The justification for the way that IRA custodians are asked to report qualified charitable distributions (QCDs) under IRC §408(d) is explained by the IRS in Information Letter 2021-0007[1] addressed to Rep. Chip Roy of Texas.

The letter begins by explaining generally how the QCD rules work:

Under Section 408(d)(8) of the Internal Revenue Code (Code), a taxpayer can exclude from gross income up to $100,000 of QCDs each year. Section 408(d)(8)(B) of the Code defines a QCD as a distribution from an IRA, whose owner is at least age 70½, made directly to one or more specified charitable organizations, provided the distribution would be includible in the IRA owner's gross income if it were made to the owner instead. Any deductions a taxpayer took for IRA contributions made during years they were 70½ or older, also reduce the amount available for QCDs.[2]

The letter to the Representative goes on to discuss the reporting on behalf of the custodian, as well as why the custodian will not identify the distribution as related to a QCD:

Under the current rules, Form 1099-R doesn’t have special reporting for QCDs. This is because an IRA trustee does not have first-hand knowledge to decide if a particular distribution meets all the conditions to be a QCD. For example, a trustee would not know:

If the taxpayer has already reached the $100,000 limit with QCDs from other IRAs,
If the distribution consisted of nontaxable money (an IRA trustee does not know if an IRA owner deducted IRA contributions), or
If the charitable organization gave the taxpayer goods or services because of the contribution (which disqualifies a distribution from being a QCD).

In many cases, the trustee might not know if the recipient charitable organization is an eligible organization under Section 408(d)(8) of the Code.[3]

The letter then explains how the taxpayer reports the distribution, taking into account these issues the custodian would not be aware of but which the taxpayer does know:

When a taxpayer files a paper Form 1040, they can say if part or all of an IRA distribution is a QCD by writing “QCD” next to line 4b. For electronically filed returns, a drop-down box gives the taxpayer a choice of “QCD,” “HFD” — to indicate a transfer to a health savings account — and “ROLLOVER.”[4]

[1] Information Letter 2021-0007, April 26, 2021 (released June 25, 2021), https://www.irs.gov/pub/irs-wd/21-0007.pdf (retrieved July 9, 2021)

[2] Information Letter 2021-0007, April 26, 2021

[3] Information Letter 2021-0007, April 26, 2021

[4] Information Letter 2021-0007, April 26, 2021