The effect of the U.S. federal income tax appraisal requirement on noncash charitable contributions for individuals

摘要

This article examines whether certain Internal Revenue Code (IRC) substantiation requirements of the charitable contribution deduction for federal income tax changed the behavior of taxpayers claiming large noncash contributions. Specifically prior to 1985, taxpayers were required to disclose certain information regarding noncash contributions. After 1984, however, a qualified appraisal was required to claim the charitable contribution deduction for noncash contributions over $5,000. Despite the increased substantiation requirement, we find evidence that the percentage of taxpayers claiming more than $5,000 in noncash contributions increased post 1984. Moreover, there is persuasive evidence that secondary tax evasion increased significantly during the same period. In this regard, we find that the percentage of taxpayers claiming noncash contributions just under the $5,001 appraisal threshold (arguably to avoid the more rigorous appraisal requirement) increased significantly post 1984 as did the percentage of self prepared tax returns, both findings indicative of secondary tax evasion.