As many churches in our area celebrated Easter in their parking lots or over video recordings, we cannot help but think what impact the coronavirus is having on not just churches but other local nonprofit organizations in our communities.  Loss of jobs or lowered salaries have left many people cutting non-essential expenses, including club memberships and donations to their favorite charities.

Congress considered this impact to the nonprofit community in the CARES Act.  Under the act, § 501(c)(3) and § 501(c)(19) organizations with less than 500 employees are eligible for payroll protection as well as other loan programs for affected small businesses (our firm has covered in the following hyperlinked blog posts SBA Releases PPP Info and Updated PPP Application).  In addition, the CARES Act includes incentives for individuals and businesses to continue their charitable donations through this difficult time.  First, it provides an above-the-line deduction for charitable contributions of up to $300.  Since 2018, because of the substantial standardized deductions, most taxpayers are choosing to not itemize deductions, including charitable contributions.  The new above-the-line deduction is meant to incentivize donations to charities, many of which are working to help their communities during the COVID-19 pandemic.

For those that wish to make large charitable contributions or who have high deductible expenses, the CARES Act also increases the amount of charitable contributions that may be deducted.  The new allowance allows a taxpayer to deductive charitable contributions up to 100% of their adjusted gross income (this is a 40% increase from previous 60% of the taxpayer’s adjusted gross income).  For corporations, the limit has increased from 10% to 25% of adjusted gross income and the limit has increased from 15% to 25% of adjusted gross income for donations of food.