Take Action on December Gift Opportunity
The calendar is moving rapidly toward the end of the year. There are just two weeks remaining to take advantage of the charitable gift benefit for nonitemizers or expanded charitable gift deductions for itemizers. The nonitemizer deduction permits an individual to deduct up to $300 or a married couple up to $600, but it is scheduled to expire on December 31.
Edward Killen, Deputy Commissioner of the IRS Tax Exempt and Government Entities Division stated, "We encourage people, if you are considering a donation to a charity, to do it as soon as possible before the December 31 deadline."
David Thompson is Vice President of Public Policy at the National Council of Nonprofits. He encouraged donors to use the nonitemizer deduction and stated, "At a time when nonprofits continue to see immense demand for services, are facing significant challenges hiring and retaining staff to deliver those services — every donation counts. We are thankful that the universal (or nonitemizer) deduction is available through the end of the year to encourage every taxpayer to give a little bit more to the missions they care about."
The nonitemizer deduction has been particularly beneficial for midsized organizations. These organizations have been crucial in addressing the challenges of the nation during the COVID-19 crisis.
Daniel Cardinali is President and CEO of Independent Sector. He noted, "Congress has sent a powerful message that everyone — not just those who itemize on their taxes — has a role to play in helping meet this moment, and we know people in America will respond in kind. We hope charitable contributions and deductions will increase in the coming years."
Taxpayers can use the IRS.com tax–exempt organizations tool if they wish to make sure that a charity qualifies for deduction. IRS TE/GE Commissioner Sunita Lough noted, "We see scams, fly–by–night organizations, pop–ups trying to take advantage of natural disasters because people want to give. And there are people who will try to take advantage of those who want to give and call in and ask for donations for organizations that are not tax exempt."
The non-itemizer deduction is quite important because about 9 out of 10 taxpayers take the increased standard deduction. Donors are able to benefit from both the standard deduction and the $300 or $600 nonitemizer deduction. Nonitemizer gifts must be in cash and may not be a gift of volunteer services, household items or to a donor advised fund.
Editor's Note: Generous donors who itemize may also benefit from the temporary increase in the maximum deduction limit. Cash gifts to qualified charities during 2021 are permitted up to 100% of adjusted gross income (AGI). The maximum deduction limit will be changed back to 60% for cash gifts in 2022. There are a number of generous Americans who have decided to maximize their gifts this year using the 100% of AGI charitable deduction limit.
A coalition of charitable organizations sent a December 14 letter to Senate Majority Leader Chuck Schumer, Senator Mitch McConnell, Speaker of the House Nancy Pelosi and Minority Leader Kevin McCarthy.
The Charitable Giving Coalition (CGC) represents thousands of charitable and faith–based organizations. The organization wrote to urge the Senators and Representatives "to expand and extend the nonitemizer charitable deduction as thousands of nonprofits continue to play an integral role in the response to recovery from the COVID–19 pandemic."
The Association of Fundraising Professionals Fundraising Effectiveness Project (FEP) report analyzed the benefits of the $300 universal charitable deduction. This above-the-line deduction was initially passed in the bipartisan CARES Act and was extended to year 2021.
The FEP shows a 15.3% increase in 2020 donations of $250 or less. This was a larger increase than existed for gifts over $250. There also was a 28% increase in gifts of $300 on December 31 of the past year. This is the exact amount of the universal charitable deduction. It seems probable that these gifts were the result of the incentive of the $300 universal deduction.
The coalition stated, "We continue to support the Universal Giving Pandemic Response and Recovery Act (S. 618, H.R. 1704), bipartisan legislation which would raise the $300/$600 cap on the nonitemizer charitable deduction to roughly $4,000 for individuals and $8,000 for couples." The Coalition explains that these gifts from millions of Americans are essential for charities to assist or to support communities and individuals with critical needs.
The nonitemizer deduction is scheduled to expire on December 31. If it lapses, there will be reduced donor support during 2022, particularly for midsized and smaller nonprofits. The Coalition concludes, "We urge you to expand and extend the nonitemizer universal charitable deduction in year–end legislation."
Editor's Note: The universal charitable deduction is not included in the current Build Back Better Act or other legislation. Because the House has adjourned and the Senate is likely to defer major legislation until the next year, the prospects for extending the nonitemizer deduction before the end of the year are low. However, it is possible that the nonitemizer deduction could be included in new legislation next year.
In IR–2021–250 the Internal Revenue Service announced that it is upgrading website services to disclose electronically-filed IRS Forms 990. The new services will be available on the Tax Exempt Organization Search webpage.
Previously, the IRS maintained the Form 990 Series data on Amazon Web Services. The change will now involve the IRS maintaining the data on IRS.gov on the Charities and Nonprofits webpage.
The Tax Exempt Organization Search Bulk Data Downloads webpage enables any individual to access the information. On the "Search Bulk Data Downloads" webpage, the user must choose a data set and download a compressed zip file. The webpage warns, "It is a large file."
The zip file will include the PDFs of IRS Forms 990. It is also possible to download a zip file of the qualified charitable organizations under Publication 78.
Editor's Note: The IRS continues to update its files to permit the download of charitable information. It is developing search tools that will allow it to provide the data in a manner similar to the nonprofit organizations that have historically made Forms 990 available. The IRS website is steadily becoming more search–friendly, but it still will require major modifications to make the data more easily accessible.
The IRS has announced the Applicable Federal Rate (AFR) for January of 2022. The AFR under Section 7520 for the month of January is 1.6%. The rates for December of 1.6% or November of 1.4% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2022, pooled income funds in existence less than three tax years must use a 1.6% deemed rate of return.
