TAX ALERT
Recently President Bush signed The Katrina Emergency Tax Relief Act of 2005 into
law. Many of the provisions directly affect the victims and those assisting
them. However, several provisions have a broader impact. For example, the law
expands the deductibility of charitable contributions; some aspects require a
direct relationship to Katrina, while others do not.
Individuals
The law temporarily suspends the limitations on charitable contributions in
general. There are two aspects to this.
Under the “contribution base limitation”, an individual may not deduct
contributions which are in excess of 50% of their Adjusted Gross Income. The new
law removes that limitation.
The law also has temporarily suspended the overall phase-out limitation imposed
on “high-AGI-taxpayers” for elected charitable contributions claimed as itemized
deductions.
Both provisions apply only to cash contributions. Additionally, such cash
contributions must be made from August 28, 2005 through December 31, 2005;
however the contribution itself does not need to directly benefit Katrina
victims.
Corporations
Corporate America also has enhanced contribution opportunities. Similar to an
individual, a C corporation is generally limited to deductions for charitable
contributions equal to 10 percent of its taxable income for the year in which
the contributions were made. This limitation has been eliminated. In order to
qualify, the corporation’s contributions must be made in cash. Such cash
contributions must be made between August 28, 2005 and December 31, 2005. In
addition, qualifying contributions are limited to those directly related to
relief efforts associated with Hurricane Katrina.
Contact your J.H. Cohn service professional for more information.
J.H. Cohn LLP
Accountants and Consultants
Offices in New York, New Jersey, California and the Cayman Islands
888-542-6461
www.jhcohn.com