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Recent Tax Developments Impacting Non-Profit Organizations

Deadline Changes

In response to COVID-19, the IRS recently released guidance on revised due dates and other provisions that impact non-profit entities. In Notice 2020-23, the IRS specifically extends the payment and filing deadlines for Forms 990-T and 990-PF. The notice also broadly provides relief for the full list of “time-sensitive actions” listed in Revenue Procedure 2018-58. This relief postpones the deadline to July 15 for most actions required to be taken by taxpayers from April 1 through July 14. The relief is granted to forms listed in Revenue Procedure 2018-58 but not otherwise identified in Notice 2020-23, so the relief includes Form 990. As a result of this guidance, Forms 990, 990-T, and 990-PF that were originally due between April 1 and July 14 are now due on July 15. Any payments associated with these forms that were due between these dates are now due on July 15 as well. Notice 2020-23 grants automatic relief to affected taxpayers; they do not have to file extensions or send documents to the IRS to obtain relief.

Changes to Charitable Contribution Tax Deductions

In addition to the changes to the filing and payment deadlines, there are other significant changes that incentivize charitable giving. The Coronavirus Aid, Relief, and Economic Security (CARES) Act creates two changes for donors to non-profits. The first change allows a taxpayer to take an “above-the-line” tax deduction for up to $300 of charitable contributions, beginning in 2020, if the taxpayer does not claim itemized deductions on his or her tax return. With the recent increase in the standard deduction, less taxpayers are itemizing. This new tax law provides a distinct benefit to these taxpayers.

The second change eliminates the cap on how much a donor can deduct in charitable gifts in a single year, for the 2020 tax year. Under the 2017 Tax Cuts and Jobs Act, individuals were previously able to deduct contributions valued at no more than 60 percent of their adjusted gross income (AGI), with the excess carried over to future years. The elimination of this cap allows donors to deduct contributions in 2020 equal to 100 percent of their AGI for the year. In addition to the changes to individual donation limits, the new tax law also benefits corporations by increasing the limit on the charitable contribution deduction from 10 percent to 25 percent of taxable income. These new laws could provide a boost to donations in 2020, as taxpayers seek to maximize their charitable contribution deductions.

Contact us at SME if you have questions about how these new regulations will impact your organization.

Kelly McCauley, CPA

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