Page 165 - Washington Nonprofit Handbook 2018 Edition

In contrast, if timely notice is given and the organization is qualified, contributions
are deductible, even if the contribution is made before the application for tax
exemption is filed.

The foregoing rule requires would-be exempt organizations organized after
October 9, 1969, to give notice to the IRS of their existence and to the status they
claim by applying for tax exemption. The effect of the notice is procedural rather
than substantive, and the action taken by the IRS on the application is not
conclusive. Nevertheless, a favorable determination letter from the IRS is of great
practical importance because it reassures potential donors and, unless revoked,
relieves them of the need to prove independently that the organization is qualified
to receive deductible contributions.

The requirement to apply for tax exemption does not apply to:

• Churches and certain related organizations;

• Organizations, other than private foundations, that do not normally
have gross receipts in excess of $5,000 per taxable year; and

• Subordinate organizations, other than private foundations, covered by
a group exemption letter.

b. Requirements for Donors

(i) Gifts of Property

An individual, partnership, or corporation is allowed no deduction for a
charitable gift of property claimed to exceed $500 unless (i) the donor’s return for
the year during which the gift was made includes a description of the property and
such other information as the IRS may require, or (ii) the donor shows that the
failure to include this statement was “due to reasonable cause and not to willful
neglect.” See Code sections 170(f)(11)(A)(i), 170(f)(11)(A)(ii)(II), 170(f)(11)(B). For
purposes of the dollar threshold, all similar items of property donated to one or
more organizations are treated as one property. See Code § 170(f)(11)(F).

This requirement applies to a C corporation only if it is either a personal
service corporation or a closely held C corporation. See Code
sections 170(f)(11)(A)(i), 170(f)(11)(B). With respect to a gift by a partnership or
S corporation, the partnership or corporation must include a statement with its
return, but if the statement is not so included, the deduction is denied at the
partner or shareholder level. See Code section 170(f)(11)(G).

WASHINGTON NONPROFIT HANDBOOK -154- 2018