Katrina Tax Act passed
On September 23, President Bush signed the Katrina Emergency Tax Relief Act of 2005 (KETRA). In this bill, Congress enacted measures designed to increase charitable giving during this time of extraordinary need. Provisions affecting charitable giving include:
- Enhanced deductions for donations of food and books by businesses for relief efforts
- A suspension of the 10% of taxable income limit for charitable gifts by corporations for gifts made to organizations aiding Katrina victims
- A suspension of the 50% of AGI limit on gifts by individuals for cash gifts to qualified charities
- An exclusion of qualified charitable gifts from the rule that requires itemized deductions to be reduced by 3% of the amount by which AGI exceeds statutory thresholds
- Other incentives for individuals such as generous mileage reimbursements
A “qualified gift” is defined as a gift of cash to any charitable entity that is allowed to receive tax-deductible contributions other than donor advised funds, supporting organizations, and certain other entities.
A window of opportunity
The suspension of the 50% of AGI limit creates a three-month window of opportunity for larger gifts by donors that could otherwise cause them to exceed the amount they could normally deduct.
A welcome additional benefit of KETRA is the possibility for donors over the age of 59½ to fund larger gifts with funds withdrawn from IRAs and many other types of retirement accounts. While such gifts cannot be contributed directly to life income gifts as would be the case under the much-awaited CARE Act, the net effect is to make outright gifts from IRAs and other retirement accounts possible on a relatively tax-free basis for those over the age of 59½. The CARE Act would restrict such gifts to those over the age of 70½.
For an overview of the bill and the opportunities it affords for additional giving this fall along with information to share with donors, see www.sharpenet.com/ketra.
Hurricane Katrina fund raising reaches record levels
The pace of charitable donations in the wake of Hurricane Katrina has far outstripped those of both the September 11 terrorist attacks and the Asian tsunami last December, The Chronicle of Philanthropy reports. Within the first 10 days after the disaster, Americans donated almost three times the amount raised in the first 10 days after the 2001 terrorist attacks and more than four times the amount donated in the first 9 days after the tsunami. So far, the American Red Cross has received around three-quarters of charitable contributions to aid the devastated Gulf Coast region.
High-profile donations to Katrina relief
While gifts from average Americans continue to flood in and form the bulk of hurricane relief donations, a number of celebrities and well-known organizations and corporations have also made generous gifts. Notable donations of cash and other services include:
- Gifts totaling $32 million from Wal-Mart and its related foundation.
- Two gifts of $10 million each from the Lily Foundation.
- Over $6 million in cash and $10 million in equipment from the General Electric Company.
- $5 million from author John Grisham and his wife, who maintain a home in Mississippi.
- $5 million from the Michael and Susan Dell Foundation.
- Gifts of $5 million and countless beverages from The Coca-Cola Company.
- Two separate gifts from the Bill and Melinda Gates Foundation totaling $2.25 million.
- $1 million gift from the Muscular Dystrophy Association.
- A combined gift of $1 million from The American Heart Association, American Cancer Society, and American Diabetes Association.
- Gifts of $1 million or more from entertainers such as George Clooney, Oprah Winfrey, Nicolas Cage, Celine Dion, and Steven Spielberg.
- $1 million donation and extensive transportation services donated by Memphis-based FedEx Corporation.