Baucus, Grassley, Thomas, and Rangel Announce Legislative Intent for Implementation of Tsunami Tax Relief
(WASHINGTON, D.C.) -- Today, leadership of Congress’ tax writing panels issued the following legislative intent governing the implementation of H.R. 241, the Indian OceanTsunami Relief Act. The measure passed the Senate and House on Thursday and was signed bythe President last Friday.
U.S. Senator Max Baucus (D-Mont), Ranking Member of the Senate Finance Committee applauded support for the legislation.
“This great tragedy has united countries around the world to help those affected by thiscatastrophe,” Baucus said. “I commend Congress and the President for moving quickly on thislegislation. Americans will now be appropriately awarded for their generosity this year.”
Ways and Means Chairman Bill Thomas (R-Calif) also offered support for the legislation.
“For Americans contributing to Tsunami relief through January 31, 2005, this legislation will enable them to accelerate the time frame for deducting these cash donations. It is a way the U.S. government can help support Americans who have given record-level contributions to this recovery effort," said Thomas.
Chairman Charles Grassley (R-Iowa) of the Senate Finance Committee said, “Taxpayers might wonder whether the organizations they’re donating to qualify for charitable deductions.The IRS has a new, improved search feature to verify organizations’ eligibility. It’s available at www.irs.gov under Publication 78. Generally, donations to American non-profit groups, churches, mosques, and synagogues qualify, but contributions to foreign organizations don’t. Thanks to the IRS’ work, taxpayers should be able to determine eligible organizations without much trouble. I also continue to urge taxpayers not to give money to groups they don’t recognize and haven’t researched. The IRS, the Better Business Bureau Wise Giving Alliance, Guide Star, the Independent Sector, and others have resources online to guide giving. A little homework canmake sure taxpayers give their money to the needy, not the greedy, and get the tax break they’ve earned.”
In general, under present law, taxpayers may claim an income tax deduction for charitable contributions. The charitable deduction generally is available for the taxable year inwhich the contribution is made. For taxpayers whose taxable year is the calendar year, the taxbenefit of a charitable contribution made in January often is not realized until the followingcalendar year when the tax return is filed.
The Act permits taxpayers to treat charitable contributions of cash made in January 2005for the purpose of relief of victims of the Indian Ocean tsunami as contributions made onDecember 31, 2004. Thus, the effect of the Act is to give taxpayers the opportunity to acceleratethe tax benefit for calendar year taxpayers who make tsumani-related charitable contributions ofcash in January 2005. Under the Act, such taxpayers may realize the tax benefit of suchcontributions by taking a deduction on their 2004 tax return.
· The Act applies only to charitable contributions of cash, whether by an individual or acorporation. Marketable securities and other property are excluded from the Act.Contributions made by credit card generally are treated as contributions of cash madeat the time of the charge.
· Under the Act, taxpayers may choose whether to treat a contribution made in January2005 as made on December 31, 2004, or as made in January of 2005. However, thededuction may be claimed only with respect to one taxable year. Taxpayers takingadvantage of the Act are advised to make a notation to that effect on their 2004 taxreturn.
· The Act does not change any other present law rules with respect to charitablecontributions. For example, the contribution must be a charitable contribution asdefined in the Internal Revenue Code. Thus, the contribution must be made to aneligible organization, which, as under present law, generally does not includecontributions to foreign organizations.
· The Act does not change the percentage limitations and carryover rules of presentlaw. If a taxpayer takes advantage of the Act, the 2004 percentage limitations of ataxpayer apply to such contribution and any excess amount is treated as a carryover ofa contribution made in 2004.
· Under the Act, contributions must be made for the Indian Ocean tsumami-relateddisaster relief. The taxpayer must substantiate that the contribution is made for suchpurpose. For example, a receipt from a charity acknowledging that a contribution isintended to be used for tsumami-related purposes generally would be sufficient.Other forms of substantiation could include a taxpayer making a notation on thetaxpayer’s check of the intended use of the contribution. However, such a notationgenerally would not establish that the contribution was made for tsunami relief if thedonee organization was not involved in assisting victims of the disaster. Othercontemporaneous evidence showing the taxpayer’s intent may be used.
· Taxpayers are not permitted under the Act to allocate a portion of a contribution tomore than one taxable year. Thus, taxpayers are required to treat the entirecontribution as made in January 2005 or as made on December 31, 2004. A taxpayerwho makes multiple contributions may treat each contribution separately. Forexample, a taxpayer making three separate gifts of $100 each may treat two gifts asmade on December 31, 2004, and one gift as made on the actual date of gift (inJanuary 2005).
· The Act applies only for purposes of the income tax.
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