Action Alert: IRS Reporting Proposal Threatens Donor, Nonprofit Security

The deadline for comments on an IRS reporting proposal threatening nonprofit and donor security is December 16 – less than a week away. The new, voluntary reporting method calls on nonprofits to collect, store, and report donors’ Social Security numbers, along with the amount of donations and other information. The proposed regulations would give nonprofits the option of filing a separate new information return with the IRS and individual donors by February 28 every year to substantiate contributions of more than $250 in value. A similar mandatory proposal was considered and rejected in the past based on numerous legal, policy and confidentiality problems it raised.

This should concern foundations and the general public for a number of reasons. Tim Delaney, president and CEO of the National Council of Nonprofits, explains in a recent blog post:

  • Opens the door to scam artists. The public is consistently warned by state attorneys general (“Never give out personal information, such as your … Social Security number“), the Social Security Administration (“your number is confidential“), and many other experts — including the IRS itself — to provide their Social Security number only when “absolutely necessary.” At minimum, this IRS proposal injects a contrary message that will confuse the public. Even without adoption by any nonprofit, a scammer could call a donor purporting to be with a (receiving) nonprofit and request the donor’s social security number in order to send a form confirming their contribution for use in case of audit.
  • Nonprofits could be targeted by hackers and made liable. Media stories the past few years have revealed massive security breaches with hackers stealing the Social Security numbers of more than 22 million people from the federal Office of Personnel Management, as well as penetrating the CIAState Department, and even the White House. The federal government has sunk billions of dollars and has hundreds, if not thousands, of people dedicated to keeping government information secure. And yet, its systems were hacked. Nonprofits have neither the financial resources nor sufficient staffing to combat hackers who will see an easy source for Social Security information. This also creates a liability nightmare for innocent nonprofits. In an interview last week with The Chronicle of Philanthropy, Janet Kleinfelter, Tennessee’s Deputy Attorney General and President of the National Association of State Charity Officials (NASCO), noted that if nonprofits collected Social Security numbers and that information were to be breached by hackers, “as a regulator, I would look at that as a breach of fiduciary duty.”
  • Giving will suffer, which means our communities suffer. Most people are cautious about the information they share online, and rightfully so. To be asked to share their address, their credit card number and their Social Security number all in the same place would be enough to scare even the most committed donor to decline to give. As much as they may want to support good works in their community, it wouldn’t justify taking the risk of their identity being stolen using the ease of online giving. For private foundations, the new regulation could result in replacement pressure, as foundations would be depended on to offset reduced individual donated funds; it would also be a drag on resources as each of their grantees may seek their Taxpayer Identification Numbers (in lieu of Social Security numbers).

WHAT CAN YOU DO?

The IRS is asking for comments on the proposal by December 16.  Submit comments at the IRS website — and let your board members, funders and donors know to submit their concerns, too.

WHAT ARE THE TALKING POINTS?

The National Council of Nonprofits compiled some talking points:

  • A charitable nonprofit should never be asking a donor for her or his Social Security number when soliciting donations. If someone is asking in relation to a donation, that should be considered a sign of a scam or fraudulent solicitation.
  • The proposed Donee Reporting Rule conflicts with the IRS advice to taxpayers to only give out their Social Security numbers when “absolutely necessary.”
  • Taxpayers may reduce giving because they are reluctant to provide Social Security numbers to charities given concerns over identity theft.
  • The current contemporaneous written acknowledgement system is working.
  • Just because the proposal is voluntary now is no reason to ignore its potential adverse impacts.

Also be sure to include basic information about your organization. As a funder you may also want to mention your concern for your grantees.

IS THIS LOBBYING?

NO. Comments on regulations are not considered lobbying by the IRS.

– David Biemesderfer, President & CEO, Florida Philanthropic Network

Watching Philanthropy in Action in Southwest Florida

Last week I had the pleasure of experiencing firsthand the last few hours of the 36-Hour Giving Challenge, an amazing two-day marathon of charitable giving to benefit nonprofits in Sarasota, Manatee, Charlotte and DeSoto counties. The second annual Challenge, which started at 7:00 a.m. on March 5 and ended at 7:00 p.m. on March 6, broke its own record by raising more than $2.78 million for 285 nonprofits. Even more impressive, the Challenge generated 17,626 donations from 50 states and 24 countries – a 65% increase in donations from last year. Continue reading

Capping the Charitable Deduction Will Hurt Floridians

As Congress reconvenes for the year-end lame duck session to address a number of critical tax and spending issues related to the fiscal cliff, there are reports that a cap on the value of the charitable deduction is under consideration as a potential short-term revenue solution.  Although these discussions deal with myriad complex issues, here are some key reasons why capping the charitable deduction is not a good idea for our communities and our state: Continue reading

Community Foundations Have A Notable Year in Growing Florida’s Philanthropic Legacy

One of the perks of running a statewide philanthropy association is that I see on a daily basis many heartwarming stories of Floridians who give their time and money to make our state a better place in which to live. The past year I’ve observed a number of particularly inspiring stories of Floridians who have made significant contributions to strengthening Florida’s philanthropic assets, working in partnership with their local community foundation. Continue reading

The Charitable Deduction & Tax Reform: How Should Philanthropy Respond?

When I met with Florida’s congressional representatives and their staffs earlier this year to talk about issues of importance to philanthropy, time and time again people from both parties told me that comprehensive spending and tax reform is likely to happen in Washington in 2013 or 2014—no matter who wins the presidential election this fall.  Since most legislative issues of interest to foundations and charitable giving concern federal tax legislation, if we want to be relevant the philanthropy sector should consider how to position and discuss these issues within a broader tax reform context. A new Urban Institute study can help.

Last week I moderated a webinar hosted by the Forum of Regional Associations of Grantmakers that featured Eugene Steuerle, one of the authors of a new study by the Urban Institute’s Tax Policy and Charities project. The study offers some helpful food for thought about the future of one of the most prominent charitable giving issues that is likely to be part of any tax reform negotiations: the charitable contribution deduction. Continue reading

Southwest Florida’s Giving Challenge Was One for the Record Books

I’m not sure what’s in the water in the Sarasota/Bradenton area, but we need to bottle it up and spread it around. Late last month the region set a new philanthropic record when four FPN members – Community Foundation of Sarasota County, Gulf Coast Community Foundation, Manatee Community Foundation and The Patterson Foundation – came together to put on the 36-Hour Giving Challenge. This first-of-its-kind online fundraising event in Southwest Florida raised a staggering $2,401,601 through 10,705 gifts in just one and a half days, breaking a record for this type of event previously held by San Diego – a city with a population more than eight times that of Sarasota.

Watching the Giving Challenge unfold, I came away with a number of key lessons and observations for our state’s philanthropy and nonprofit field: Continue reading

New FPN Report Shows Recession’s Toll on Florida’s Charitable Giving, But Outlook Is Brighter

Florida Philanthropic Network’s latest research report documents the serious toll that the economic recession has taken on charitable giving in Florida. The report confirms that the combined charitable giving of individuals, foundations and corporations in Florida dropped 8.6 percent between 2008 and 2009, which follows a double-digit decline the previous year. But on the bright side, the state’s charitable giving is estimated to have stabilized in 2010 and rebounded slightly in 2011.

The recession appears to have had an even greater negative impact on charitable giving in Florida than in the country as a whole. This is not surprising when you consider that Florida was hit harder by the recession than most other states. A growing number of Floridians have been forced to cut back on their charitable donations as they face new financial hardships. Continue reading