Subject to certain limits, individuals who itemize may claim a deduction for charitable contributions they make to qualifying charitable organizations. These limits generally range from 20% to 60% of an individual’s adjusted gross income (“AGI”) and vary by the type of contribution and type of charitable organization. For example, a cash contribution made by an individual to a qualifying public charity generally is limited to 60% of the individual’s AGI. Excess contributions may be carried forward for up to five tax years.
The CARES Act permits electing individuals to apply an increased limit, up to 100% of their AGI, for qualified contributions (“Increased Individual Limit”). The election is made on a contribution-by-contribution basis. Qualified contributions are limited to those made in cash during calendar year 2020 to qualifying charitable organizations.
As with the new limited deduction for nonitemizers, cash contributions to most charitable organizations qualify, but, once again, those made either to supporting organizations or to establish or maintain a donor advised fund, do not. Nor do most cash contributions to charitable remainder trusts.
Unless an individual makes the election for any given qualified contribution, the usual percentage limit applies. Keep in mind an individual’s other allowed charitable contribution deductions reduce the maximum amount allowed under this election. Individuals who would like to take advantage of the Increased Individual Limit must make their elections with their Form 1040 or Form 1040-SR.
Corporate limit increased to 25% of taxable income
The CARES Act permits C Corporations to apply an increased limit of 25% of taxable income (Increased Corporate Limit) for charitable contributions of cash they make to eligible charities during the 2020 calendar year. The maximum allowable deduction is usually limited to 10% of a corporation’s taxable income.
Here again, the Increased Corporate Limit does not automatically apply. C Corporations must elect application of the Increased Corporate Limit on a contribution-by-contribution basis.
Increased limits on amounts deductible by businesses for certain donated food inventory
Businesses donating food inventory that is eligible for the enhanced deduction (for contributions for the care of the ill, needy, and infants) are eligible for increased deduction limits. For contributions made in 2020, the limit for these contribution deductions is increased from 15% to 25%. For C Corporations, the 25% limit is based on their taxable income. For other businesses, including sole proprietorships, partnerships, and S corporations, the limit is based on their aggregate net income for the year from all trades or businesses from which the contributions were made. A special method for computing the enhanced deduction continues to apply, as do food quality standards and other requirements.
Keep good records
The IRS reminds both individuals and businesses that special recordkeeping rules apply to any taxpayer claiming a charitable contribution deduction. Usually, this includes obtaining a receipt or acknowledgment letter from the charity before filing a return and retaining a cancelled check or credit card receipt. For donations of property, additional recordkeeping rules may apply, including filing a form 8283 and obtaining a qualified appraisal.
For additional details on how to apply the percentage limits described above and a description of the recordkeeping rules for substantiating gifts to charity, see Publication 526, Charitable Contributions, available on IRS.gov.
For more information about other Coronavirus-related tax relief, visit IRS.gov/Coronavirus.
A few weeks ago, the U.S. Department of Commerce (DOC) announced affirmative preliminary determinations in the antidumping duty investigations of passenger vehicle and light truck tires exported to the U.S. from South Korea, Taiwan, Thailand and Vietnam.
The DOC made a statement that: "preliminarily determined that exporters have dumped passenger tires in the United States" at rates of 14.24% to 38.07% for South Korea, 52.42% to 98.44% for Taiwan, 13.25% to 22.21% for Thailand and up to 22.30% for Vietnam.
Currently, the DOC is scheduled to announce its final determinations in these cases on or about May 14, 2021, unless the deadline is extended.
The DOC also announced that its concurrent countervailing duty (CVD) investigation of passenger tire imports from Vietnam remains ongoing.
U.S. Department of Labor Announces Final Rule to Clarify Independent Contractor Status under the Fair Labor Standards Act
The U.S. Department of Labor today announced a final rule clarifying the standard for employee versus independent contractor status under the Fair Labor Standards Act (FLSA).
Sharpening the test to determine who is an independent contractor under the FLSA makes it easier to identify employees covered by the Act, while recognizing and respecting the entrepreneurial spirit of workers who choose to pursue the freedoms associated with being an independent contractor.
The Final Rule includes the following clarifications:
The rule will take effect 60 days after publication in the Federal Register, on March 8, 2021.
Reaffirms an “economic reality” test to determine whether an individual is in business for him or herself (independent contractor) or is economically dependent on a potential employer for work (FLSA employee).
Identifies and explains two “core factors” that are most probative to the question of whether a worker is economically dependent on someone else’s business or is in business for him or herself:
The nature and degree of control over the work.
The worker’s opportunity for profit or loss based on initiative and/or investment.
Identifies three other factors that may serve as additional guideposts in the analysis, particularly when the two core factors do not point to the same classification. The factors are:
The amount of skill required for the work.
The degree of permanence of the working relationship between the worker and the potential employer.
Whether the work is part of an integrated unit of production.
The actual practice of the worker and the potential employer is more relevant than what may be contractually or theoretically possible.
Provides six fact-specific examples applying the factors.