CARES Act Makes Charitable Giving Even Sweeter

April 2, 2020Alerts

In addition to the financial assistance programs to provide relief for businesses impacted by the coronavirus pandemic, the CARES Act enhances incentives for certain charitable contributions in an effort to drive giving in our most desperate of times.

The changes – some permanent, some temporary – are summarized below:

Permanent Charitable Deduction for Non-Itemizers

Individuals who do not itemize will be able to take an above-the-line charitable deduction of up to $300 for cash contributions made to public charities or certain private foundations. Contributions to supporting organizations, donor advised funds and certain private foundations do not qualify. This change applies to tax years 2020 and beyond.

Temporary Increased Limits on Deductibility of Cash Contributions by Individuals

In general, an individual is subject to deduction limitations for charitable contributions made each year. Under the Act, “qualified contributions” are disregarded for purposes of applying such deduction limitations. “Qualified contributions” are cash contributions made to public charities or certain private foundations in 2020. Contributions to supporting organizations, donor advised funds and certain private foundations do not qualify. Qualified contributions will be deductible to the extent they do not exceed the individual’s adjusted gross income less all other charitable deductions taken in the same tax year. Any amounts not able to be deducted in 2020 may be carried forward. Effectively, this temporary provision gives individuals the ability to make a fully-deductible contribution of 100 percent of their adjusted gross income.

Temporary Increased Limits on Deductibility of Contributions by Corporations

Cash – In general, a corporation may deduct charitable contributions made up to 10 percent of the corporation’s taxable income. Qualified contributions (as defined above) are deductible by a corporation to the extent that the qualified contributions do not exceed 25 percent of the corporation’s taxable income less all other charitable deductions taken in the same tax year. Any amounts not able to be deducted in 2020 may be carried forward.

Food Inventory – Donations of food inventory were previously subject to a 15 percent income limitation. Under the Act, a c-corporation may deduct donations of food inventory made in 2020 up to 25 percent of the corporation’s taxable income. Food inventory donations remain subject to certain basis and gain limitations described in Code Section 170. Any amounts not able to be deducted in 2020 may be carried forward.