Have carried-forward charitable contributions?
It so happened that at the point I got my repayment I had a larger amount of carried-forward contributions on my tax books than the amount of the repayment. To put it another way, I had donated more than I was able to write off of my U.S. taxes, and the IRS rules allow you to carry forward such excess donations for a period of five years from the year in which the deduction was made. My tax person, who is very competent and whom I have been going to for years, said that the rules in this situation aren't 100% clear, but the IRS is very likely to just be reasonable about it and accept a simple reduction of my carried-forward amount. (Per my tax person the IRS doesn't track the carry-forward, but should the taxpayer get audited, he better have good records!)
To put this in context, say I had donated $50,000 over the past five years but because of income-based limits on deductibility (like you can only deduct up to 50% of the amount of your income), I was only able to write off $20,000. I now have $30,000 that I can deduct from future years taxable income. Say that of the $50,000 I donated, I used $40,000 in services and have $10,000 left on account. After whatever it takes to complete the repayment I get the $10,000 back from the CoS. So in my records I reduce the $30,000 that I was carrying forward by $10,000 (the amount of the repayment), and I am now left with $20,000 that I can still carry forward. Let's say that this year I have enough income so that I can write off the whole $20,000, and carry forward nothing to next year.
This is all legit and sensible. The IRS is getting its due, since in the end I will have donated $50,000 minus the $10,000 I got back, or $40,000. I have written off $40,000 in donations: $20,000 over the past five years as described above, and $20,000 this year. It's as if I had never donated the $10,000 I got back. I report nothing about the $10,000 check to the IRS, I just keep track of everything should I get audited.
BTW, I never received any sort of tax documents from CoS about the repayment amount. But I wouldn't have put it past the CoS to drop a note to the IRS about the repayment so they could keep a close eye on my tax returns for a year or two, or maybe bring me in to chat. I keep my taxes squeaky-clean, but the thought of being audited still rattles me. Paranoid, perhaps?