulation that would have given nonprofits the option to report donors’ private information to the agency.

Donors who make gifts greater than $250 to charity are required to get a “contemporaneous written acknowledgment” of their donation when they claim a tax deduction. The IRS proposal would have allowed the nonprofits, rather than the donors, to report the gift, including the donor’s name, address, and Social Security number.

The proposal drew the ire of many nonprofits and charity regulators. Nonprofits don’t necessarily have sophisticated computer security programs that could protect donor data, they said. They worried that scam artists and identity thieves would lure donors into giving out their Social Security numbers.

“Many comments expressed significant concerns about donee organizations collecting and maintaining taxpayer identification numbers,” wrote Karen Schiller, the agency’s acting deputy commissioner for services and enforcement in the IRS’s withdrawal notice.

The proposal was considered because some donors who were being audited by the IRS pushed to allow charities to file amended Forms 990 — the publicly available forms nonprofits file each year — to show they had made a gift.