It is an understatement to say these are difficult times. Many Americans are losing their jobs, schools that are often a source of daily meals for children are closed, and stay home mandates are making it even more difficult for those who rely on the support of our nation’s charities to get the help they need.

The CARES Act made significant changes to the contribution limits of Internal Revenue Code (IRC) Section 170, presumably to encourage charitable giving during this time of great need.

Individual Charitable Giving

At the election of the taxpayer, qualified contributions made during the calendar year 2020 are no longer subject to the 60% of adjusted gross income (AGI) limit. The deduction may be allowed up to 100% of the taxpayer’s AGI, with any excess available for carryover for five years subject to the 60% AGI limitation.

In addition, for taxable years beginning in 2020 an eligible individual may deduct up to $300 of cash contributions even if they don’t itemize.

Corporation Charitable Giving

The contribution limit has been increased from 10% to 25% of the corporation’s taxable income as historically determined under IRC Section 170(b)(2), with any excess available for carryover for five years.

Qualified Contributions

Qualifying contributions are those made in cash (and certain food items) during the calendar year 2020 to the following types of organizations:

• Churches, or a convention/association of churches
• Educational organizations that normally maintain a regular faculty and curriculum, and have a regular enrolled student body in attendance at the place where its educational activities regularly occur
• Entities whose principal purpose is to provide medical or hospital care, or related research, if the following criteria are met:
  1. The organization is a hospital or is directly engaged in the continuous, active conduct of medical research in conjunction with a hospital, and
  2. During the calendar year in which the contribution is made, the organization is committed to spend the contributions received for medical or hospital related research before January 1 of the fifth calendar year (beginning after the date the contribution is made)
• Entities that normally receive a substantial part of its support (excluding income received for the performance of its principle purpose) from the U.S., any state or political subdivision of the U.S., or from the general public, and is organized and operated exclusively to:
  • Receive, hold, invest and administer property
  • Make expenditures to or for the benefit of principally a state college or university
• Governmental units
• Organizations that normally receive a substantial part of their support from a governmental unit or from direct or indirect contributions from the general public
• Certain private foundations
• Agricultural research organizations directly engaged in continuous, active research in conjunction with a land grant college or university or a non-land grant college of agriculture (during the calendar year in which the contribution is made, the organization must be committed to spend the contribution for such research before January 1 of the fifth calendar year after the date of the contribution)

Qualifying contributions do not include payments to organizations described in the tax code as supporting organizations, donor advised funds and private foundations.

Contributions of Food Inventory

The tax code long provided for an enhanced deduction for taxpayers contributing “apparently wholesome food” out of their own inventory. The limitation for this type of contribution has been increased from 15% to 25% for donations made during 2020.

Contact Cathy Lorenz at clorenz@cohencpa.com or a member of your service team to discuss this topic further.

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Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.