Articles

On Friday, January 22, President Obama signed into law H.R. 4462, an untitled act to accelerate the income tax benefits for charitable cash contributions for the relief of victims of the earthquake (the (Act”). The Act is an “off-Code” provision, i.e., it does not amend the Internal Revenue Code, but does provide federal income tax benefits for affected taxpayers. Under the Act, a taxpayer may treat certain charitable contributions made after January 11, 2010, and before March 1, 2010, as having been made on December 31, 2009, and not in 2010. The language of the Act effectively gives taxpayers a choice between claiming a 2009 deduction and claiming a 2010 deduction, subject to otherwise applicable limitations and restrictions.

 

In order to qualify under the Act, the contribution must satisfy all of the requirements for a charitable contribution deduction under the Code, must be made for the relief of victims in areas affected by the earthquake in Haiti on January 12, and must be made in cash. In recognition of a recent innovation in charitable giving, the Act also relaxes the recordkeeping and substantiation requirements otherwise applicable to such contributions. Under the Act, if the contribution is charged to a telephone or wireless services bill, e.g., as a result of a text-message authorization, these requirements are satisfied if the taxpayer has a telephone bill showing the name of the donee organization, the date of the contribution, and the amount of the contribution.

Separately, the IRS issued Notice 2010-16, designating the Haiti earthquake as a “qualified disaster” for purposes of section 139. As the result of this designation, individuals may exclude from their gross income any amount paid to or for the benefit of the individual for personal, family, living, or funeral expenses, or to repair or rehabilitate a personal residence or repair or replace its contents, in all cases to the extent that such expenses are incurred as a result of the earthquake. In addition, the expenses are eligible for this exclusion only to the extent that they are not compensated for by insurance or otherwise.

Employer-sponsored private foundations may make disaster relief payments to employees affected by a qualified disaster without jeopardizing their tax-exempt status.

Please contact your Smith & Howard advisor for details (404.874.6244).