COVID-19 Related Updates for Nonprofit and Tax-Exempt Clients by Attorney Rocky Cabagnot
IRS Tax Day Extension Does Not Apply to Nonprofits (Yet)
In response to the COVID-19 pandemic, on March 21, 2020, the Internal Revenue Service and the US Treasury Department IR-2020-58. IR-2020-58 provides that the federal income tax filing due date of April 15, 2020 is automatically extended to July 15, 2020. Taxpayers do not need to file any additional forms or call the IRS to qualify for this automatic federal tax filing and payment relief.
Nonprofits know that Form 990 must be filed by the 15th day of the 5th month after the end of your organization's accounting period. For a calendar year nonprofit, Form 990 is due May 15 of the following year. As of today, this date has not been extended for nonprofits that must file Form 990. The Treasury and the IRS did state additional guidance will be issued as needed. Calendar year nonprofits that do face the May 15, 2020 deadline to file Form 990 can still file for extension by filing extension by filing Form 4868.
The New CARES Act Incentivizes Charitable Giving
Last Friday, March 27, 2020 the Coronavirus Aid, Relief and Economic Security (CARES) Act to help individuals and businesses affected by COVID-19. We addressed the effect of the CARES Act regarding forgivable loans for our business and nonprofit clients here. As part of the CARES Act, certain legislative changes were drafted to increase charitable giving during the pandemic:
- $300 Cash Contribution Deduction. Beginning in 2020 and each year thereafter (this is not limited to only 2020), donors can take a $300 above-the-line deduction for cash contributions to charities, regardless of whether the donor itemizes deductions or not. As many charities know, the increase in the standard deduction in the 2017 tax act eliminated the economic benefit for charitable contributions for about 30 million filers who no longer itemize their deductions. This new change should hopefully re-incentivize these donors. Current itemizers will, of course, get to itemize a contribution in any amount.
- Enhanced Charitable Contribution Limits for Individuals and Corporations. Generally, individuals that itemize deductions are limited with respect to the amount of deduction available for charitable contributions made during the year. These limits are typically determined by a percentage of the individual’s adjusted gross income (AGI). Corporations are subject to similar restrictions limited by the corporation’s taxable income. As a result of the CARES Act, for individuals that itemize, the 60% of adjusted gross income (AGI) limit that previously applied for qualifying cash contributions to public charities will not apply for 2020. Thus, individuals will be eligible for a deduction up to 100% of AGI for 2020 for qualifying cash contributions. For corporations, the 10% limit on deductions for charitable contributions has been increased to 25% of taxable income. The new charitable giving incentives under the CARES Act will only apply to cash donations, not donations of stock, real estate or other non-cash types of property. In addition, the contributions must be to public charities – not private foundations or donor-advised funds.
COVID-19 Related Updates for Nonprofit and Tax-Exempt Clients
IRS Tax Day Extension Does Not Apply to Nonprofits (Yet)
In response to the COVID-19 pandemic, on March 21, 2020, the Internal Revenue Service and the US Treasury Department IR-2020-58. IR-2020-58 provides that the federal income tax filing due date of April 15, 2020 is automatically extended to July 15, 2020. Taxpayers do not need to file any additional forms or call the IRS to qualify for this automatic federal tax filing and payment relief.
Nonprofits know that Form 990 must be filed by the 15th day of the 5th month after the end of your organization's accounting period. For a calendar year nonprofit, Form 990 is due May 15 of the following year. As of today, this date has not been extended for nonprofits that must file Form 990. The Treasury and the IRS did state additional guidance will be issued as needed. Calendar year nonprofits that do face the May 15, 2020 deadline to file Form 990 can still file for extension by filing extension by filing Form 4868.
The New CARES Act Incentivizes Charitable Giving
Last Friday, March 27, 2020 the Coronavirus Aid, Relief and Economic Security (CARES) Act to help individuals and businesses affected by COVID-19. We addressed the effect of the CARES Act regarding forgivable loans for our business and nonprofit clients here. As part of the CARES Act, certain legislative changes were drafted to increase charitable giving during the pandemic:
- $300 Cash Contribution Deduction. Beginning in 2020 and each year thereafter (this is not limited to only 2020), donors can take a $300 above-the-line deduction for cash contributions to charities, regardless of whether the donor itemizes deductions or not. As many charities know, the increase in the standard deduction in the 2017 tax act eliminated the economic benefit for charitable contributions for about 30 million filers who no longer itemize their deductions. This new change should hopefully re-incentivize these donors. Current itemizers will, of course, get to itemize a contribution in any amount.
- Enhanced Charitable Contribution Limits for Individuals and Corporations. Generally, individuals that itemize deductions are limited with respect to the amount of deduction available for charitable contributions made during the year. These limits are typically determined by a percentage of the individual’s adjusted gross income (AGI). Corporations are subject to similar restrictions limited by the corporation’s taxable income. As a result of the CARES Act, for individuals that itemize, the 60% of adjusted gross income (AGI) limit that previously applied for qualifying cash contributions to public charities will not apply for 2020. Thus, individuals will be eligible for a deduction up to 100% of AGI for 2020 for qualifying cash contributions. For corporations, the 10% limit on deductions for charitable contributions has been increased to 25% of taxable income. The new charitable giving incentives under the CARES Act will only apply to cash donations, not donations of stock, real estate or other non-cash types of property. In addition, the contributions must be to public charities – not private foundations or donor-advised funds.