Charitable Giving Incentives Included in Hurricane Relief Package

After reaching agreement on the Katrina Emergency Tax Relief Act (H.R. 3768), the House and Senate each passed the final measure on September 21, 2005, and President Bush signed it into law on September 23. The House passed the measure by a vote of 422 to 0 and the Senate passed it by unanimous consent.

The package contains several items of importance to the charitable sector listed below, though it does not contain the IRA Charitable Rollover. There may be additional Katrina relief tax packages assembled in the coming weeks.

In brief, the charitable giving provisions in the final Katrina relief tax package include:

• Temporary suspension of the income limits on new individual cash charitable donations in 2005. Importantly, the enhanced charitable deductions for individual cash donations applies to all charities, not just charities engaged in work related to Hurricane Katrina.
• Temporary suspension of the income limits on new corporate cash charitable donations for Katrina relief in 2005.
• A modified version of the Senate provision relating to charitable donations of food inventory.
• A modified version of the Senate provision relating to charitable donations of books. The modified provision allows a tax deduction for educational books donated to public schools and requires a certification from the school that the books are suitable for its educational programs.
• The mileage rate for deductions claimed by individuals for use of vehicles for charitable purposes is raised from the current 14 cents/mile to 70 percent of the business rate, if the vehicles were used to provide relief related to Hurricane Katrina. If the individual is a volunteer and is reimbursed for the use of the personal vehicle, the individual does not have to pay income tax on the reimbursement. Both provisions are effective through December 31, 2006.
• Creates a special tax deduction for individuals who provide rent-free housing to dislocated persons for at least 60 days.

Previous Action

On the morning of September 15th, the Senate and House each passed different versions of Hurricane Katrina tax relief measures that included charitable giving incentives. Later on the 15th, the Senate passed by unanimous consent a revised version of HR 3768 that included some provisions from the original Senate bill and some from the House bill. The Senate-passed HR 3768 was then sent back to the House for reconsideration.

Modifications made by the Senate before passage included:

• IRA Charitable Rollover: Dropped.
• Corporate Charitable Contributions: Modified to temporarily increase the percentage limitation to one hundred percent of the corporation’s taxable income for new contributions of cash to the Katrina relief effort for one taxable year ending on or before December 31, 2005.
• Individual Income Limits for Cash Contributions: Modified to increase cash contribution level for individuals from 50 percent to 100 percent of adjusted gross income for new cash contributions for tax years ending on or before December 31, 2005. Overall limitation on itemized deductions waived.

See a full list of modifications (PDF) the Senate made to its original bill.

Independent Sector organized a briefing for all Senate tax staff on the Senate’s Hurricane Katrina relief bill on September 14. Several IS member organizations participated.

The original Senate bill S. 1696, the Hurricane Katrina Tax Relief Act of 2005, in addition to tax changes designed to help the victims directly, included incentives to encourage charitable giving such as an IRA charitable rollover provision and enhanced deductions for business donations of food and books. The bill also would have raised the cap on individual cash contributions from 50 percent to 60 percent of adjusted gross income and on corporate cash contributions from 10 percent to 15 percent of the corporation’s taxable income. In addition, it would have increased the standard mileage rate allowed for charitable use of an automobile to 50 percent of the standard business rate and would allow taxpayers to claim an additional personal exemption amount on their income tax for taking in displaced hurricane victims. All provisions would be effective only for donations made between August 28, 2005 and December 31, 2005. The bill passed by unanimous consent.

The House passed by voice vote a hurricane tax relief measure (H.R. 3768) introduced by Representative Jim McCrery (R-LA) that also included incentives for charitable giving, but which was more limited in scope than the Senate bill. Like the Senate bill, the House measure provided a tax deduction for individuals who provide rent-free housing for dislocated persons and raises limits on charitable contributions, but it did not include the IRA charitable rollover, or the enhanced deductions for food and book donations. In the House bill, contributions specifically related to Hurricane Katrina relief would not count against individual and corporate donation limitations. The House bill also included a provision to increase the mileage deduction for charitable use of a vehicle from the current 14 cents per gallon to 70 percent of the standard business rate, but only for vehicles used for Hurricane Katrina relief through 2006.


Last Updated: January 27, 2006

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