CARES Act Provides Nonprofit Organizations with Fundraising Opportunity
Many nonprofit organizations, including healthcare facilities, religious organizations, educational institutions, museums and entities providing social welfare programs, are experiencing financial difficulties in carrying out their missions amid the SARS-CoV-2 virus and COVID-19 pandemic. In 2020, 501(c)(3) organizations will likely become more reliant on charitable contributions to help sustain operating activities.
Sections 2204 and 2205 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provide incentives for donors to support nonprofit organizations during the COVID-19 crisis. This legislation modified existing tax rules to allow all donors a tax benefit, regardless of whether the donors itemize deductions on their federal tax returns. Sharing this knowledge with donors could provide a fundraising opportunity for many 501(c)(3) entities.
Specifically, the CARES Act provides the following charitable contributions deduction modifications:
- Individual taxpayers who don’t otherwise elect to itemize deductions are allowed an above-the-line deduction in 2020 for up to $300 for charitable contributions made in cash (not stock) to any qualifying §501(c)(3) public charity, excluding donor-advised funds and supporting organizations.
- For individual taxpayers who itemize deductions, the CARES Act temporarily increases the limitation on deductions for charitable contributions made in 2020. The 60 percent of adjusted gross income limitation is suspended for 2020 for cash contributions to qualifying organizations. For contributions of food inventory, the limitation is increased from 15 percent to 25 percent. Excess contributions may be carried forward to future years based on the existing charitable contribution carryforward rules.
- In addition, the CARES Act increases the limitations on deductions for charitable contributions for corporations that make cash contributions in 2020 from 10 percent of taxable income to 25 percent of taxable income. Contributions must be made to a public charity, but contributions to a supporting organization or a donor-advised fund wouldn’t qualify for the increased limits. The relevant percentage limitation applicable to donations of food inventory also is increased for donations made in 2020, from 15 percent to 25 percent.
Armed with these new tax law provisions, nonprofit organizations can conduct fundraising campaigns to help sustain their mission. Fundraising appeals can communicate not only the organization’s need in this time of crisis but also the direct tax benefits to individual donors.
As with most topics related to COVID-19, changes are being made rapidly. Please note that this information is current as of the date of publication. For more information, contact your BKD Trusted Advisor™ or use the Contact Us form below.