Charitable Incentives in Federally Declared Disaster Legislation

Midwestern Disaster Tax Relief
Senator Charles Grassley (R-IA) and other Midwestern Senators introduced a package of temporary tax provisions and incentives to encourage charitable gifts aimed at aiding the victims of the recent floods and tornadoes in their region. The bill, S.3322 is modeled after tax legislation that Congress passed to help victims of Hurricanes Katrina, Rita and Wilma in 2005 and the Kansas tornado in 2007.

Update
As part of the Emergency Economic Stabilization Act of 2008 (H.R.1424), the House of Representative voted October 3rd to put in place the temporary charitable giving incentives and volunteer mileage assistance initially proposed as part of the Midwestern Disaster Tax Relief Act. The Senate passed identical language earlier in the week and President Bush signed the bill shortly after passage.

Current Status
On September 23, the Senate adopted the Grassley Midwestern Disaster Tax relief package as part of H.R.6049, the energy/tax extenders legislation. The House is scheduled to vote September 24 on its broader disaster relief legislation that temporarily lifts the limits on charitable donations for relief efforts and raises the volunteer mileage deduction rate. The bill, H.R.7006, would waive through 2009 the current limits on donations to charity by individuals (50%) and corporations (10%) for cash contributions for relief efforts related to a Federally-declared disaster. The bill would also raise the current deduction rate from 14 cents per mile by granting the Treasury Secretary the authority through 2011 to set the mileage deduction for volunteers at a rate “not less than” the deduction rate for medical mileage expenses (currently 27 cents per mile). The disaster relief package does not exempt mileage reimbursements from taxable income, as would be permitted in recently introduced House and Senate volunteer legislation (H.R.6854/S.3532).

What the Proposals Would Do
If adopted, the charitable provisions of the bills dealing with federally declared disasters would--

• Remove the limit on individual and corporate charitable contributions that meet the following criteria:
• Contributions are made in cash,
• Contributions must be to charitable organizations listed in Section 170(b)(1)(A) of the Internal Revenue Code (generally, public charities, governmental units, and private operating foundations), but not donor-advised funds or supporting organizations,
• Contributions are made for relief efforts in federally declared disaster areas, and
• The taxpayer obtains from the charity a contemporaneous acknowledgement that the contributions were used or will be used for relief efforts in the disaster area.
• Increase the deductible mileage rate for charitable use of vehicles in the area from 14 cents to 70 percent of the business rate.
• Permit volunteers to exclude from income mileage reimbursement for relief efforts.

Midwestern Disaster Areas
Since May 20, President Bush has declared areas in nine states as disaster area due to severe storms, tornados, or flooding, and thus making them eligible for federal aid. The nine states are Arkansas , Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri and Wisconsin.

Last Updated: October 3, 2008

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