What the New Charities Law Means For You
On Aug. 17, 2006, President Bush signed into law a bill that will impact grantmakers and donors.
The new charitable provisions, part of the Pension Protection Act of 2006 (H.R. 4), include the
first comprehensive regulation of donor-advised funds, as well as reforms or incentives that will
affect private foundations, supporting organizations and individual donors.
If You're An Individual Donor
If you have an IRA and are over age 70½
In 2007, you can withdraw up to $100,000 from your IRA tax-free if you give the money directly to charity. This does not include split-interest gifts (such as charitable lead trusts and charitable remainder trusts) and gifts to donor-advised funds, supporting organizations and private foundations. Although your withdrawal will not be subject to federal income tax, it could be subject to state income tax, depending on whether the tax law in your state conforms to the new federal law.
If you itemize deductions
You must now have a bank record or written communication from a charity to support all monetary donations (cash, check or other monetary gift). You can no longer rely on your own written records.
If you donate clothing and household items
No deduction is allowed for contributions of clothing and household items unless the property is in "good used condition or better." You must now file a qualified appraisal with your tax return for any single clothing or household item for which you claim a deduction of more than $500.
If you donate non-cash property over $5,000
You must follow new requirements of what constitutes a "qualified appraiser," the appraisals must now be in accordance with generally accepted appraisal standards, and there are stiffer penalties for overvaluation (for income tax purposes) and undervaluation (for gift and estate tax purposes) of donations. The charity will have to report on any dispositions of donations within three years of receipt (increased from two years) on Form 8282. There are also new rules for gifts of tangible personal property intended for use by the charity to further its charitable purposes. If the charity disposes of the property within three years (increased from two years), your contribution will be reduced from fair market value to cost basis, unless the charity can prove to the IRS that continued use was impossible or infeasible.
This information was made possible by the Forum of Regional Associations of
Grantmakers and its members, with valuable technical assistance provided by
Andras Kosaras, Council on Foundations.
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