Senate Pass Charity Tax Provisions Along With Wall Street Bailout

October 02, 2008

Senate Pass Charity Tax Provisions Along With Wall Street Bailout

The U.S. Senate attached a package of tax benefits to legislation to rescue the troubled financial sector, increasing the odds that the expired charity tax incentives could be renewed this year.

The package added to the bailout bill would extend for two years a measure allowing donors age 70 1/2 or older to transfer up to $100,000 to charity from their individual retirement accounts each year without paying income taxes on the money.

The Senate-passed legislation would renew the provision retroactive to January 1, 2008, and extend it to the end of 2009.

Additional provisions in the Senate legislation would renew and extend other breaks related to charitable giving, including special deductions that businesses may take for gifts of food and donations of books and computers to schools.

The legislation also creates tax incentives for charitable giving to help victims of summer storms, tornadoes, and floods in the Midwest.

People who use their cars and other vehicles to provide disaster relief in the Midwest would be able to deduct 41 cents per mile — 70 percent of the current business mileage rate — through the end of 2008. The rates now are 14 cents per mile for charitable activities and 58.5 cents for business activities.

Volunteers in the Midwest could also exclude from their income any reimbursements from charities for the use of their vehicles, up to the amount of the standard business rate, through the end of 2008.

Earlier this week, the tax-breaks legislation appeared to be in limbo, as the Senate and the House of Representatives had passed similar but not identical versions of bills to renew the benefits. The two chambers had differed chiefly over how the benefits would be paid for.

The addition of the tax benefits is expected to make the rescue bill more appealing to House Republicans, two-thirds of whom voted against the bailout on Monday. But the move could alienate conservative, “Blue Dog” Democrats in the House who voted for the original bill. The “Blue Dogs” oppose extending the tax credits unless they are paid for with spending cuts or tax increases.

The House recessed on Monday for the Jewish New Year, but returned today to take up a bailout bill.

— Kelly Field and Grant Williams

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