The Tax Court has disallowed a $64 million charitable contribution because there was no written acknowledgment from the recepient at the time.

The donation was of a façade easement to a historic trust where there was no contemporaneous written acknowledgment, or CWA, from the donee organization, as required by Code Section 170(f)(8)(A). (15 West 17th Street LLC v. Commissioner,   147 T.C. No. 19.)

Among other things, the CWA must state whether the donee provided the donor with any goods or services in exchange for the gift.

The U.S. Tax Court
The U.S. Tax Court Matthew Bisanz

15 West 17th Street LLC claimed the charitable contribution deduction on its 2007 partnership return. The substantiation requirements of Code Section 170(f)(8)(A) do not apply to a contribution “if the donee organization files a return, on such form and in accordance with such regulations as the Secretary [of the Treasury] may prescribe,” that includes the information specified in Subparagraph (B). However, until now the Treasury has declined to issue any such regulations.

The LLC’s 2007 return was audited and the deduction was disallowed. After the case was docketed in the Tax Court, the donee organization submitted an amended Form 990, Return of Organization Exempt from Income Tax, that included a statement that the donee had provided the LLC with no goods or services in consideration for the gift. The LLC filed a motion for partial summary judgment, contending that the action by the donee eliminated the need for a CWA to substantiate the LLC’s gift.

The Tax Court held that the discretionary delegation of rulemaking authority spelled out in Code Section 170(f)(8)(D) is not self-executing in the absence of the regulations to which the code section refers. Since the CWA requirement was not met, the deduction was denied.

A dissenting opinion would allow the deduction, since “in the absence of regulations from the Secretary, a donee filing a return that contains the information described in Section 170(f)(8)(B) satisfies the requirements of Section 170(f)(8)(D).”

Roger Russell

Roger Russell is senior editor for tax with Accounting Today, and a tax attorney and a legal and accounting journalist.