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COVID-19 Update – How the CARES Act Affects Tax Benefits Related to Charitable Giving

On Friday, March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act” or “Act”). The Act was one of several Congressional responses to the COVID-19 emergency and it covered many areas, including the tax benefits related to charitable giving.

Generally, there are limitations on deductions for charitable contributions for both individual and corporate taxpayers based on the taxpayer’s adjusted gross income (“AGI”), in the case of individuals, and taxable income, in the case of corporations. The CARES Act increases the limit on individual taxpayers’ deductions for cash contributions to public charities from 60% of the individual’s AGI to 100% of the individual’s AGI. This increase effectively suspends the limit for individuals in 2020.  For corporate taxpayers, the CARES Act increased the income limits on the deduction for charitable cash contributions from 10% of the corporation’s taxable income to 25% of the corporation’s

New Regulations for Charitable Contributions in Exchange for State or Local Tax Credits

June 19, 2019

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The IRS has issued final regulations that address the question of whether a state or local tax credit should be treated as a return benefit, or quid pro quo, when received in return for making a charitable contribution. Under Reg § 1.170A-1(h)(3), the amount of a taxpayer’s charitable contribution deduction under section 170(a) is reduced by the amount of any state or local tax credit that the taxpayer receives or expects to receive in consideration for the taxpayer’s payment or transfer. An exception applies for taxpayers when the state and local tax credits received or expected to be received is 15 percent or less of the taxpayer’s payment or fair market value of the property transferred.

The new regulation also addresses whether state or local tax deductions received in return for making a charitable contribution should be treated as a return benefit. Unlike tax credits, however, state or local tax

Charitable Income Tax Deductions: The Rockefeller Edition

March 29, 2017

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Billionaire David Rockefeller passed away this week at the age of 101.  According to Forbes magazine, during his lifetime, the well-known philanthropist gave away nearly $2 billion.

In light of this newsworthy charitable donation, we thought now would be a good time to remind everyone of some of the basic income tax deductions available for gifts to charities.

Section 170 of the Internal Revenue Code (the “Code”) governs income tax deductions for charitable contributions. In the case of an individual making a cash gift to a Section 501(c)(3) organization classified as a “public charity” (such as churches, schools, hospitals, and governmental units), the gift is deductible for federal income tax purposes so long as the aggregate gifts do not exceed fifty percent (50%) of the taxpayer’s adjusted gross income (“AGI”) for the taxable year.

In the case of a contribution of capital gain property to a public charity, a taxpayer can only deduct

Recent SEC Settlement Demonstrates FCPA Risks from Charitable Contributions

September 28, 2016

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For just the second time in the Foreign Corrupt Practices Act’s (FCPA) history, a company was charged with FCPA offenses based solely on a charitable contribution that was intended to buy the influence of a foreign official.

On September 20, 2016, Utah-based Nu Skin Enterprises, Inc. paid almost $766,000 to settle SEC charges that it violated the internal controls and books-and-records provisions of the FCPA when Nu Skin’s China subsidiary (the “Subsidiary”) made a $154,000 payment to a charity. The SEC alleged that the charitable donation was to improperly influence a high-ranking Chinese Communist party official to prevent a provincial agency investigation of the Subsidiary.

Click here to read the Alert in full.

Review of Income Tax Deduction Rules for Charitable Gifts

August 22, 2016

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People.com is reporting that Amber Heard, who received a $7 million settlement in her divorce from Johnny Depp this week, is donating the entire $7 million settlement to charities with “a particular focus to stop violence against women” as well as the Children’s Hospital of Los Angeles.

In light of this newsworthy charitable donation, we thought now would be a good time to remind everyone of some of the basic income tax deductions available for gifts to charities.

Section 170 of the Internal Revenue Code (the “Code”) governs income tax deductions for charitable contributions. In the case of an individual making a cash gift to a Section 501(c)(3) organization classified as a “public charity” (such as churches, schools, hospitals, and governmental units), the gift is deductible for federal income tax purposes so long as the aggregate gifts do not exceed fifty percent (50%) of the taxpayer’s adjusted gross income (“AGI”) for the

Review of Income Tax Deduction Rules for Charitable Gifts

June 10, 2015

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According to area newspaper the St. Louis Post Dispatch, one of St. Louis’ wealthiest families, that of Enterprise Holdings founder Jack Taylor, is making some very large charitable donations this week–a total of $92.5 million to 13 cultural institutions and charities, most local to St. Louis.

