Part IV. Items of General Interest

Limited Penalty Relief for Filers of Form 1098–T, Tuition Statement , Under Section 6724(f).

Announcement 2016–03

This announcement provides notice that the IRS will not impose penalties under section 6721 or 6722 on eligible educational institutions required to file Forms 1098–T, Tuition Statement, for the 2015 calendar year, solely because they fail to include a student’s correct taxpayer identification number (TIN) on Form 1098–T. This announcement is limited to 2015 Forms 1098–T required to be filed by eligible educational institutions by February 29, 2016, or March 31, 2016 (if filed electronically). This announcement does not provide penalty relief for any other failure that would cause a filer to be subject to penalties under section 6721 or 6722, or any other penalty under any provision of the Code.

Section 6050S(a)(1) requires eligible educational institutions to file information returns (Form 1098–T) with the IRS and to furnish written statements to taxpayers relating to qualified tuition and related expenses paid to or billed by the eligible educational institution. Section 6050S(b)(2) provides that these information returns must contain, among other things, the name, address, and TIN of any individual who is enrolled at the institution and the amount of qualified tuition and related expenses paid or billed.

Section 6721 imposes a penalty on an eligible educational institution that fails to file correct and/or timely information returns with the IRS. Section 6722 imposes a penalty on an educational institution that fails to furnish correct and/or timely written statements to the student. However, section 6724(a) provides that the penalty under section 6721 or 6722 may be waived if it is shown that the failure was due to reasonable cause and not due to willful neglect.

The Trade Preferences Extension Act of 2015 (Public Law 114–27 (129 Stat. 362 (Jun. 29, 2015)) (TPEA) recently amended section 6724. Section 805 of

TPEA amended section 6724 by adding a new subsection (f), which provides that no penalty will be imposed under section 6721 or 6722 against an eligible educational institution solely by reason of failing to include an individual’s TIN on a Form 1098–T or related statement if the institution contemporaneously certifies under penalties of perjury in the form and manner prescribed by the Secretary that it has complied with the standards promulgated by the Secretary for obtaining such individual’s TIN. The provision applies to returns required to be made and statements required to be furnished after December 31, 2015.

Relief under section 6724(f) applies only to eligible educational institutions and does not apply to insurers required to file Forms 1098–T under section 6050S(a)(2) or to persons engaged in the business of servicing student loans and obligated under section 6050S(a)(3) to report on Form 1098–E student loan interest aggregating $600 or more for a calendar year.

The IRS is unable to make necessary programming and form changes to implement section 6724(f) with respect to Forms 1098–T for the 2015 calendar year. The IRS, therefore, will not impose penalties under section 6721 or 6722 against an eligible educational institution that timely files or furnishes 2015 Forms 1098–T or statements with missing or incorrect TINs during 2016. This penalty relief does not apply to other failures subject to a penalty under section 6721 or 6722, such as failure to file 2015 Forms 1098–T timely, or a failure to include all of the other information required to be included on the Form 1098–T.

In addition, this penalty relief does not apply to Forms 1098–T for years prior to the 2015 calendar year that were required to be filed before January 1, 2016, but are actually filed during 2016. For information about penalty relief related to Forms 1098–T for calendar years prior to 2015, see the IRS information release at, https:// www.irs.gov/uac/Newsroom/For-Collegesand-Universities:-IRS-Waives-Penalties-forMissing-or-Incorrect-Taxpayer-IdentificationNumbers. Procedures implementing section 6724(f) for Forms 1098–T and statements

required to be filed after December 31, 2016, will be provided in separate guidance. The principal author of this announcement is James G. Hartford of the Office of Associate Chief Counsel (Procedure & Administration). For further information regarding this announcement, contact Gerald Semasek at (202) 317-6845 (not a toll-free number).

Substantiation Requirement for Certain Contributions; Withdrawal

REG–138344–13

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Withdrawal of notice of proposed rulemaking.

SUMMARY: This document withdraws proposed regulations that would implement the statutory exception to the “contemporaneous written acknowledgement” requirement for substantiating charitable contribution deductions of $250 or more. The withdrawal affects persons that make charitable contributions and organizations that receive charitable contributions.

DATES: As of January 8, 2016 the notice of proposed rulemaking published on September 17, 2015 (80 FR 55802), is withdrawn.

