Charitable Giving

Because of the lack of state support, private colleges and universities in particular rely strongly on charitable gifts to sustain student financial aid and minimize tuition increases.

Without significant charitable contributions, many colleges and universities could not maintain their core missions – including ensuring access to their institutions, particularly for low-income students.

Private charitable donations also support research, teaching, technology, and the public service activities that economically benefit society.

About

Both the charitable deduction and the IRA rollover are vital fundraising tools for private colleges and universities.  

Unfortunately, there are proposals to limit the charitable deduction; and Congress renewed the so-called “Pease” limitations on charitable giving in 2013, which limit the value of charitable donations for high-income taxpayers.

The good news is that Congress and President Obama finally made the IRA rollover permanent after almost 10 years of existing as a temporary, often expired, tax benefit.  Starting retroactively, in 2015 and going forward, the IRA rollover is a permanent tax benefit.

In addition, the Tax Cuts and Jobs Act of 2017 (TCJA), maintained the IRA charitable rollover in a tax reform environment where a significant amount of tax breaks were eliminated.  TCJA also maintained the charitable deduction, although the doubling of the standard deduction, and the rate reductions, could ultimately result in less giving over time.
 

Tax Benefits to Encourage Charitable Giving

The Federal Government has long supported and encouraged gifts to charities with various tax incentives.  The charitable deduction, which has existed for nearly 100 years, was created to support public purposes, charitable and educational, and to advance the common good.  

The IRA Charitable Rollover was initially enacted in 2006, and allows individuals age 70-1/2 and older to make tax-free gifts from their retirement accounts directly to charities.  Gifts are limited annually to $100,000 per individual.
 

Covid-19 Pandemic Charitable Giving Provisions

The CARES Act created two new charitable giving tax benefits to try and help nonprofits during the pandemic.  First, the CARES Act created a temporary above-the-line deduction for cash donations of $300 per tax return for 2020. This benefit is only available to non-itemizers who claim the standard deduction ($12,400/single, $18,650/head of household, $24,800/married joint filers).
 
Second, for those who itemize, the bill lifts the existing cap on annual cash contributions to charities, raising it from 60 percent of adjusted gross income to 100 percent. This is also in effect for 2020 only, however, excess amounts can be carried forward for 5 years.

What You Can Do

Contact your Senators and Representative and their staffs to let them know how important the charitable tax benefits are to your institution. Tell them:
 

  • THANK YOU for supporting the IRA charitable rollover.  To make it even more beneficial, the age limit should be lowered, and the annual gift limit increased.
  • THANK YOU for supporting the charitable deduction. There should be no cap or dollar limitations on the charitable deduction, and further charitable incentives may be necessary if the 2017 tax rate reductions negatively affect charitable giving over time. 

Resources

NAICU Contact

Karin Johns: Karin@NAICU.edu 

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