On March 27, 2020, Congress passed, and President Trump enacted, the Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide emergency health care and economic assistance during the COVID-19 global pandemic. This legislation addresses concerns ranging from small business interruption to individual, family, and business economic relief. While the legislation contains a myriad of economic and healthcare response-related provisions, this summary focuses on one aspect of the economic provisions – those provisions relevant to non-profits.
For individuals, any qualified contribution shall be allowed as a deduction as long as the aggregate of the contributions does not exceed the excess of the taxpayer’s contribution base over the amount of all other charitable contributions allowed under the Internal Revenue Code. For this purpose, a taxpayer’s contribution base means the taxpayer’s adjusted gross income computed without regard to any net operating loss carryback. A “qualified contribution” is any charitable contribution as long as the contribution is paid in cash during 2020 and the taxpayer has elected the application of this exception. Like the above-the-line deduction changes, qualified contributions do not include contributions to private foundations, supporting organizations, or to donor-advised funds. If the aggregate amount of qualified contributions exceeds the limitation, then the excess will be allowed as a carryover for five years. This change is effective for taxable years ending after December 31, 2019.
For corporate taxpayers, the 10 percent limitation on charitable contribution deductions is increased to 25 percent of taxable income. Excess contributions may be carried forward to future years.
P&N professionals are closely following the development of COVID-19 relief measures in order to offer insight into the potential impacts on taxpayers. If you have questions about how the CARES Act may affect your tax situation, please contact your P&N advisor.