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February 24, 2010New Law Permits 2009 Charitable Deduction for Haiti Relief Contributions
Charitable contributions made after January 11, 2010 and before March 1, 2010 are deductible on 2009 income tax returns.
In an effort to encourage further charitable giving to help those affected by the earthquake in Haiti, Congress passed a bill on January 21 that permits donors to deduct (on their 2009 income tax returns) charitable contributions of cash made after January 11, 2010, and before March 1, 2010, for the relief of victims in areas affected by the earthquake. The President signed the bill immediately after it passed in both houses of Congress, giving effect to the new law. The new law does not apply to noncash contributions.
501c(3) organizations, including churches, that are accepting charitable contributions for the relief of earthquake victims must consider the implications of the new law in assisting their donors with proper documentation.
Federal tax law requires donors who make individual contributions of $250 or more to obtain proper written acknowledgments from the donee charities for such contributions. A proper written acknowledgment from a donee charity must include the name and address of the charity, the name and address of the donor, the date and amounts of the charitable contributions (either individually or in the aggregate), and an indication as to whether the donor received any goods or services in exchange for the contributions. If a donor receives goods or services in exchange for contributions, additional information is required.
Donors ordinarily must substantiate charitable contributions in individual amounts of less than $250 with either a "bank record" or a written communication from the donee showing the name of the donee organization, the date of the contribution, and the amount of the contribution. However, the new law allows a "telephone bill" to serve as adequate documentation for Haiti relief contributions, so long as it contains the name of the donee organization, the date of the contribution, and the amount of the contribution. This provision was adopted to facilitate contributions made by text messages.
In order to assist donors in applying the new law, we recommend that charitable organizations receiving earthquake-relief contributions after January 11, 2010, and before March 1, 2010, send proper written acknowledgments to donors as soon as possible after the end of February 2010. The written acknowledgment should clearly indicate that the gifts were made for the relief of the January 12 earthquake victims in Haiti and should also clearly indicate that the gifts were made after January 11, 2010, and before March 1, 2010. Charitable organizations should remember that donors may deduct such contributions on their 2009 income tax returns, or they may deduct them on their 2010 income tax returns. The charity is not required to determine which year the donor chooses to deduct the charitable contribution. Accordingly, the charity should include earthquake-relief contributions for Haiti given after January 11, 2010, and before March 1, 2010, in any subsequent written acknowledgment of a donor's cumulative contributions to the organization during 2010. It may be helpful to remind donors in early 2011 that they may not deduct in 2010 any contributions that were already deducted in 2009.
Example
Assume that a charitable organization accepts earthquake-relief contributions along with general contributions for the entire year 2010. Donor A makes a $500 earthquake-related contribution after January 11 but before March 1 of 2010, and makes an additional $1,000 earthquake-related contribution in March 2010. To assist the donor in availing himself of the provisions of the new law, the charity sends a proper written acknowledgment to the donor on March 10, 2010, indicating that the donor made a contribution in the amount of $500 after January 11 and before March 1 of 2010 for the benefit of earthquake victims in Haiti. When the charity sends Donor A an annual contribution acknowledgment after the end of 2010, the charity will include all contributions made by Donor A during the year 2010, including the one made in January and the one made in March of that year. The acknowledgment should clearly indicate that it includes all contributions made during the year.
The charity does not know whether Donor A will deduct his January 2010 contribution on his 2009 return or on his 2010 return. Donor A's decision in that regard is not relevant to the charity with respect to its process for acknowledging charitable contributions.
To learn more about how to file your 2009 tax return and for tax help throughout 2010, order Richard Hammar's 2010 Church & Clergy Tax Guide.
Michael Batts serves as an editorial advisor for Church Finance Today, Church Law & Tax Report, Your Church, and ChurchSafety.com.
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