Taxpayers received rare good news today out of the Internal Revenue Service (IRS): the agency withdrew its dangerous donor reporting regulation. The proposed rule would have given charitable organizations the option to substantiate donations over $250 by submitting a report to the IRS that would include the donor’s Social Security Number (SSN).
Not many government proposals remain voluntary for long and the regulations raised significant concerns among taxpayers and charitable organizations. As NTU President Pete Sepp explained in his comments submitted in opposition to the rule, “The fact that this proposed rule is currently optional provides little assurance to taxpayers that this deeply flawed methodology won’t become the new norm and made effectively mandatory for all organizations.”
The rule would have posed numerous privacy risks and exposed donors to increased threat of identity theft. Many nonprofits aren’t equipped to secure the kind of data the IRS was requiring, over a long period of time, and the IRS itself has had trouble protecting the personal information of taxpayers. Charitable organizations also cited concerns about fundraising: requiring donors to take extra steps or divulge personal information to a nonprofit could be a disincentive to donating.
Laughably, the background of the proposed rule itself stated that “The present CWA [contemporaneous written acknowledgement] system works effectively with minimum burden on donors and donees, and the Treasury Department and the IRS have received few requests … to implement a donee reporting system.” In other words, the rule was completely unnecessary and was yet another disconcerting instance of government agencies creating rules to address nonexistent problems, rules that could have had a profoundly harmful effect on charitable organizations – and free speech.
The decision to withdraw this rule is great news for taxpayers, but the threat to charitable activities is still ongoing. In November, the Supreme Court denied an appeal on the part of nonprofit organizations against a California regulation requiring nonprofits to disclose donors on tax forms. NTU joined an amicus brief opposing the regulation. It’s clear that taxpayers and charitable organizations alike need to stay vigilant in the ongoing fight against government attempts to trample speech.