Closer Look At Year-End Credit Card Giving

Based on my previous year-end potpourri post, several readers questioned the point made about credit card gifts technically not completing until the date the charge shows up on the donor’s credit card statement (I heard this from a top planned giving attorney).

Interestingly enough, the IRS previously ruled that credit card gifts were not complete until donors paid their credit card bills!! (that was back in the 1970s so don’t worry if you never heard that doozy)

In a later IRS revenue ruling, though, the IRS backed of that one and ruled that the year of the charge was the appropriate date for a credit card gift to charity.    Here is a quote from a recent IRS statement that you might find helpful:

“Rev. Rul. 78-38, 1978-1 C.B. 67, provides that when a contribution is made to a qualified charity by credit card, it is deductible in the year the charge is made, regardless of when the creditor is paid.”  Taxpayer inquiry – 3/24/2010

Settled!  So why was I quoting a lawyer (a very good one, mind you) saying that it’s the date of the credit card statement itself – not necessarily the charge date?

I am thinking that maybe our lawyer friend is taking an extreme view on the phrase “when a charge is made.”  This might just be a case where an attorney is out-thinking the IRS on a purely intellectual level.  In theory, the legal obligation doesn’t really happen until the credit card company sends you the statement showing the obligation.

But, the IRS has said repeatedly that the year of the charge is determinative! Let’s go with it and you can quote this blog!

Ok, maybe I didn’t hear the attorney correctly or maybe this is the time to hit the real issue on the nail.

Read this carefully: the gift is complete in the year of the charge.

That means that you (the charity) better have processed that charge in that year.    Maybe that was what the attorney was saying.  The donor doesn’t know the real date of his gift until he sees the date it was processed on his credit card statement.

Beware fundraisers: process year-end credit card gifts before the end of the year!

Have a great end of year!

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