Author: Ron Emanuel, CPA, Business Assurance & Advisory Services Supervisor | Not-for-Profit Industry Team
The Internal Revenue Code has numerous provisions that provide incentives for charitable giving by individuals and businesses. The America Gives More Act, passed by the U.S. House of Representatives on July 17, 2014 as H.R 4719, seeks to enhance and make certain temporary provisions permanent. The goal of the Act is to encourage Americans to increase charitable contributions, allowing the not-for-profit community, including foundations, charities, schools, etc. to expand their reach while carrying out their mission.
The America Gives More Act is comprised of a package of several bills, which propose the following changes to the Internal Revenue Code:
- Extension and expansion of charitable deduction for contributions of food inventory
- Temporary enhanced deduction which expired December 31, 2013 made permanent
- Increase deduction from 10% to 15%
- Rule allowing certain tax-free distributions from individual retirement accounts for charitable purposes made permanent
- Special rule for qualified conservation contributions modified and made permanent
- Extension of time for making charitable contributions
- Expands the deadline for claiming charitable contributions from December 31 to April 15 for individuals.
- Modification of the tax rate for the excise tax on investment income of private foundations
- Reduces the tax rate from 2% to 1%
The provision of the Act relating to charitable deductions for contributions of food and inventory could have a significant impact on food banks across America. Since the deduction for charitable contributions of food inventory for all taxpayers was expanded in 2006, the Food Donation Connection estimated donations have increased 127 percent. According to Feeding America, “3.6 billion pounds of food is distributed by food bank members each year. This legislation would significantly increase food bank access to the 70 billion pounds of nutritious food wasted each year…”
The Act will continue to allow seniors to make charitable contributions from their Individual Retirement Accounts without a tax penalty. According to the Independent Senior, this provision has “prompted more than $140 million in gifts to the work of nonprofits since enactment, assisting social service providers, religious organizations, cultural institutions and schools, and other nonprofits.”
Many taxpayers do not know what their tax liability for the year will be until their tax return is complete. By extending the deadline for claiming charitable contributions to April 15, the hope is taxpayers will increase charitable gifts as they become certain of their tax liability.
The U.S. House of Representatives passed the bill by a vote of 277 to 130. On July 23,2014, the bill was read the second time and placed on the Senate Legislative Calendar under “General Orders”, calendar no. 477.
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