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55 Tax Provisions

Tax Extender Bill Passed by the House:

Charitable organizations, like the Sonora Area Foundation, have historically been supported in their activities by charitable giving made in accordance with the Internal Revenue Code. Three charitable giving incentives – including the IRA charitable rollover, the enhanced charitable deduction for food inventory, and the enhanced charitable deduction for land conservation – are part of a set of 55 tax provisions known as “tax extenders” that have regularly expired and then are reinstated.

Unfortunately, all of the tax extenders, including the three charitable giving incentives, were allowed to expire on January 1st of this year as our representatives in Congress tried to find a path for the tax extenders to continue while addressing budgetary concerns.

That’s why I was glad to see that a bill – H. R. 4719 – that would make the three charitable tax extenders permanent was passed by the House of Representatives on a bipartisan basis on July 17th. Of particular note to the Foundation was the inclusion of making permanent the IRA charitable rollover.

Section 3 of H.R. 4719 makes permanent a provision allowing tax-free distributions from IRAs for charitable purposes. This provision provides that individuals who are at least 70½ years old may make tax-free distributions of up to $100,000 per year from an IRA to a qualifying charitable organization. Under current law, taxpayers may claim itemized deductions for charitable contributions, limited to a certain percentage of an individual taxpayer’s adjusted gross income (AGI). Making tax-free IRA charitable distributions permanent would further incentivize taxpayers to contribute to charitable organizations. According to testimony received by the House Ways and Means Committee, in the first two years it was available, the IRA charitable distribution option prompted more than $140 million in charitable donations, with the median gift just under $4,500.

On the other side of Capitol Hill, the Senate is considering tax extenders as well, using a different process than the House. In April, the Senate Finance Committee voted to extend the IRA charitable rollover, conservation easement and the food inventory provisions for two years, retroactive to the beginning of 2014.

Action by the full Senate is not anticipated this summer, and could be delayed until the lame duck session following the November mid-term elections. If the Senate does act, the two houses would then need to resolve the differences in their treatment of these important charitable tax provisions. While observers noted that there seems to be a general consensus that these items will be addressed, it remains to be seen how the House and Senate will resolve their different approaches. We will keep our eye on the progress of Congress on these matters.