The Tax Relief Act (actually, “The Tax Relief, Unemployment Insurance Preauthorization, and Job Creation Act of 2010”), passed by Congress and signed into law by President Barak Obama late in December 2010 included several provisions that may directly or indirectly impact non-profit organizations. A summary of key provisions follows:
The most immediate benefit felt by tax-exempt organizations is the same that every employer will see. In 2010, under the HIRE Act, employers were not required to pay the employer’s share of social security tax (or FICA) for new employees unemployed during the 60 days before beginning work. That exemption expired in 2011. For 2011, however, the employee’s share of FICA is reduced to 4.2% of wages up to $106,800 instead of 6.2%.
The Act extended the ability of a taxpayer aged 70½ or older to make a charitable contribution from his or her IRA of up to $100,000 annually through 2011. (Previously, this could be done through 2009 only). Certain rules apply. For example, the distribution must be to a 501(c)(3) public charity that is not a donor-advised fund or a supporting organization. Distributions to private foundations do not qualify, nor do those in which the donor receives something in exchange for her donation (other than a de minimis gift, a so-called quid pro quo).
Similarly, the Tax Relief Act extended enhanced deductibility of certain contributions of property provided under prior legislation. Through 2011, a qualified conservation contribution (i.e., a donation of certain real property interests to a qualified 501(c)(3) for conservation purposes to be protected in perpetuity) remains deductibility up to 50% of the donors adjusted gross income with a 15-year carry forward, versus the standard 30% limitation and a 5-year carry forward.
The Act also extended enhanced deductibility for donations of certain food and books to schools, and of certain computer equipment various types of educational organizations including K-12 schools and public libraries.
Special rules must be followed for taxpayers to take advantage of these tax breaks. Non-profits and their donors should consult with their professional tax advisors prior to utilizing them. The attorneys at The Law Firm for Non-Profits would be happy to assist you.