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Advocacy Blog
Thursday, September 22, 2005
Katrina Tax Legislation Sent to Bush
"A $6.1 billion tax-relief bill to aid in recovery from Hurricane Katrina cleared Congress, amid laments over the deficit but no clear direction from Republicans beyond creating World War II styled bonds to finance the debt from the disaster," the Wall Street Journal reports. "The House gave its approval on a 422-0 vote, and the Senate sent it on to President Bush for his signature last night without a roll call."
INCENTIVES FOR CHARITABLE DONATIONS:
- Encourages cash donations by
individuals. Under current law, individuals may deduct
charitable donations up to 50 percent of their adjusted gross income.
Deductions for charitable donations are further limited by the
phase-out of itemized deductions. Under the proposal, cash donations to
charities are exempt from the 50-percent income limitation and the
phase-out of itemized deductions if the donations are made before
January 2006.
- Encourages cash donations
by corporations. Under current law, corporations may deduct
charitable donations up to 10 percent of their taxable income. The
proposal waives the 10-percent income limitation for cash donations
related to Hurricane Katrina if the donations are made before January
2006.
- Modifies tax treatment when using a
personal vehicle for charitable work. Under current law,
individuals may claim a tax deduction for the costs associated with
using a personal vehicle for charitable work. The deduction is
calculated by using a mileage reimbursement rate of 14 cents-per-mile.
The reimbursement rate for business use is set periodically through IRS
guidance and currently stands at 48.5 cents-per-mile. The proposal sets
the mileage reimbursement rate for charitable contributions at 70
percent of the standard business mileage rate. If the individual is a
volunteer and is reimbursed for the use of the personal vehicle, the
proposal ensures that the individual does not have to pay income tax on
the reimbursement. Both provisions are effective through December 31,
2006.
- Encourages charitable donations of
food inventory. Under current law, C-corporations may deduct
the cost of food inventory donations. The value of the deduction is
equal to the lesser of two times the basis or basis plus one-half of
the added value. The proposal extends the current-law deduction for
food donations to S-corporations, partnerships and sole proprietors
through the end of the 2005 calendar year.
- Encourages
donations of educational books to public schools. The
proposal allows a charitable deduction through the end of the 2005
calendar year for donations of educational books to public schools. The
value of the deduction is equal to the lesser of two times the basis or
basis plus one-half of the added value.
The IRA Rollover has been jettisoned.
For a summary of the legislation that has been sent to the president.
Posted by Jennifer Lowe
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