• Congress Allows 100% Deduction for Cash Charitable Contributions Made Before December 31
  • September 30, 2005 | Authors: Richard A. Johnson; G. Michael Yopp
  • Law Firm: Waller Lansden Dortch & Davis, LLP - Nashville Office
  • On Wednesday, the U.S. House of Representatives and the U.S. Senate sent to President Bush for his signature The Katrina Emergency Tax Relief Act of 2005. The Act is expected to be signed into law by President Bush. Included in the Act is a provision which, in effect, allows individuals to deduct 100 percent of their cash contributions to most charities if made between August 28, 2005, and December 31, 2005, against their income (with certain adjustments). The charities do not have to support Katrina relief efforts. The Act temporarily waives the itemized deduction limitation and the percentage of income limitation.

    Eligible charities include churches, educational organizations, public charities and certain types of private foundations, but they do not include supporting organizations. Contributions to create or to provide additional funding to an existing segregated fund or to a donor advised fund at a qualifying charity are not eligible for the 100 percent deduction.

    This is a one-time opportunity for individuals who desire to make significant cash contributions, including providing an opportunity for those individuals who have existing charitable pledges to accelerate them to maximize the resulting charitable deduction. In addition, this is an opportunity to contribute to certain types of private foundations, while obtaining a 100 percent charitable deduction for the contribution.

    We believe this is the first time in 35 years that the Congress has allowed the full deductibility of charitable contributions without limitations.