The recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act provides a bit of good news for all of us. The CARES Act outlines changes in charitable giving rules to provide incentives to donors to help tax-exempt organizations through this difficult time. These changes are summarized as follows:
- For the 2020 taxable year, an individual who does not itemize their deductions can deduct a contribution of up to $300 made to charitable organizations. This gift has to be made in cash (including cash, checks and credit cards), can’t be made to a supporting organization (as defined in IRS Code Section 509(a)(3)) and can’t be for the establishment of a new, or maintenance of an existing, donor-advised fund.
- For the 2020 taxable year, individuals who are making large donations that have previously been limited due to contribution base restrictions (i.e. 60 percent cash) will no longer be subject to this restriction. The charitable contribution cannot be greater than their adjusted gross income (AGI). Any excess will be carried forward. Qualified contributions mean any charitable contribution (as defined in section 170(c) of the Internal Revenue Code of 1986) if such contribution is paid in cash during the calendar year 2020 to an organization described in section 170(b)(1)(A). This doesn’t include contributions by a donor to a supporting organization, or for the establishment of a new, or maintenance of an existing, donor-advised fund. The taxpayer must elect the application of this section (no limitation applied).
- For the 2020 taxable year, any qualified corporate contribution is allowed as a deduction only to the extent that the aggregate of such contributions does not exceed the excess of 25 percent of the taxpayer’s taxable income. Any excess will be carried forward. Qualified contributions mean any charitable contribution (as defined in section 170(c) of the Internal Revenue Code of 1986) if such contribution is paid in cash during the calendar year 2020 to an organization described in section 170(b)(1)(A). This doesn’t include contributions by a donor to a supporting organization, or for the establishment of a new, or maintenance of an existing, donor-advised fund. The taxpayer must elect the application of this section (25 percent limit). The deduction for certain donations of food inventory also increased from 15 to 25 percent of taxable income.
Tax-exempt organizations should consider these changes in their development efforts and look for opportunities to attract new and enhanced gifts as a result of the loosening of the restrictions on charitable giving by both individuals and corporations. Reach out to our Tax-Exempt experts today with questions.
The information and advice we are providing for this matter relates to COVID-19 legislative relief measures. Because legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that could modify some of the advice and information provided to you, after the conclusion of our engagement. We therefore make no warranties, expressed or implied, on the services provided hereunder.