FOR FURTHER INFORMATION CONTACT: Robert Basso at (202) 3177011 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

Section 170(f)(8)(A) of the Internal Revenue Code provides the statutory requirement that a taxpayer who claims a charitable contribution deduction for any contribution of $250 or more obtain substantiation in the form of a contemporaneous written acknowledgment (CWA) from the donee organization. However, in section 170(f)(8)(D), Congress provided an exception to the CWA requirement. Under the exception, a CWA is not re

January 25, 2016 294 Bulletin No. 2016–4

quired if the donee organization files a return on such form and in accordance with such regulations as the Treasury Department may prescribe (donee reporting).

Section 1.170A–13(f) of the Income Tax Regulations provides the rules issued by the Treasury Department and the IRS for substantiating charitable contributions of $250 or more. See TD 8690 (1997–1 CB 68). When issuing TD 8690 in 1997, the Treasury Department and the IRS specifically declined to issue regulations to implement donee reporting under section 170(f)(8)(D). The IRS has consistently maintained that the section 170(f)(8)(D) exception is not available unless and until the Treasury Department and the IRS issue final regulations prescribing the method for donee reporting. Nevertheless, some taxpayers under examination for their claimed charitable contribution deductions have recently argued that a failure to comply with the CWA requirements of section 170(f)(8)(A) may be cured if the donee organization files an amended Form 990, “Return of Organization Exempt From Income Tax,” that includes the donor’s contribution information. These taxpayers argue that an amended Form 990 constitutes permissible donee reporting under section 170(f)(8)(D), even if the amended Form 990 is submitted to the IRS many years after the purported charitable contribution was made. In response to some donors’ requests, some donee organizations have filed amended Forms 990 attempting to effectuate donee reporting. The Treasury Department and the IRS have concluded that the Form 990 is an unsuitable reporting method for this purpose and may not be used to effectuate donee reporting.

However, in response to the interest by some taxpayers in donee reporting under the statutory exception, the Treasury Department and the IRS proposed regulations to implement a framework addressing the manner and timing for donee reporting under section 170(f)(8)(D). On September 17, 2015, a notice of proposed rulemaking (REG–138344–13) was published in the Federal Register (80 FR 55802). The proposed framework for donee reporting was based on a specific-use information return that would include, among other things, the donor’s name, address, and taxpayer identification number. Similar to other specific-use information returns filed with the IRS, the donor’s taxpayer identification number was required in order to properly associate the donation information with the correct taxpayer. Unlike a CWA, which is not sent to the IRS, the donee reporting information return would be sent to the IRS, which must have a means to store, maintain, and readily retrieve the return information for a specific taxpayer if and when substantiation is required in the course of an examination.

The proposed framework for donee reporting was intended to minimize the reporting burden on donee organizations by making it voluntary, and to protect donor privacy by not using the Form 990 series. In the preamble to the proposed regulations, the Treasury Department and the IRS expressed concern about the potential risk for identity theft with a donee reporting system based on a specific-use information return because donee organizations would be collecting donors’ taxpayer identification numbers and maintaining those numbers for some period of time. The Treasury Department and the IRS requested comments,

including specifically on whether additional guidance was necessary regarding the procedures a donee organization should use to mitigate the risk of identity theft of donor information.

The Treasury Department and the IRS received a substantial number of public comments in response to the notice of proposed rulemaking. Many of these public comments questioned the need for donee reporting, and many comments expressed significant concerns about donee organizations collecting and maintaining taxpayer identification numbers for purposes of the specific-use information return. In response to those comments, the Treasury Department and the IRS have decided against implementing the statutory exception to the CWA requirement, and therefore that exception remains unavailable unless and until final regulations are issued prescribing the method for donee reporting. Accordingly, the notice of proposed rulemaking is being withdrawn.

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Withdrawal of Notice of Proposed Rulemaking

Under the authority of 26 U.S.C. 7805, the notice of proposed rulemaking (REG– 138344–13) that was published in the Federal Register on September 17, 2015 (80 FR 55802) is withdrawn.

Karen M. Schiller, Acting Deputy Commissioner for Services and Enforcement.

(Filed by the Office of the Federal Register on January 7, 2016, 8:45 a.m., and published in the issue of the Federal Register for September 17, 2015, 80 F.R. 55802)

Bulletin No. 2016–4 295 January 25, 2016