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Tax Incentives Extended for Charitable Contributions

On February 4, 2015 the House Ways and Means Committee approved five charitable bills, four of which could make various expired tax incentives permanent. Below is a summary of the charitable aspects of the extenders:

  • IRA Charitable Rollover – H.R. 114-637, this bill would reinstate and make permanent the Charitable IRA Rollover, allowing certain tax-free distributions from IRAs to charities. In summary, an IRA owner over age 70 ½ would be able to transfer up to $100,000 per year from their IRA to a charity without reporting taxable income.
  • Land Conservation – H.R. 114-641, this bill would reinstate and make permanent the increased percentage limits and extended carry-forward period for conservation easements. This would entail gifts of real property for conservation purposes, which could potentially qualify for a deduction of up to 50% of adjusted gross income. The deduction could also be carried forward for up to 15 years.
  • Food Inventory Contributions – H.R. 114-644, this bill would reinstate and make permanent the enhanced deduction for contributions of food inventory. In other words, individuals and organizations could potentially reduce their taxable income by donating qualifying food inventory to certain charitable organizations. Restaurants and similar businesses that have left over food each day are able to donate those items, if they meet certain qualifying factors, for a tax incentive.
  • S Corporation Charitable Contributions – H.R. 114-630, this bill would reinstate and make permanent the provisions regarding basis adjustments to stock of S corporations that make charitable contributions of property. In summary, an S corporation that owns assets with an appreciated value can transfer those assets to a charity and take advantage of favorable basis rules for their shareholders.
  • Private Foundation Excise Tax – H.R. 114-640, this bill would simplify the two-tier excise tax on investment income of private foundations, by implementing a flat 1% rate.

Whether or not the bills will be vetoed, is yet to be determined. If they should pass, the impact could be fairly significant on individual donors, as well as the organizations receiving the contributions. Stay tuned!

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