In light of this, we thought now would be a good time to remind everyone of some of the basic income tax deductions available for gifts to charities.

Section 170 of the Internal Revenue Code (the “Code”) governs income tax deductions for charitable contributions. In the case of an individual making a cash gift to a Section 501(c)(3) organization classified as a “public charity” (such as churches, schools, hospitals, and governmental units), the gift is deductible for federal income tax purposes so long as the aggregate gifts do not exceed fifty percent (50%) of the taxpayer’s adjusted gross income (“AGI”) for the taxable year.

In the case

Don’t Get Stuck With a Non-Deductible Conservation Easement

October 6, 2014

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The increasingly popular conservation easement charitable deduction allows a landowner to deduct a portion of the value of a piece of land by limiting the land’s use.  In a typical scenario, a landowner records a conservation easement on the land and then donates the conservation easement to a conservation organization.  The landowner receives an appraisal of the value of (i) the developable land and (ii) the land once the conservation easement has been recorded.  The landowner then deducts the difference as a charitable contribution.  In such a scenario, Section 170 of the tax code allows a deduction as long as the easement is perpetual, made to a qualified organization, and for a valid conservation purpose.

The typical scenario is changing, however, as more and more landowners are holding their property in trust.  When the land is held in trust, it is more

A 200% Tax on Self-Dealing? And People Think the Estate Tax is High!

May 12, 2014

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With research and drafting assistance provided by our extern from Washington University School of Law, Rachael Lynch.

Now that we’ve scared you with the potentially high taxes for self-dealing in private foundations, what is self dealing?

Self dealing includes any of the following transactions:

1. sale or exchange, or leasing, of property between a private foundation and a disqualified person (click here for a definition of a disqualified person); 2. lending of money or other extension of credit between a private foundation and a disqualified person; 3. furnishing of goods, services, or facilities between a private foundation and a disqualified person; 4. payment of compensation by a foundation to a disqualified person; 5. transfer of income or assets of a private foundation to a disqualified person; and 6. agreement by a private foundation to make any payment to a government official (other than an agreement to hire the official

Charitable Gifts to Supporting Organizations

February 28, 2014

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As we discussed in our prior post, Review of Income Tax Deduction Rules for Charitable Gifts, an income tax deduction up to fifty percent (50%) of the taxpayer’s adjusted gross income is allowed for gifts to public charities of non-capital gain property and up to thirty percent (30%) for gifts of capital gain property.  These same contribution limits apply to gifts to supporting organizations.

What is a supporting organization?  Supporting organizations are described in Section 509(a)(3) of the Internal Revenue Code as charities that carry out their exempt purposes by supporting other public charities.  A supporting organization generally warrants public charity status because it has a relationship with its supported organization sufficient to ensure that the supported organization is effectively supervising or paying particular attention to the operations of the supporting organization.

Review of Income Tax Deduction Rules for Charitable Gifts

January 10, 2014

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zuckerbergThe Chronicle of Philanthropy recently released its list of the Top 10 biggest charitable gifts of 2013 (which is really the Top 15, since 5 gifts tied at 10th place), and do they make me wish I qualified as a charity!

Topping the list at Number 1 were Mark Zuckerberg of Facebook, and his wife, Priscilla Chan, who gifted $992.2 million of Facebook shares to the Silicon Valley Community Foundation. Number 2 on the list were Nike Chairman Phil Knight and his wife, Penelope Knight, who made a $500 million pledge to the Oregon Health and Science University Foundation.

The list continues:

3. Michael Bloomberg: $350 million pledge to Johns Hopkins University 4. Charles B. Johnson: $250 million pledge to Yale University 5. Stephen Ross: $200 million pledge to University of Michigan 6. Muriel Block: $160 million bequest to Yeshiva University 7.