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Not For Profit/Exempt Organizations Blog

The New Tax Relief Law – What is in it for Charities?

Posted in Charitable Giving

On Friday, December 17, 2010, the President signed into law the unwieldy titled, “Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010”.   In order to help explain the provisions in the new law, the Joint Committee on Taxation issued a Technical Explanation.  The Tax Relief Act has many provisions which affect charities, such as changes to the estate tax, income tax rates, capital gains rates, a payroll tax cut, and other changes to the tax law. 

Specifically, the new law contains certain provisions that have a direct favorable impact on charities:

1. IRA Charity Contribution. The law allowing tax free distribution from an IRA (up to $100,000 for those over 70½), if the distribution is contributed to charity, is extended through 2011. If done in January, 2011, the taxpayer can elect to have the distribution deemed made on December 31, 2010. Code § 408(d)(8)(F)

2. Contribution of Conservation Easement. The more favorable deduction rules for contributions to charities of capital gain real property made for conservation purposes are extended until 2012. Code § 170 (b)(1)(E)(vi)

3. Contribution of Book Inventories to Public Schools. The enhanced deduction for contributions by corporations of book inventories to public schools is extended through 2011. Code § 170(e)(3)(D)(iv)

4. Contribution of Food Inventory. The enhanced charitable deduction rules for contribution of food inventory are extended until 2012. Code § 170(e)(3)(C) (iv)

5. Contribution of Computers. The enhanced charitable deduction rules for corporate contributions of computer inventory are extended until 2012. Code § 170(e)(6)(G)

6.  UBIT from Certain payments from Controlled Subsidiaries. The special favorable grandfather rules for payments such as rent, royalties or interest income by a controlled organization to its controlling parent under agreements in effect on August 17, 2006 (pursuant to the 2006 PPA) are extended until 2012.  Code § 512(b)(13)(E)(iv)

7. Contributions of property by S corporations. The new law extends until 2012 the special basis adjustment rule. This limits the reduction in a shareholder’s basis in the S corporation stock by the pro rata share of the contributed property’s adjusted basis rather than its fair market value. Code § 1367(a)

(Please note, in the links provided to the relevant provisions of the Code, the dates have not yet  been updated to reflect the extensions.)