Commentary; Posted: 9/6/06
Non-Cash charitable gifts
Rev. John C. Blackford,
Religion Columnist
Charitable contributions apart from cash gifts are recognized by the Internal Revenue Service (IRS) as legitimate deductions on our income tax reports. Our state also approves of them.
Americans claimed $9 billion in deductions for clothing and household goods in 2003, according to the IRS.
However, new tax rules will require appraisals for some donations and the dumpster for others. The new regulations became law last month as part of a large pension bill meant to clarify and give oversight to the field of charitable giving.
Worn and frayed clothing will no longer qualify for a tax break, according to the new IRS rules. To be eligible for a deduction, contributions will have to be in ėgood-used condition or better,î and items worth more than $500 will require an appraisal.
Part of the reason for the changes is the effort by our government to require more accurate accounting because of the Enron and Arthur Andersen scandals, according to a spokesman for the Goodwill Industries.
Further, ėThe Senate Finance Committee was concerned that some people might be taking advantage of various parts of the tax code, even down to the donation of clothing and household goods.î
Goodwill Industries is one of the largest recipients of these items in the nation, and collects more than one billion pounds of clothing annually at its 2100 stores.
In our state it is known as Goodwill/Easter Seals of Minnesota, and has a number of collection points and retail stores in the Twin Cities. This writer was privileged to serve as member of the Goodwill/Easter Seals Board for over 10 years, and be a part of this fine organization, which serves handicapped and low-income people.
The new rules do not require the Goodwill or other charitable groups to trace the donations or the donors, who evaluated the items, things that would make it possible for the IRS to detect cheating.
The practice has been to issue a blank receipt for each donation, and the giver estimates the value of the item.
ėThe main thing is that we always ask that our donors give us things that are in good condition or things that they would give to a friend,î said a representative of Goodwill/Easter Seals.
Nationwide, about five percent of donated items are too tattered or worn to sell. Several years ago similar restrictions were placed on gifts of automobiles, and the deduction is now limited to the amount the car sells for at auction, or the ėblue bookî value.
The new regulations also require documentation for cash gifts. In order to claim a gift to a church, for example, we are advised by the IRS to use a check. At least temporarily, those who are 70 or older may contribute up to $100,000 from an IRA without paying tax on the money.
United Way of America has said this provision might generate an additional $400 million in new giving over the next two years.
As for determining the value of donations, donors are on their own for now. Charitable organizations, such as the Goodwill and Salvation Army, will be involved in planning a valuation guide, but it is not known when it will be available.
From now on taxpayers will need an appraisal confirming the value of charitable contributions of more than $500 in value, and donations must also be of ėgoodî quality in order to get a deduction.
Appraisals will be required for household items including furniture, furnishings, electronics, appliances, linens and similar items. Food, paintings, antiques, other objects of art, jewelry, gems and collections do not require an appraisal.
Acknowledgement: The Minneapolis Star Tribune for August 19, 2006. A general guideline from the IRS about donations is at www.startribune.com/a1653.
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