Employee Benefits Blog

Posts tagged Charitable contributions

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Blast from the Past Keeps Giving: The Donor Advised Fund

Question: What tax planning tool was born almost 80 years ago and is still offering taxpayers a way to make charitable donations in a meaningful and tax-efficient manner?

Answer: The Donor Advised Fund

The donor-advised fund has a rich history of benefiting both taxpayers and charities. The charitable funds were first introduced in the 1930s by community foundations, but their use flourished as reporting requirements increased for private foundations in the 1970s and as the IRS approved commercial providers in the 1990s. The funds have now launched into the top 10 largest charities in the United States. Fidelity Charitable Gift Fund overtook the United Way as the largest charity in America in 2016. It held the top spot again in 2017 and was joined in the top ranking by the philanthropy funds from Goldman Sachs (#3), Schwab (#6) and Vanguard (#10). Using data from 2010-2016, National Philanthropic Trust found that there were about 285,000 individual funds with over $85 billion in managed assets.

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Hurricane Sandy: Favorable Rules for Leave-Based Charitable Donation Programs

In general, employees are taxed on compensation that they earn even if they assign it to someone else, and they can claim deductions for contributions to charity only if they itemize their deductions.  Also, the deduction available to C corporations for charitable contributions is generally less favorable than the deduction for business expenses, in that the charitable contributions deduction generally cannot exceed 10% of the corporation’s taxable income.

In Notice 2012-69, the Internal Revenue Service relaxed all of these general rules for leave-based charitable contribution programs to benefit victims of Hurricane Sandy.  Under such a program, employees would elect to forgo vacation, sick, or personal time in exchange for cash donations by their employer to a Section 170(c) tax-exempt charitable organization for the relief of victims of Sandy.