Recordkeeping and Substantiation
By: Breana Behrens
A charitable contribution is not deductible unless a record of the donation has been kept and properly substantiated in accordance with the IRC and Treasury Regulations. Substantiation is the requirement that a landowner request and keep certain documents that pertain to the donation of a conservation easement. The documentation that is required varies depending on the date, nature, type, and dollar amount of the contribution. However, proper documentation may include proof of payment such as a receipt or cancelled check, a contemporaneous written acknowledgement, or a qualified appraisal.
A conservation easement donor must have a bank record or written communication from the charity to which the donation was made in order to claim a charitable deduction. The communication, such as a letter or receipt, must include the name of the charity, the date of the donation, and the amount of the donation.
A contemporaneous written acknowledgement from the charity is required for all charitable contribution deductions of $250 or more. “Contemporaneous” means that the donor must obtain the acknowledgment by the earlier of the date on which they file their tax return claiming the charitable contribution deduction or the due date (including extensions) for the return. The acknowledgement does not need to be attached to the donor’s tax returns, but should be kept on record. The acknowledgement must include the name of the charitable organization, amount of the contribution, description of the contribution, and a statement that no goods or services were provided in return for the donation.
If a donor receives any goods or services in return for their donation it may be considered a quid pro quo exchange and a charitable deduction would be disallowed. However, there are exceptions to the quid pro quo requirement, such as the token amount exception, the intangible religious benefits exception, and the membership benefits exception. There are specific rules that govern these exceptions. Furthermore, the value of any benefit received may be subtracted from the value of the donation to show the net value of the total exchange.