The government recently passed the unprecedented Coronavirus Aid, Relief, and Economic Security (CARES) Act, a stimulus package intended to help the American people and the economy cope with and recover economically from the COVID-19 global pandemic.
In this flash update, we focus on charitable giving provisions that we think will be helpful to nonprofit organizations trying to marshal resources through the crisis.
- The CARES Act has temporarily eased limitations in Section 170 of the Internal Revenue Code of 1986 (IRC of 1986) on the deductibility of cash contributions for individuals and corporations making cash donations in 2020 to a qualified list of nonprofit recipient types.
- Under the provisions in the CARES Act, individuals may qualify for tax deductions on charitable contributions to eligible nonprofit institutions up to the full amount of their adjusted gross income. Similarly, corporations may qualify for tax deductions on cash contributions of up to 25% of taxable income to qualifying nonprofit organizations.
- On a related note, the CARES Act also increased the maximum deductibility of food inventory from 15% of taxable income to 25% of taxable income.
Above-the-Line Deduction for Non-Itemizers
- Another new avenue of fundraising support for nonprofit organizations relates to a provision allowing individual donors who do not currently itemize deductions on their tax returns to report up to $300 in charitable contributions (made in cash) in tax years starting after December 31, 2019. It is important to note that these charitable contributions have to be made to a specific set of qualified organizations.
- One silver lining to this new addition is that it does not seem to have a set end date; many nonprofit organizations lamented that the Tax Cuts and Jobs Act of 2017, which raised the standard deduction and reduced the number of itemizers, might inadvertently decrease the amount of donations coming from non-itemizers. This provision creates the potential for a large group of non-itemizing donors to qualify for tax deductions on charitable contributions, which could incentivize them to give.
What can nonprofit organizations do today?
- First Step: Work with tax and/or legal services firm(s) which have experience with nonprofit organizations to understand the full extent of this legislation. The benefits mentioned in the previous sections have the potential to help donors make charitable donations at a cheaper after-tax dollar cost than they would have been able to without the CARES Act provisions.
- Communicate early and often: As events relating to the virus and market volatility unfold, it is important to communicate with your donors often and proactively. Let them see what you are doing to help the community and how their contributions have the potential to fund solutions.
- Work on digital capabilities: Creating the ability to reach your donors online and to receive donations securely is crucial at a time when most of the country is under shelter-in-place restrictions.
- For more resources: Please ask your PNC advisor for our papers on best practices for managing your nonprofit organization through the crisis, including Nonprofit Enterprise Management: Strategic Planning for Adverse Scenarios; Best Practices for Maintaining Donor Engagement During the COVID-19 Pandemic; and The Coronavirus and Possible Effects on Fundraising. More resources on the Paycheck Protection Program and our response to COVID-19 are available on PNC’s website.
- Save the date: On April 21 at 2 pm ET, we will be hosting a webinar, Nonprofit Enterprise Management: Strategic Planning for Adverse Scenarios. Please click or ask your PNC representative for an invitation. Please feel free to forward this invitation to your fellow board members, colleagues, or other interested parties.
The Endowment & Foundation National Practice Group
The Endowment & Foundation National Practice Group builds on our long-standing commitment to philanthropy and is focused on endowments, private and public foundations, and nonprofit organizations. We seek to help these organizations address their distinct investment, distribution and capital preservation challenges.
For more information, contact Henri Cancio-Fitzgerald at firstname.lastname@example.org.