Proposed legislation known as the Charitable Act appears to be gaining momentum in Congress. The bill calls for creating a “below the line” deduction for taxpayers who do not itemize on their tax return. The proposed deduction will reach up to one-third of the standard deduction (approximately $4,500 for an individual filer and $9,000 for married joint filers). In addition to providing an overall boost to charitable giving, the intent is to help reverse the recent decline in the number of households giving to nonprofits each year by increasing the number of taxpayers who can benefit from the charitable deduction.
Qualified Charitable Distributions (QCDs) are having a moment, thanks to new laws passed late last year that expand this unique charitable giving opportunity for those who are 70½ or older. Watch out for potential pitfalls, though. As a recent legal analysis points out, the devil is in the details, especially regarding the new “Legacy IRA” provisions allowing eligible taxpayers to make a one-time QCD to a charitable remainder trust or charitable gift annuity.
A recent private letter ruling reinforced once again that the IRS takes the concept of “private inurement” very seriously for nonprofits. As in, if you do it, you’re out. Most nonprofits know that they will be putting their 501(c)(3) exemption status at risk if they play fast and loose with the rules preventing undue benefits to a private person. After all, nonprofits are established for the public good, and public good and private profit do not mix. Take note of this if you are an advisor who counsels nonprofit organizations.