America Gives More Act Targets Nonprofit Deductions

July 16, 2014       Patrick Sullivan      

The U.S. House of Representatives is likely to debate this week a legislative package concerning IRA distributions to charity, food donations, deduction filing, conservation easement and foundation excise taxes. H.R. 4719, “America Gives More Act of 2014,” was reported out of the House Committee on Ways and Means.

The act now encompasses five separate measures. The first, formerly known as the “Fighting Hunger Incentive Act of 2014,” would increase the allowable limit of food donations from 10 percent to 15 percent of the donor’s aggregate income. It would also guarantee fair market value of the donation even if there’s little demand for the item. The special food inventory deduction, previously temporary, would be made permanent and applied retroactively to December 31, 2013.

The second measure would make permanent and retroactive to December 31, 2013 the ability of IRA holders age 70.5 or older to make gifts to charity from their IRAs without incurring a tax on the withdrawal. According to a letter with more than 850 signatories sent to the House by the Washington, D.C.-based Independent Sector, “The provision has prompted more than $140 million in gifts to the work of nonprofits since enactment (in 2006)…”

Also to be made permanent and retroactive by the bill would be a land conservation easement to be deducted. This makes an exception to partial interest rules, where unless a piece of land is gifted entirely to a charity, the landowner gets no deduction. “The enhanced deduction for donations of land conservation easements allows land owners to get a meaningful deduction for permanently retiring development rights to their property to protect and preserve significant natural resources,” according to Independent Sector’s letter.

The fourth provision would allow taxpayers to claim deductions until the filing deadline of April 15 for the previous year. Laura Kalick, tax director at accounting firm BDO’s Nonprofit and Education practice, based in Bethesda, Md., said while her clients are feeling positive about the extension, they said it might cause headaches with receipting. But, the positives outweigh the negatives. “We’re thinking at a minimum, people will make contributions earlier in the year and maybe even increase their total,” she said. This will also be made retroactive to December 31, 2013.

The final provision would lower some private foundations’ investment tax from 2 percent to 1 percent. This would take effect in 2015.

According to the Independent Sector letter, the food donation, IRA contribution and conservation provisions were allowed to expire on January 1, for the fourth time in recent years.

“On each of the three previous occasions, an entire package of tax extenders was reinstated retroactively at the end of the following year,” according to the letter. “While this may be an adequate solution for many provisions in the extenders package, these charitable provisions are different. Without an incentive in place and assured, many of the gifts the incentives were intended to promote will simply not take place.”

Kalick believes the House could debate and vote on the package as early as tomorrow, and expects the bill to pass both the House and the Senate. “The conjecture has been, the ‘Do Nothing Congress’ would like to have something positive to go back to voters with, and this is really perfect for them to take back,” she said.