On January 22, 2010, a new federal law came into effect in response to the outpouring of support being offered by American taxpayers in connection with relief efforts for those affected by the earthquake in Haiti. This law is designed to provide the following benefits for taxpayers making cash contributions in connection with those relief efforts. The law has two key provisions.
Acceleration of tax deduction
This provision allows a taxpayer to elect to claim a charitable income tax deduction in 2009 for a contribution made during a set time period in 2010 for Haiti earthquake relief. In order to qualify for this accelerated tax deduction these requirements must be met:
o The contribution must be of cash only.
o The contribution must have been made for “the relief of victims in areas affected by the earthquake in Haiti on January 12, 2010.
o The contribution would have otherwise been allowable as a charitable contribution deduction under section 170 of the Internal Revenue Code of 1986.
o The contribution must have been made after January 11, 2010, and before March 1, 2010.
If these requirements are met, a taxpayer may claim the contribution as a charitable deduction as if such contribution was made on December 31, 2009, and not in 2010.
The Internal Revenue Code generally requires that a taxpayer receive a “written contemporaneous acknowledgment” (a properly formatted receipt) in order to claim a charitable income tax deduction. In response to the Haiti earthquake, many contributions were made through text messages by cell phone. Unfortunately, cell phone bills would not ordinarily meet the statutory requirements of a charitable contribution receipt.
In order to allow taxpayers to claim a deduction for these text message contributions, the new law also provides that “a telephone bill showing the name of the donee organization, the date of the contribution, and the amount of the contribution shall be treated as meeting the recordkeeping requirements of section 170(f)(17) of the Internal Revenue Code of 1986.”
Things to consider or remember
First, consider whether you can make a gift to help the victims of the earthquake in Haiti. There is desperate need in that country and any support you can give is welcome. Cash is the most needed item as it provides relief organizations with the capital and flexibility they need to provide the services most urgently required in Haiti.
Second, determine if the accelerated income tax deduction allowing you to claim your contribution in 2009 is beneficial to you – either for a gift you have already made or a gift you are contemplating.
Third, if you wish to use the accelerated income tax deduction confirm that your gift meets the requirements of the law. The gift must be: (i) a gift of cash; (ii) made for relief of victims in areas affected by the earthquake in Haiti on January 12, 2010; (iii) otherwise deductible as a charitable contribution; and (iii) made after January 11, 2010, and before March 1, 2010.
Fourth, if you have made or will make a gift by telephone text message, keep a copy of your phone bill showing the required information in order to substantiate your charitable income tax deduction.
As always, please consult with your personal tax advisor about how the tax laws affect your personal tax situation in connection with your charitable giving.
For more information
Please contact the Community Foundation for Southeast Michigan at 313.961.6675 or visit www.cfsem.org if you have any questions about this new law or if we can be of assistant in helping you to identify charitable organizations to support in connection with the earthquake in Haiti. Thank you for your interest and support.
© 2010 Community Foundation for Southeast Michigan.