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New IRS rules demand receipts for church donations


The next time you toss bills into the church collection plate, you might want to ask the usher for a receipt.

New federal rules for the 2007 tax year – which took effect Jan. 1 – forbid tax deductions for charitable donations unless the taxpayer can prove the donation through receipts or other official financial records.

The rules, enforced by the Internal Revenue Service, require that people claiming charitable donations back up those deduction claims with canceled checks; records from banks, credit card companies or credit unions; or written notices from the charity or not-for-profit institution.

In the past, the IRS has allowed personal notes, diaries, or bank registers as sufficient proof that you actually placed those $5, $10 or $20 bills in the basket each week of the year.

Congress approved the new guidelines in August, as an add-on to the Pension Protection Act of 2006, which deals mostly with pension and retirement savings. President Bush signed them into law. The new rules cover monetary donations to any charitable institution, not just religious ones.

The changes shouldn’t affect the giving habits of people who already donate in church-provided envelopes, with checks, or over the Internet. They can still receive records from the church, bank, or credit card company, and present them to their accountant.

Still, a lot of money is given anonymously. At St. Genevieve’s Catholic Church in Elizabeth, N.J., for example, nearly 20 percent of the $7,000 collected each week is cash that the church cannot connect to anybody, said George Gillen, the church’s pastor.

Cash donors who throw their bills unfettered into collection plates must change their habits if they want to claim deductions, said Todd Polyniak, a partner in Sax Macy Fromm & Co., a business accounting and consulting firm in Clifton, N.J.

“They’re making it much more difficult for you to say you gave money you truly didn’t give, even if it’s small dollar amounts,” he said.

In the end, Polyniak said, some not-for-profit organizations will bear the burden of the new rules, because offering receipts for every cash donation would strain their resources.

“A lot of them don’t have the resources to provide all this documentation,” he said. “[Providing it for everyone is] going to take away from their mission.

“I feel the pain of the not-for-profits more than for the government, but I can understand why the government’s doing it. ... The government is responding to what they perceive as abuse, and the way they see it, a lot of small dollars add up to big dollars.”


Jeff Diamant writes for The Star-Ledger in Newark, N.J.