As expected, President Bush has submitted several tax proposals to Congress, including several that are designed to promote charitable giving. Church treasurers should be familiar with the following proposals:
• Charitable contribution deduction for non-itemizers. The president is proposing that nonitemizers be allowed to deduct contributions to charity. Under current law, only persons with enough deductions to “itemize” on Schedule A (Form 1040) are allowed any deduction for their contributions to charity. Since only 30% of taxpayers are able to use Schedule A, the majority of taxpayers receive no tax benefit from their charitable contributions. The president’s proposal would change this inequity.
• Tax-free withdrawals from IRAs for charitable purposes. The president is proposing tax-free distributions from IRAs to charity. Under current law, distributions from an IRA are subject to income tax, which discourages older Americans from making contributions to charity out of their IRA. To qualify for tax-free treatment, a distribution must be to a church or other charitable organization to which deductible contributions can be made, and it must be made after the IRA owner reaches age 70-1/2.
• Increased contribution limit for corporations. Under current law, corporations can deduct charitable contributions only up to 10% of taxable income. The president has proposed that this limit be increased to 15%.
• Corporate donations. The president wants to spur corporations to donate equipment, facilities, vehicles, or aircraft to charity by providing them with limited liability for injuries resulting from the use of the donated property.
• The “compassion capital fund.” This program would “match” private contributions with federal funds to provide increased assistance to help small community and faith-based charities increase their capacity, improve their competence and expand their programs.
This content originally appeared in Church Treasurer Alert, March 2001.