Senators Propose Tax Incentives for Midwestern Disaster Relief

June 30, 2008

Senators Propose Tax Incentives for Midwestern Disaster Relief

A group of Midwestern U.S. senators have introduced legislation to create tax incentives for charitable giving to help victims of the storms, tornados, and floods that have hit their region.

The Midwestern Disaster Tax Relief Bill—an amendment to H.R. 3221, an unrelated bill designed to ease the housing crisis—would allow individuals and corporations to get unlimited charitable deductions for donations to relief efforts in the affected areas through the end of 2008. (The measure would not apply to contributions to donor-advised funds.)

It would also allow people using their vehicles for disaster relief to deduct 70 percent of the business mileage rate. (The rates now are 14 cents per mile for charitable activities and 50.5 percent for business activities.) Volunteers could also exclude from their income reimbursements from charities for use of their vehicles.

The bill, S. AMDT. 5035, would also extend provisions that expired at the end of 2007 allowing a variety of businesses such as restaurants, grocery stores, or farms to earn an “enhanced deduction” for donating surplus food to charity. In general, federal law allows companies to deduct the production costs of certain goods they donate, which is usually below their fair market value. The “enhanced deduction,” which is now is limited to certain kinds of corporations, allows donors to deduct production costs plus some of the difference between production costs and fair market value.

Sponsors include 10 senators from Illinois, Indiana, Iowa, Minnesota, Missouri—including Charles Grassley, Republican of Iowa, the senior Republican on the Senate Finance Committee, and Barack Obama of Illinois, the presumptive Democratic presidential nominee.

The Council on Foundations offers this analysis of the amendment on its Web site.

— Suzanne Perry

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