Three reasons the IRS should reject new regulation targeting non-profits

The Internal Revenue Service (IRS) – the same agency that unlawfully targeted conservative and Tea Party groups – now wants to broaden its assault on taxpayers – specifically nonprofit organizations.

Under a new regulation proposed by the IRS, the tax agency would have some nonprofit charities report the Social Security numbers (SSNs) of donors giving at least $250 in one year. The regulation would permit, but not require, charitable organizations to file a new, separate information return (in addition to the Form 990) to substantiate covered contributions. The new informational return would require the charity to collect an individual donor’s name, address, and Social Security number, and provide a copy to the donor.

We have filed public comments with the IRS opposing this new regulation. It’s a bad idea for a number of reasons. Here are three:

1. On its website, the IRS advises consumers and taxpayers to provide their SSN (or TIN) only when “absolutely necessary.”  Even as a voluntary system, the proposed regulations essentially require charities to ask donors to give out their SSNs when it is not absolutely necessary. Voluntary and “absolutely necessary” are diametrically opposed to each other and the IRS should not create a system which provides such inconsistent advice. Doing so undermines consumer and taxpayer protections, and erodes public confidence in both charities and the IRS.


2. Requests for SSNs are likely to result in reduced charitable giving. When confronted with requests for SSNs for contributions exceeding $250, donors will logically be unwilling to contribute more than $250.

3. Concerns about identity theft are very real and a significant reason this new regulation should not be adopted. Just this year, hackers have accessed sensitive employee data at the federal Office of Personnel Management (OPM) and the Central Intelligence Agency (CIA), two sophisticated organizations with the resources to protect against identity theft and sensitive information. Hackers were nevertheless able to breach their fire-walls and steal the information of millions of federal employees and contractors. If OPM and the CIA (among countless other governmental and private organizations) cannot protect against such security breaches and theft, it seems particularly ill-advised to set up a system that has charities collecting, storing, and (hopefully) protecting SSNs.

Further, the IRS acknowledged in its notice, the present system “works effectively, with minimal burden on donors and donees.” That being the case, there seems little need to create a new, optional, parallel reporting regime that would implement additional administrative burdens on charities.