The Internal Revenue Service has dropped a proposed regulation giving tax-exempt organizations the option of providing the Social Security Numbers of their donors.

The rule, which the IRS and the Treasury Department proposed last September, called on charities to ask for additional personal donor information, including Social Security numbers for any donation of $250 or more. Charities expressed concern about the proposal, and the National Council of Nonprofits called on many of them to submit comments to the IRS objecting to it (see Charities Concerned about IRS Proposal to Provide Social Security Numbers of Donors). Nearly 38,000 comments were received as of Thursday, mostly objecting to the proposal.

Sen. Pat Roberts, R-Kan., introduced legislation last month to block the proposed regulation (see Senate Bill Would Block IRS from Collecting Social Security Numbers of Charity Donors). Roberts expressed satisfaction that the IRS has dropped it.

“I am pleased the IRS has listened to reason and has scrapped this plan,” he said in a statement. “The rule would have had a chilling effect on charitable giving and would have added a costly burden to charitable organizations.”

The IRS withdrew the proposal in a document that was published in the Federal Register and was posted online on Roberts’ Senate website.

“The proposed framework for donee reporting was intended to minimize the reporting burden on donee organizations by making it voluntary, and to protect donor privacy by not using the Form 990 series,” said the IRS and the Treasury. “In the preamble to the proposed regulations, the Treasury Department and the IRS expressed concern about the potential risk for identity theft with a donee reporting system based on a specific-use information return because donee organizations would be collecting donors’ taxpayer identification numbers and maintaining those numbers for some period of time. The Treasury Department and the IRS requested comments, including specifically on whether additional guidance was necessary regarding the procedures a donee organization should use to mitigate the risk of identity theft of donor information. The Treasury Department and the IRS received a substantial number of public comments in response to the notice of proposed rulemaking. Many of these public comments questioned the need for donee reporting, and many comments expressed significant concerns about donee organizations collecting and maintaining taxpayer identification numbers for purposes of the specific-use information return. In response to those comments, the Treasury Department and the IRS have decided against implementing the statutory exception to the CWA requirement, and therefore that exception remains unavailable unless and until final regulations are issued prescribing the method for donee reporting. Accordingly, the notice of proposed rulemaking is being withdrawn.”

Tim Delaney, president and CEO of the National Council of Nonprofits, had expressed concern about the proposal opening the door for scam artists who would get access to the donees’ personal information.

“Nonprofits have neither the financial resources nor sufficient staffing to combat hackers who will see an easy source for Social Security information,” he wrote. “This also creates a liability nightmare for innocent nonprofits…To be asked to share their address, their credit card number and their Social Security number all in the same place would be enough to scare even the most committed donor to decline to give.”

Roberts echoed those concerns. “Given that the agency has not yet adequately addressed the issues surrounding breaches of existing taxpayer information, a point the IRS readily acknowledges, and states that the existing system of substantiating charitable contributions works well, there was no compelling tax administration or enforcement reason to move forward with this proposal,” he said.

A conservative group, FreedomWorks Foundation, helped spur the thousands of comments criticizing the proposed rules. “Any day you score a huge victory over the IRS is a great day,” said FreedomWorks Foundation CEO Adam Brandon in a statement. “This rule would have had a huge impact on charitable giving, and we’re glad that the IRS has withdrawn it. We hope the backlash over this proposed rule sends a message to bureaucrats that we’ll continue to challenge the disturbing advance of the regulatory state.”