How eager would you be to provide your Social Security number along with your donation to your favorite charity?
That’s the question donors and nonprofits could face if the IRS adopts a rule requiring that for donations of $250 or more.
In an effort to head off implementation of the “Gift Substantiation Regulation,” the Nonprofit Center of Northeast Florida has joined more than 200 national, regional and local organizations in petitioning the IRS to withdraw the proposal, based on its anticipated effect on the nonprofit community.
“It could increase administrative costs and bring a lot of confusion in terms of how to explain it to donors,” said Rena Coughlin, CEO of the Nonprofit Center.
A petition submitted Wednesday by the National Council of Nonprofits points out requiring charities to collect sensitive personal information, such as Social Security numbers, would require the organizations to divert resources from their core missions to purchase and maintain costly data security systems.
That would be a particular burden to the majority of nonprofits, which operate with small staffs and limited resources.
Among the nearly 300 North Florida nonprofits that are members of the center, 67 percent have annual budgets less than $500,000 and 77 percent have budgets less than $1 million, Coughlin said.
Requiring submission of Social Security numbers could greatly impact donations from people who make small annual gifts.
Major donors with planned philanthropy typically set up foundations through which to give. But many people write their donation check from the same account they use to pay their mortgage, car payment and other household expenses.
Coughlin said based on a recent survey conducted by the center, 85,000 donors in North Florida are in the “low wealth” category, compared to 18,000 in the “high wealth” category.
“Those are folks who are making donations out of their paychecks,” said Coughlin.
Asking for their Social Security along with a donation “could make people think twice” about donating, she said.
While providing a Social Security number would allow the government to cross reference donations with exemptions claimed on tax returns, Coughlin said a system for that already is in place.
Organizations send donors a letter confirming the date and amount of their contribution that can be provided to the IRS if requested, she said.
Another danger of donors submitting personal information to nonprofits is the possibility of creating a new way to commit fraud.
Coughlin said a nonprofit can be registered with the state for less than $1,000. After nonprofit status is established, an organization could begin soliciting donors not for their money, but for their personal information that could then be used for fraudulent activity.
“If the government allows nonprofits to collect Social Security numbers, it could create a new class of white-collar criminal,” she said.
The national association in its petition cited a study from 2009. The Government Accountability Office reviewed a proposal similar to the latest possible new regulation and found “taxpayers may reduce giving because they are reluctant to provide Social Security numbers to charities given concerns over identity theft.”
In addition, the petition states, “Like other law enforcement agencies, the IRS has consistently warned individuals to give out their Social Security numbers only when absolutely necessary.”
Coughlin said with the country’s nonprofit community concerned about possible implications and the previous conclusions and recommendations from the federal government, the hope is the IRS will withdraw its proposal to implement the rule.
“There must be bigger fish in the sea,” she said.
(904) 356-2466