5 bills that could change charitable contribution rules

Earlier this year, the House Ways & Means Committee approved five bills that aim to help increase funds for charitable activities. For eventual enactment into law there is a long road ahead and chances of all five bills passing is minimal, but the potential impact for charitable contributions is significant. The first three bills listed have actually been effective in prior years, but have always had to be renewed by Congress; the last two are completely new: - H.R. 2807, The Conservation Easement Incentive Act of 2013 This bill seeks to make permanent a temporary provision that expired for tax years after Dec. 31, 2013. The provision allows for individuals to deduct the fair market value of any qualified conservation contribution to the extent of the excess of 50 percent of the contribution base over the amount of all other allowable charitable contributions. This bill is has been reported to the House but has not been voted on as of this writing. - H.R. 4619, Individual Retirement Account Rollover to Charity Provision This bill seeks to make permanent a temporary provision that expired for tax years after Dec. 31, 2013. The provision allows for an individual who is age 70.5 and older to make charitable contributions directly from an IRA to a public charity without including the donation amount in his/her taxable income. This bill is has been reported to the House but has not been voted on as of this writing. - H.R. 4719, Fighting Hunger Incentive Act of 2014 The provision allows any taxpayer engaged in a trade or business to take an enhanced deduction for certain donations of food inventory. This bill seeks to make permanent a temporary provision that expired for tax years after Dec. 31, 2013. The bill also expands the temporary provision by increasing certain percentage limitations on deductions for contributions of food inventory and by establishing guidelines for determining the market value of donated food in certain circumstances. This bill passed the House in July of 2014. - H.R. 4691, Simplification of Excise Tax on Private Foundation Investment Income Current legislation requires tax-exempt private foundations to pay a two-percent excise tax on its net investment income. This rate can be reduced to one-percent in any year in which a foundation's charitable distributions exceed its average historical payout rate determined with respect to a rolling five-year base period. The proposed legislation would permanently replace the two rates of excise tax with a single one-percent tax rate. - H.R. 3134, Charitable Giving Extension Act The provision would allow for individuals to make donations to charities up until the due date of the person's tax returns (without extensions). In turn, individuals could deduct these donations on the previous calendar year's tax return. For individuals and tax planners, this would give taxpayers plenty of time to consider charitable contributions as a means to reduce their tax liability right up until taxes are due. Charities would most likely receive money earlier in the year as opposed to the end of the year when most donations are currently made. Except for 4719, all of these bills are proposed and have not yet been voted on by the House. All the bills would need Senate approval and, of course, the president's signature to become law. As you can imagine, support for the bills seems to be divided along party lines. Republicans support the bills as a means to reduce an individual's tax liability while Democrats generally oppose the bills due to the potential substantial decrease in tax revenue. What is not in dispute is that the bills would be a boon to charitable organizations and helpful to all taxpayers when performing tax planning. It is expected that the bills may be voted upon much later in the year or that some of the provisions may be added to other bills. Stay tuned and if you support or oppose the bills be sure to let your representative know. ----- Greg H. Carver, CPA, is a manager with Mengel, Metzger, Barr & Co. LLP and may be reached at gcarver@mmb-co.com. Published: Wed, Aug 27, 2014