Cal. Code Regs. Tit. 18, §§ 24357-1 - Charitable, Etc., Contributions and Gifts; Allowance of Deduction

(a) In General.

(1) General rule. Any charitable contribution (as defined in Section 24359) actually paid during the income year is allowable as a deduction in computing net income, regardless of the method of accounting employed or when pledged. In addition, contributions by a bank or corporation may under certain circumstances be deductible even though not paid during the income year (See Reg. 24357-2(b)). The deduction is subject to the limitations of Section 24358 (See Reg. 24357-2) and is subject to verification by the Franchise Tax Board.

(2) Information required in support of deductions for income years beginning before January 1, 1964. In connection with claims for deductions for charitable contributions paid in income years beginning before January 1, 1964, taxpayers shall state in their tax returns the name and address of each organization to which a contribution was made and the amount and approximate date of the actual payment of each contribution. Any deduction for a charitable contribution must be substantiated, when required by the Franchise Tax Board, by a statement from the organization to which the contribution was made indicating whether the organization is a domestic organization, the name and address of the contributor, the amount of the contribution, and the date of its actual payment, and by such other information as the Franchise Tax Board may deem necessary.

(3) Information required in support of deductions for income years beginning after December 31, 1963.

(A) In general. In connection with claims for deductions for charitable contributions paid in income years beginning after December 31, 1963, taxpayers shall state in their tax returns the name of each organization to which a contribution was made and the amount and date of the actual payment of each contribution. If a contribution is made in property other than money, the taxpayer shall state the kind of property contributed (for example, used clothing, paintings, securities) and shall state the method utilized in determining the fair market value of the property at the time the contribution was made. In any case in which a taxpayer makes numerous cash contributions to an organization during the income year, the taxpayer may state the total cash payments made to such organization during the income year in lieu of listing each cash contribution and the date of payment.

(B) Statement from donee organization. Any deduction for a charitable contribution must be substantiated, when required by the Franchise Tax Board, by a statement from the organization to which the contribution was made indicating whether the organization is a domestic organization, the name and address of the contributor, the amount of the contribution, the date of actual receipt of the contribution, and such other information as the Franchise Tax Board may deem necessary. If the contribution includes an item of property (other than money or securities which are regularly traded on a stock exchange or in an over-the-counter market) which the donee deems to have a fair market value in excess of $200 at the time of receipt, such statement shall also indicate for each such item its location if retained by the organization, the amount received by the organization on any sale of the property and the date of sale, or in case of other disposition of the property, the method of disposition.

(b) Time of Making Contribution. Ordinarily a contribution is made at the time delivery is effected. In the case of a check, the unconditional delivery (or mailing) of a check which subsequently clears in due course will constitute an effective contribution on the date of delivery (or mailing). If a taxpayer unconditionally delivers (or mails) a properly endorsed stock certificate to a charitable donee or the donee's agent, the gift is completed on the date of delivery (or mailing, provided that such certificate is received in the ordinary course of the mails). If the donor delivers the certificate to its bank or broker as the donor's agent, or to the issuing corporation or its agent, for transfer into the name of the donee, the gift is completed on the date the stock is transferred on the books of the corporation.

(c) Contribution in Property.

(1) General Rules. If a contribution is made in property other than money, the amount of the deduction is determined by the fair market value of the property at the time of the contribution. The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts. If the contribution is made in property of a type which the taxpayer sells in the course of its business, the fair market value is the price which the taxpayer would have received if it had sold the contributed property in the lowest usual market in which it customarily sells, at the time and place of the contribution (and in the case of a contribution of goods in quantity, in the quantity contributed). The usual market of a manufacturer or other producer consists of the wholesalers or other distributors to or through whom it customarily sells, unless it sells only at retail in which event it is its retail customers. If a donor makes a charitable contribution of, for example, stock in trade at a time when it could not reasonably have been expected to realize its usual selling price, the value of the gift is not the usual selling price but is the amount for which the quantity of merchandise contributed would have been sold by the donor at the time of the contribution. Costs and expenses incurred in the year of contribution in producing or acquiring the contributed property are not deductible and are not a part of the cost of goods sold. Similarly, to the extent that costs and expenses incurred in a prior income year in producing or acquiring the contributed property are reflected in the cost of goods sold in the year of contribution, cost of goods sold must be reduced by such costs and expenses. Transfers of property to an organization described in Section 24359 which bear a direct relationship to the taxpayer's business and which are made with a reasonable expectation of financial return commensurate with the amount of the transfer may constitute allowable deductions as trade or business expenses rather than as charitable contributions. See Section 24343.

(d) For disallowance of certain charitable deductions otherwise allowable under Sections 24357 and 24359 (relating to organizations engaged in prohibited transactions).

(1) For denial of deduction for charitable contributions as trade or business expenses and rules with respect to treatment of payments to organizations other than those described in Section 24359, see Section 24343.

(2) No deduction shall be allowed under Section 24357 for amounts paid to an organization--

(A) A substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation, or

(B) Which participates in or intervenes in any political campaign on behalf of any candidate for public office.

For purposes of determining whether an organization is attempting to influence legislation or is engaging in political activities, see Section 23701 d. Moreover, no deduction shall be allowed under Section 24357 for expenditures for lobbying purposes, promotion or defeat of legislation, etc.

Notes

Cal. Code Regs. Tit. 18, §§ 24357-1

1. New section filed 5-3-61; effective thirtieth day thereafter (Register 61, No. 9).
2. Amendment filed 12-22-69; effective thirtieth day thereafter (Register 69, No. 52).
3. Renumbering and amendment of Section 24357-24359(a) to Section 24357-1 filed 9-3-82; effective thirtieth day thereafter (Register 82, No. 37).

Note: Authority cited: Section 26422, Revenue and Taxation Code. Reference: Section 24357, Revenue and Taxation Code.

1. New section filed 5-3-61; effective thirtieth day thereafter (Register 61, No. 9).
2. Amendment filed 12-22-69; effective thirtieth day thereafter (Register 69, No. 52).
3. Renumbering and amendment of Section 24357-24359(a) to Section 24357-1 filed 9-3-82; effective thirtieth day thereafter (Register 82, No. 37).