ISSUE:

Donors generally can deduct their contributions only in the year they actually make them in cash or other property.

 

 

 

SITUATION:

Idaho Bible College & Seminary (IBCS) is a private college exempt under Internal Revenue Code section 501(c)(3) and section 170(b)(1)(A)(i).  They are not required to file Form 990 annually.

IBCS’s Controller called us to pass along a question they received from one of their donors.  For 2017, December 31 is on a Sunday.  New Year’s Day (January 1) is a banking holiday.  The donor was concerned about whether a contribution they made to IBCS – via credit card – would be considered a charitable deduction in 2017 or 2018.

We tell them that we get a lot of these types of questions – especially in December.  Credit card contributions are deductible in the year (on the date) the donor makes the charge to their credit card.

 

RULES:

From IRS Publication 17 (page 169-170)

You can deduct your contributions only in the year you actually make them in cash or other property (or in a later carryover year, as explained later under Carryovers). This applies whether you use the cash or an accrual method of accounting.

Time of making contribution. Usually, you make a contribution at the time of its unconditional delivery.

Checks. A check you mail to a charity is considered delivered on the date you mail it.

Text message. Contributions made by text message are deductible in the year you send the text message if the contribution is charged to your telephone or wireless account.

Credit card. Contributions charged on your credit card are deductible in the year you make the charge.

Pay-by-phone account. Contributions made through a pay-by-phone account are considered delivered on the date the financial institution pays the amount.

Stock certificate. A properly endorsed stock certificate is considered delivered on the date of mailing or other delivery to the charity or to the charity’s agent. However, if you give a stock certificate to your agent or to the issuing corporation for transfer to the name of the charity, your contribution isn’t delivered until the date the stock is transferred on the books of the corporation.

Promissory note. If you issue and deliver a promissory note to a charity as a contribution, it isn’t a contribution until you make the note payments.

Option. If you grant a charity an option to buy real property at a bargain price, it isn’t a contribution until the organization exercises the option.

Borrowed funds. If you contribute borrowed funds, you can deduct the contribution in the year you deliver the funds to the charity, regardless of when you repay the loan.

 

BOTTOM LINE:

  • Many donors have questions about when they may count contributions.
  • The IRS gives information on many common types of payments/contributions in IRS Publication 17.
  • Every institution should have established, written procedures on how to account for year-end contributions.
  • Ultimately, donors should work with their knowledgeable tax advisors to determine the timing of their specific charitable gifts.

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.