Good Tax News for Charitable Donors

Nonprofit organizations and charitable donors can celebrate the first step in restoring the tax deductibility of certain gifts. On July 17th, the U.S. House of Representatives passed the ‘America Gives More Act of 2014.’ The five provisions in the bill, H.R. 4719, are:

  1. Increase the deductible limit of food inventory donations from 10% to 15% of taxable income and guarantee the market value deduction regardless of demand for the food. Food banks will greatly benefit, as they rely heavily on donations from businesses.
  2. Allow individuals who are at least age 70 ½ to make donations from IRAs without incurring a withdrawal penalty. Seniors could donate up to $100,000 of an IRA distribution to charities.
  3. Allow deductions for contributions for conservation land easement. The deductibility of land for charitable use ultimately benefits communities.
  4. Allow gifts made until the individual tax filing deadline, typically April 15, to be deducted in the prior year tax return. An individual may be more likely to donate funds once he or she understands the full tax picture for the year.
  5. Reduce an excise tax on investments from private foundations from 2% to 1%. Lower taxes can translate to higher contribution amounts to charities and exempt organizations.

The first four provisions would take effect immediately and be retroactive to their December 31, 2013 expiration date. The fifth provision, for private foundations, would take effect in 2015.

The bill passed the House, mostly along party lines, 277 to 130, although many provisions have bi-partisan support. Those in favor view the deductions as a means of spurring investment in local communities through the nonprofit sector. Those opposed, including the Obama Administration, want the loss of tax revenue to the federal government to have budget offsets to prevent further deficits. The estimated impact is adding $16.2 billion to the budget deficit over the next decade.

The America Gives More Act of 2014 must pass the Senate and then be signed into law by President Obama. An organized group of 850 charities and foundations, including Feeding America, Independent Sector, Association of Fundraising Professionals, Land Trust Alliance and YMCA of the USA, still have work ahead to ensure passage of the bill. Their message to Congress: “Enactment of this legislation will have a significant and positive impact on millions of individuals and families in every congressional district who benefit from the programs and services provided by charitable organizations.”

It’s a good time to let your senators know how you feel about the America Gives More Act of 2014.