Charities celebrate donors’ privacy after IRS rejects regulation

The IRS announced in early January that it will not pass a proposed regulation that would have required more sensitive information from donors. If passed, the regulation would require nonprofits to store the Social Security numbers of donors who donated more than $250.

Many local nonprofits are thrilled the IRS decided against it.

“These tax deductions are a huge incentive for people to donate to charity,” said Meredith Richard, executive director of Musical Empowerment, a local charity that helps bring music into underprivileged children’s lives.

“The main reason that I think most charities are really skeptical of this proposal is because anything you send to the IRS, anything you have to deal with, makes it a headache for charities,” she said.

“It’s just an additional headache and would add a lot more to our workload.”

Gordon Jameson, president and chairperson of the board of directors at FRANK Gallery, said collecting Social Security numbers would be implausible.

“It’d be impossible to collect peoples Social Security numbers, and people would be highly reluctant to give them, I’m sure,” he said. “It would be hazardous to have that information spread out all over the place — I’m sure it would stop charitable donations to anything.”

All this sensitive information would have to be stored in computers, and there’s always the risk of hacking information.

“The procedure would require Social Security numbers, or other tax ID numbers, and then we would have to make this information secure and send it to the IRS,” Richard said. “I think that would have potentially scared off donors because we would have to ask for their Social Security numbers and that’s very sensitive information that people don’t want to share.”

David Heinen, vice president for public policy and advocacy for the N.C. Center for Nonprofits, said this leads to a larger issue, especially for smaller charities.

“Perhaps the bigger cost is that they would probably need to have more — you know, an electronic system where they’re keeping it to have more firewalls, more encryption, more protection of the data,” Heinen said.

He said donors might be more open to donating to larger charities because of this.

“Just because implicitly larger organizations probably have the safeguards in place to prevent identity theft, they may have less of a concern about that,” he said.

The runoff of larger charities hurting smaller ones doesn’t stop there. Big-name charities, like the Children’s Cancer Fund of America and the Breast Cancer Society, have recently been accused of fraud, which Richard said can cause a freezing effect for donations everywhere.

“Honestly, I think what’s effecting donations most right now is the IRS, and other organizations have given out reports of charities that are using and abusing that donated money,” Richard said. “That’s all it takes is a couple to ruin the reputation of other nonprofits.”

Large nonprofits make millions every year, but donations to smaller nonprofits are vital to their existence because they’re not nationally recognized. But any time the media draws attention to fraud committed by larger charities, people assume it’s the norm, Heinen said.

“That action, by one can hurt the reputation and donations to the other 10,000 or so nonprofits or so that are doing things the right way.”

arts@dailytarheel.com