Tax Extenders Affecting the Not-for-Profit Industry: A Closer Look

On December 18, 2015, President Obama signed Tax “Extenders” legislation into law.  Many of the provisions were made permanent.  The bill includes provisions for several groups such as individuals, businesses and tax-exempt organizations. 

Previously Expired Tax Extender Provisions that Affect Nonprofit Organizations

  1. Special rule for qualified conservation contributions.  The provision makes permanent the increased percentage limits and extended carryforward period for qualified conservation contributions for contributions made in taxable years beginning after December 31, 2014.
  2. Tax-free distributions from individuals from individual retirement plans for charitable purposes.  The provision makes permanent the exclusion from gross income for qualified charitable distributions from an IRA.  The exclusion may not exceed $100,000 per taxpayer in a tax year.  The provision is effective for distributions made in taxable years beginning after December 31, 2014.
  3. Enhanced charitable deduction for contributions of food inventory.  This provision makes permanent for businesses to claim an enhanced deduction for contributions of food inventory made after December 31, 2014.
  4. Tax treatment of certain payments to controlling exempt organizations. This now -permanent 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. The provision is effective for payments received or accrued after December 31, 2014.
  5. Basis adjustment to stock of S corporations making charitable contributions of property.  This now-permanent provision allows S corporation shareholders to take into account their pro rata share of charitable deductions even if they would exceed the shareholder’s adjusted basis in the S corporation.  The provision applies to charitable contributions made after December 31, 2014.
  6. Special rules concerning charitable contributions to, and public charity status of, agricultural research organization.  This provision allows certain charitable contributions to qualifying agricultural research organizations to qualify for the 50% limitation.  It also allows treating certain qualifying agricultural research organizations as public charities, regardless of their source of financial support.
  7. Extension of new markets tax credit.   The provision extends the new market tax credit through 2019, and the carryover period for unused new markets tax credits until 2024.

If you have any questions regarding the extended and/or permanent provisions, please contact the nonprofit group of Schneider Downs.

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