Charitable Incentives in Federally Declared Disaster Legislation

Midwestern Disaster Tax Relief
Senator Charles Grassley (R-IA) and other Midwestern Senators have 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.

Current Status
By a vote of 51 to 43, the Senate failed on July 30 to end a filibuster on the motion to proceed to S.3335, the “Jobs, Energy, Families and Disaster Relief Act of 2008. The bill incorporates several of the charitable provisions in the Grassley bill, S.3322, and expands them to apply to federally declared disasters this year and in 2009.

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 delcared 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: July 30, 2008

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