Tax Provisions - Also Known As Tax Extenders

Energy & Resources|Not-for-Profit|Tax

By Elena Faurie

On April 3, 2014, the U.S. Senate Finance Committee voted to extend a set of expired tax provisions through the end of 2015.  These tax provisions, also called “tax extenders,” are usually extended for one or two years rather than becoming permanent laws or being allowed to expire.  The current tax extenders were in effect until the end of 2013.  Senator Harry Reid (D-NV) introduced the Tax Extenders Act of 2013 (S. 1859) on December 19, 2013.  The bill includes provisions for several groups such as individuals, small businesses, renewable energy and tax-exempt organizations. 

Previously expired provisions affecting nonprofit organizations include the following:

  1. Tax treatment of certain payments to controlling exempt organizations.  This provision lets  payments, such as interest, rent, royalties and annuities to a tax-exempt organization by controlled entity to be excluded from the tax-exempt organization’s unrelated business income, provided the arrangements represent fair market value.
  2. Special rules for contributions of capital gain real property made for conservation purposes.  The bill would extend for two years the increased contributions limits and carry-forward period for contributions of appreciated real property for conservation purposes.
  3. Tax-free distributions from individual retirement plan for charitable purposes.  This provision would be extended for two years.  It permits an Individual Retirement Arrangement (IRA) holder who is 70-1/2 or older to exclude from gross income up to $100,000 per year in distributions made directly from the IRA to certain public charities.
  4. Basis adjustment to stock of S corporations making charitable contributions of property.  This provision allows S corporations shareholders to take into account their pro rata share of charitable deductions even if they would exceed shareholder’s adjusted basis in the S corporation.
  5. Enhanced charitable deduction for contributions of food inventory.  This provision allows businesses to claim an enhanced deduction for contributions of food inventory.

As of today, the bill has stalled in the Senate, and the future of these tax extenders is uncertain.  According to Senator Reid, the bill will most likely be put off until after the midterm elections in November.  The bill will need to be approved by the full Senate, before moving forward.  Similar bills have been advanced by other members of Congress; however, they have met with the same fate.

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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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