Deadline Looming for Higher Deduction Limits for Hurricane Relief – Churches and Charities Engaged in Hurricane Relief May Wish to Remind Donors of the Special Higher Contribution Deduction Limits Which Expire December 31

Churches and charities engaged in providing relief for victims of Hurricanes Harvey, Irma, and/or Maria may wish to notify their donors now of special higher contribution deduction limits passed by Congress and signed by President Trump – the special provision in the law expires December 31.

Recent Legislation Provides Additional Tax Relief to Hurricane Victims

On September 29, President Trump signed into law H.R. 3823, the “Disaster Tax Relief and Airport and Airway Extension Act of 2017” (“the Act”), providing additional federal tax relief to victims of Hurricanes Harvey, Irma, and Maria.  The relief provided by this legislation is in addition to relief which was previously announced by the IRS (see our related Special Alert here).  A key provision of this legislation includes a temporary raising of the charitable contribution deduction limits for qualified hurricane-related contributions – described further below.

Temporary Raising of Charitable Contribution Deduction Limits for Qualified Contributions

Generally, charitable contribution deductions by individuals and businesses are subject to certain percentage limitations based on the individual’s adjusted gross income or the business’ taxable income, depending on the type of property contributed and the type of organization receiving the donation.  For example, cash contributions by individuals to public charities are generally deductible up to 50% of adjusted gross income and contributions by corporations are generally deductible up to 10% of the company’s pretax income calculated before taking the deduction.

Under the Act, these percentage limitations are temporarily raised for qualified contributions made to organizations of the types described below.  For individuals, total charitable contributions can be deducted up to the taxpayer’s adjusted gross income.  (Non-hurricane-related contributions continue to be subject to the regular limits.)  For corporations, total charitable contributions can be deducted up to the company’s taxable income calculated before taking the charitable deduction. (Non-hurricane-related contributions continue to be subject to the regular limits.)

To qualify for this special treatment, contributions must be paid in cash (including checks and contributions made by credit card) during the period from August 23 through December 31, 2017, to a charitable organization (other than a supporting organization or a donor advised fund) for relief efforts in the Hurricane Harvey, Irma, or Maria disaster areas. Taxpayers also must obtain a contemporaneous written acknowledgment from the recipient organization indicating that the contribution was used (or will be used) for such hurricane relief efforts.  Taxpayers must make an election on their applicable tax return to apply these relief provisions.

Let Us Know if We Can Help

If you are a BMWL client and would like assistance addressing the information described in this Alert, we would be glad to help! It is our pleasure and privilege to serve you.

This publication is for general informational and educational purposes only, and does not constitute legal, accounting, tax, financial, or other professional advice. It is not a substitute for professional advice. For permission to reprint, please contact us.  © 2023 Batts Morrison Wales & Lee, P.A.  All rights reserved.
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