February 04, 2008
President Bush Includes Charitable-Giving Incentives in Budget Proposal
By Sam Kean
Washington
In his administration’s newly released 2009 budget, President Bush proposed making permanent a number of temporary incentives for charitable giving. He also proposed eliminating the two-tier structure of taxes that private foundations must pay on their investment income, replacing it with a flat rate of 1 percent instead.
The following provisions would become permanent if Congress were to approve President Bush’s budget:
- Individuals age 70 1/2 or older could donate up to $100,000 from their Roth Individual Retirement Accounts (IRAs) without paying income tax on the money. A similar provision was in effect in 2007, but it expired at the end of the year and has not been extended.
- Grocery stores, restaurants, farmers, and other small businesses could claim an “enhanced tax deduction” for donating excess food to charity. This provision also expired at the end of 2007.
- Companies that donate computers, computer hardware, and software to schools and libraries would qualify for a charitable deduction.
- Donors could claim a deduction for partial donations of land for conservation purposes.
President Bush had proposed making all of these deductions permanent in last year’s budget as well.
In addition, the administration proposed a flat tax of 1 percent on all private foundations’ net investment income. Currently, private foundations pay 2 percent on such income unless their charitable giving for the year exceeds their average giving for the past five years. If that condition is met, the tax on investments is 1 percent.
The administration argues that a single tax rate would eliminate the threat that a foundation would have to pay the higher tax rate if it greatly increased giving one year to meet demand, since the one-year increase would also increase their five-year average. The flat rate could also make more funds available for donations and would simplify planning for taxes.
Comments
Commenting is closed for this article.
Previous: Red Cross to Lay Off One-Third of Its Staff
Next: Charities Vow to Fight Proposed Cuts in Federal Budget
I believe this proposal would allow for qualified charitable distributions from non-ROTH IRA accounts as in PPA 2006.
— Eric F. Rice Feb 11, 10:23 AM #