The $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law by President Trump on March 27, 2020. The 880-page economic stimulus bill contains many provisions intended to bring relief to those affected by the crisis across many sectors, including individuals, hospitals and public health, state and local governments, small businesses, large corporations, and education. The goal is to help businesses and individuals weather the storm of this crisis, which has brought about an unprecedented shut down of the American economy.
Of note, the bill contains a one-time “above-the-line” deduction for cash contributions of up to $300 made in 2020, to be taken on next year’s tax filing. The over 90% of people who file using the standard deduction do not typically get the benefit of a deduction for charitable contributions. Under the CARES Act, all taxpayers, even those using the standard deduction, will be eligible for this “above-the-line” deduction. Gifts to donor advised funds and non-cash gifts are not eligible.
For individuals who itemize deductions, there is usually a cap on the limit allowed for deductions for contributions (50% of AGI or 60% for cash contibutions). That limit will be suspended for contributions made in 2020. For corporations, the limit on deductions for contributions is increased from 10% of AGI to 20% for 2020.
The inclusion of an expanded charitable giving incentive is a critical acknowledgement by Congress that nonprofits need an infusion of financial resources to maintain and expand services to meet growing community needs, while also protecting the health of their staff, volunteers, and constituents. It is the first time Congress has passed this type of giving incentive in response to a disaster or national emergency. Unfortunately, the $300 cap does not stimulate the level of giving required to recover lost revenue from event cancellation, projected declines in giving due to a slowing economy, increasing demands for services, and adapting business models to support public health.