The uncertain times created by the COVID-19 Pandemic also created a rapidly changing environment bringing
about challenges and disruptions for our communities, healthcare systems and economy. At this point, no one knows for sure the extent and duration of the pandemic or the ultimate impact on the investment markets. However,
Commerce Trust, a division of Commerce Bank, has been helping clients for over 100 years, and we are
here to serve as your source of trusted advice.
to assure you that you are not alone. Commerce Trust values the relationships formed with our nonprofit
clients, and we truly appreciate the important role nonprofits will serve in helping the country successfully emerge
from this crisis.
With the interruption in our economy, donor development has become even more challenging. Donors are less
accessible and may have increased concerns about making gifts given the uncertainty. The Coronavirus Aid, Relief
and Economic Security Act (the “CARES” Act) was signed into law on Friday, March 27, 2020. While much of the act provided direct financial relief programs to companies, including provisions for nonprofits, the CARES Act also
provided important charitable giving incentives that you will want to share with your donors.
THE CHARITABLE GIVING INCENTIVES PROVIDED BY THE CARES ACT
■ A new above-the-line deduction (universal or non-itemizer deduction that applies to all taxpayers) for total qualified charitable contributions of up to $300. The incentive applies to cash contributions made in 2020 and can be claimed on tax forms next year.
■ Cash contributions made by individual taxpayers in 2020 to public charities are subject to a limit of 100% of
adjusted gross income, up from the 60% limit.
■ Cash contributions made by C-corporations in 2020 to public charities are subject to a limit of 25% of taxable
income, up from the 10% limit; excess contributions above these limits may be carried over.
■ The limit on deductible food inventory contributions is 25%, increased from 15%
■ These newly enacted giving incentives do not apply to contributions made to supporting organizations or
donor advised funds.
CHARITABLE GIVING AND PLANNED GIVING STRATEGIES
In addition to the new provisions above, donors still can take advantage of existing charitable and planned giving tools as well. Two giving strategies that are very easy for donors to implement are IRA Qualified Charitable Distributions and gifts of appreciated assets. These strategies, as well as other types of planned gifts, may be of interest for donors that may not want to deplete cash at this time, however still want to provide support.
■ IRA Qualified Distributions: Donors over age 70 ½ can make a direct annual transfer from a traditional IRA to a nonprofit of up to $100,000, which is also knows as a Qualified Charitable Distribution (QCD) and exclude the distribution from taxable income. While the CARES Act waives the required minimum distribution (RMD) requirements for 2020, in future tax years, because the QCD qualifies to fulfill part or all of the RMD, a transfer from the IRA custodian directly to the nonprofit may reduce the donor’s taxable income, making it in effect an “above the line” charitable contribution. This reduction in income may also help to prevent the donor’s Medicare Part B and D premiums from increasing as they are tied to income.
■ Donor may consider gifts of appreciated property, such as publicly traded securities and real estate. Appreciated gifts of long-term capital gain property to public charities qualify up to a 30% of AGI limit (lower limit may apply for gifts to Private Foundations). For those that do not itemize, they would not receive a charitable deduction for the gift, however may still have a tax benefit by avoiding the capital gain that would be recognized if the donated assets were sold.
■ Donors may continue to take advantage of other types of planned gifts such as Charitable Remainder Trusts, Charitable Lead Trusts, Charitable Gift Annuities, Beneficiary Designations, Transfer on Death Designations and Bequests included in estate planning documents. These strategies, as well as other more complex planning tools, may be of interest to certain donors.
COMMUNITY FOUNDATION AND COMMUNITY RESPONSE TO COVID-19 PANDEMIC
Additionally, as the crisis unfolded, more than 350 U.S community foundations in 50 States, plus the District of
Columbia created relief funds to support those affected by COVID-19. These funds have been directing critical
relief to local nonprofits partnering with local governments and health organizations to help contain the spread.
To date, these efforts mobilized approximately $724 million to help those in need across the country.* These initiatives
have continued and will adapt to fund relief in this evolving crisis. Nonprofits may want to consider contacting local
community foundations in their geographic area to review the criteria and process for applying for a grant.
For more information about the donor giving strategies discussed, please contact your Commerce Trust
Institutional Relationship Manager. If you are not currently a Commerce client, but would like to discuss
these topics, simply email Commerce Trust’s Director of Nonprofit Services, Amy Pieper
*”Community Foundations Nationwide Launch Coronavirus Relief Efforts” Community Foundation Public Awareness Initiative, March 11, 2020.
Always consult with your CPA and professional advisor on matters involving taxes.
Commerce does not provide tax advice or legal advice to customers. While we may provide information or express general opinions from time to time, such information or opinions are not offered as professional tax or legal advice. Consult a tax specialist regarding tax implications related to any product and specific financial situation.
Past performance is no guarantee of future results, and the opinions and other information in the commentary are as of May 19, 2020. This summary is intended to provide general information only, may be of value to the reader and audience, and is reflective of the opinions of Commerce Trust.
This material is not a recommendation of any particular security or investment strategy, is not based on any particular financial situation or need, and is not intended to replace the advice of a qualified attorney, tax advisor or investment professional. Diversification does not guarantee a profit or protect against all risk.
Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed, and is subject to change rapidly as additional information regarding global conditions may change
Commerce Trust is a division of Commerce Bank.
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