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The Bush administration is dropping its proposal requiring churches to report to the Internal Revenue Service the names of donors who give more than $500 a year, the Treasury Department said Friday.

"We are looking at alternatives to the reporting requirement (for charities) to improve compliance" with tax laws, said Desiree Tucker-Sorini, the assistant treasury secretary for public affairs. "If we move forward with something like the requirement, churches would be excluded."Fred T. Goldberg Jr., the assistant secretary of the treasury for tax policy, drafted a letter making clear the administration will not push the proposal, said Oliver Thomas, general counsel for the Baptist Joint Committee on Public Affairs.

The proposal has drawn fire from many church groups, especially some conservative churches whose members are the subject of a tug-of-war between Bush and Republican challenger Patrick J. Buchanan.

Thomas led a group of church leaders who met with Goldberg on Thursday to protest the proposal, which Bush included in his 1993 budget with the intent of raising $400 million over five years. At that meeting, Thomas said, Goldberg "agreed with us that the government had no business forcing churches to act as agents of the IRS."

On Friday, Thomas said, Goldberg read to him the letter he had drafted. "It was a good, strong letter that makes clear that an exception to the reporting requirement for non-profits will have a carve-out for churches, synagogues and other religious institutions," Thomas said.

However, Goldberg was awaiting White House approval before sending the letter, Thomas said.

The extra caution apparently was necessitated by an uncertainty about just how the president would decide the issue. Even as Goldberg was assuring church leaders that the proposal was dead, Samuel Skinner, the White House staff chief, was telling reporters it was very much alive.

"No decisions have been made," Skinner said. "There are arguments on both sides."