Ten years ago, the IRS issued proposed regulations on the substantiation rules for charitable deductions. For ten years, we have been waiting for the final regulations to be released. In fact, these regulations have been on the IRS’s Priority Guidance list for quite some time. On July 30, 2018, the IRS at long last published the final regulations.
At first blush, the regulations seem straightforward. There were very few changes made to the proposed regulations and, in many instances, merely mimic the changes that Congress made to the Code in 2004 and 2006.
However, complications arise when you look to apply the effective dates – especially in light of the fact that the old final regulations (contained in Reg. §1.170A-13) are still valid.
The new regulations are generally contained in Reg. §1.170A-15 through §1.170A-18. The “old” regulations are contained in Reg. §1.170A-13. However, to say that Reg. §1.170A-13 contains the old regulations is extremely misleading. In fact, the “old” regulations are still valid as the “new” regulations did not replace or repeal the regulations under Reg. §1.170A-13 in any way. In short, the regulations under Reg. §1.170A-13 are still valid – at least to the extent that they do not conflict with the new regulations.
In the normal course of publishing regulations, the IRS replaces “old” regulations, and taxpayers and practitioners no longer have to worry about the old regulations, except when dealing with transactions that predate the effective date of the new regulations. Because the IRS did not replace or repeal the old regulations, practitioners must read the old regulations when looking at the new regulations to determine which set of regulations applies, or if both could apply. In fact, in many instances, the new regulations cross-reference the old regulations – usually when looking to define terms. However, because the old regulations cover most of the same topics as the new regulations, practitioners must keep in mind the effective dates of the new regulations. Further complicating the situation is the fact that the new regulations generally give the taxpayer the option of applying these new regulations back to 2006.
Generally, the old regulations are effective for contributions made after July 30, 2018 (the qualified appraisal/appraiser regulations are effective for contributions made on or after January 1, 2019). However, because the old regulations are still valid, practitioners must determine whether the new regulations are in conflict with the old regulations. To the extent that the new regulations and the old regulations address the same issue, the new regulations should control. Problems might arise, however, when the new regulations are silent on a particular issue. Where the new regulations are silent, the practitioner must determine if the new regulations have effectively “wrote out” the requirements of the old regulations by exclusion, or whether the requirements of the old regulations are still valid. In updating the Portfolios, this determination is not always clear.
The IRS could have simplified the matter greatly by simply incorporating the old regulations under Reg. §1.170A-13 where necessary into the new regulations and replacing the old regulations completely. However, because they chose to keep both sets of regulations running concurrently, practitioners must compare both sets of regulations, keeping in mind the effective dates, to determine which regulations are more advantageous for their clients.
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