Edward Killen, Deputy Commissioner of the IRS Tax Exempt and Government Entities Division stated, "We encourage people, if you are considering a donation to a charity, to do it as soon as possible before the December 31 deadline."
David Thompson is Vice President of Public Policy at the National Council of Nonprofits. He encouraged donors to use the nonitemizer deduction and stated, "At a time when nonprofits continue to see immense demand for services, are facing significant challenges hiring and retaining staff to deliver those services — every donation counts. We are thankful that the universal (or nonitemizer) deduction is available through the end of the year to encourage every taxpayer to give a little bit more to the missions they care about."
The nonitemizer deduction has been particularly beneficial for midsized organizations. These organizations have been crucial in addressing the challenges of the nation during the COVID-19 crisis.
Daniel Cardinali is President and CEO of Independent Sector. He noted, "Congress has sent a powerful message that everyone — not just those who itemize on their taxes — has a role to play in helping meet this moment, and we know people in America will respond in kind. We hope charitable contributions and deductions will increase in the coming years."
Taxpayers can use the IRS.com tax–exempt organizations tool if they wish to make sure that a charity qualifies for deduction. IRS TE/GE Commissioner Sunita Lough noted, "We see scams, fly–by–night organizations, pop–ups trying to take advantage of natural disasters because people want to give. And there are people who will try to take advantage of those who want to give and call in and ask for donations for organizations that are not tax exempt."
The non-itemizer deduction is quite important because about 9 out of 10 taxpayers take the increased standard deduction. Donors are able to benefit from both the standard deduction and the $300 or $600 nonitemizer deduction. Nonitemizer gifts must be in cash and may not be a gift of volunteer services, household items or to a donor advised fund.
Editor's Note: Generous donors who itemize may also benefit from the temporary increase in the maximum deduction limit. Cash gifts to qualified charities during 2021 are permitted up to 100% of adjusted gross income (AGI). The maximum deduction limit will be changed back to 60% for cash gifts in 2022. There are a number of generous Americans who have decided to maximize their gifts this year using the 100% of AGI charitable deduction limit.
Expand and Extend the Nonitemizer Deduction
A coalition of charitable organizations sent a December 14 letter to Senate Majority Leader Chuck Schumer, Senator Mitch McConnell, Speaker of the House Nancy Pelosi and Minority Leader Kevin McCarthy.
The Charitable Giving Coalition (CGC) represents thousands of charitable and faith–based organizations. The organization wrote to urge the Senators and Representatives "to expand and extend the nonitemizer charitable deduction as thousands of nonprofits continue to play an integral role in the response to recovery from the COVID–19 pandemic."
The Association of Fundraising Professionals Fundraising Effectiveness Project (FEP) report analyzed the benefits of the $300 universal charitable deduction. This above-the-line deduction was initially passed in the bipartisan CARES Act and was extended to year 2021.
The FEP shows a 15.3% increase in 2020 donations of $250 or less. This was a larger increase than existed for gifts over $250. There also was a 28% increase in gifts of $300 on December 31 of the past year. This is the exact amount of the universal charitable deduction. It seems probable that these gifts were the result of the incentive of the $300 universal deduction.
The coalition stated, "We continue to support the Universal Giving Pandemic Response and Recovery Act (S. 618, H.R. 1704), bipartisan legislation which would raise the $300/$600 cap on the nonitemizer charitable deduction to roughly $4,000 for individuals and $8,000 for couples." The Coalition explains that these gifts from millions of Americans are essential for charities to assist or to support communities and individuals with critical needs.
The nonitemizer deduction is scheduled to expire on December 31. If it lapses, there will be reduced donor support during 2022, particularly for midsized and smaller nonprofits. The Coalition concludes, "We urge you to expand and extend the nonitemizer universal charitable deduction in year–end legislation."
Editor's Note: The universal charitable deduction is not included in the current Build Back Better Act or other legislation. Because the House has adjourned and the Senate is likely to defer major legislation until the next year, the prospects for extending the nonitemizer deduction before the end of the year are low. However, it is possible that the nonitemizer deduction could be included in new legislation next year.
Updated IRS Tax Exempt Organization Search Tool
In IR–2021–250 the Internal Revenue Service announced that it is upgrading website services to disclose electronically-filed IRS Forms 990. The new services will be available on the Tax Exempt Organization Search webpage.
Previously, the IRS maintained the Form 990 Series data on Amazon Web Services. The change will now involve the IRS maintaining the data on IRS.gov on the Charities and Nonprofits webpage.
The Tax Exempt Organization Search Bulk Data Downloads webpage enables any individual to access the information. On the "Search Bulk Data Downloads" webpage, the user must choose a data set and download a compressed zip file. The webpage warns, "It is a large file."
The zip file will include the PDFs of IRS Forms 990. It is also possible to download a zip file of the qualified charitable organizations under Publication 78.
Editor's Note: The IRS continues to update its files to permit the download of charitable information. It is developing search tools that will allow it to provide the data in a manner similar to the nonprofit organizations that have historically made Forms 990 available. The IRS website is steadily becoming more search–friendly, but it still will require major modifications to make the data more easily accessible.
Applicable Federal Rate of 1.6% for January -- Rev. Rul. 2022-1; 2022-2 IRB 1 (15 Dec 2021)
The IRS has announced the Applicable Federal Rate (AFR) for January of 2022. The AFR under Section 7520 for the month of January is 1.6%. The rates for December of 1.6% or November of 1.4% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2022, pooled income funds in existence less than three tax years must use a 1.6% deemed rate of return.
