The Mailbox Rule
We received a $10,000 gift check in the mail today. It was dated December 30, 2012 (which was a Sunday, by the way) and the postmark date was January 2, 2013. The donor enclosed a nice note saying, among other things, that he was glad to make his "2012 gift" and hoped we could use it in our annual fund. He is a consistent donor. I know that my thank-you letter and receipt letter - the one about not providing any goods or services in return for the gift - should include the date of the gift, but I know he thinks - and wants the IRS to think that he completed the gift in 2012. Actually, I think he thinks he did exactly that. But I'm pretty sure the "mailbox rule" says the envelope has to be postmarked in the year of the deduction, which is by December 31. My boss says not to worry, that we can throw away the envelope and simply pretend that the postmark was in time, and no one will be the wiser. What should I do?
IRS Publication 526 says, "A check that you mail to a charity is considered delivered on the date you mail it." Treasury Regulation 1.170A-1(b) says, " . . . a contribution is made at the time delivery is effected. The . . . mailing of a check . . . will constitute an effective contribution on the date of . . . mailing." This is the mailbox rule, and most people think it means the envelope has to be postmarked by that date. But, when you read the Regulation, you don't see the word "postmark" anywhere. You see only the words "date of mailing." The donor could make the argument that he did mail the check in 2012. After all, when you drop something in the postbox you think it's gone.
But, of course, the donor could have dropped the check in the postbox on January 2, which would make it uncontestably a 2013 gift. If he took this to court, who would believe him and credibly speak on his behalf? Some random stranger walking by at the time he dropped off the envelope? With the one fact that can be proven, the IRS would almost certainly contend that this was a 2013 gift, and not eligible for deduction in 2012.
But you could do as your boss suggests: just throw the envelope away and consider it a day by thanking the donor for his 2012 gift - erasing the IRS's one fact that can be proven. But that would be wrong, and neither of you believes otherwise. The right thing to do would be to acknowledge in your correspondence to the donor that the envelope bearing the gift as having been postmarked on January 2. I'd also call or visit to explain the issue. I'd tell him about the law and the impossibly small amount of wiggle room it leaves for those who contend they dropped their gift in the mailbox the day before the new year begins.
Your own legal council and maybe even the board - should have a stated policy on this issue, both on when such a gift is deemed to have been made and how you acknowledge such gifts. Perhaps the policy should call for stating the postmark date of every gift sent by mail, no matter what time of year. Think of how much stronger your conversation with the donor would be if you could show a policy on the matter. (The idea of policies must be taken seriously. Their purpose, I infer from far too many of my consultations, seems to be more about providing a quick solution for a problem of the moment rather than a thought-out guide that reflects professionalism and ethics.)
You might want to make the mailbox rule part of your communications with donors. Most of the fall appeal letters I've seen say plenty about end-of-year giving but nothing on this particular point. And, given that this problem comes up every year for many organizations, I don't know why.
And, if you're inclined to throw away this advice, along with the donor's envelope, consider this possibility: the donor is an IRS agent who wants to see how you respond.