December 22, 2015

The Protecting Americans From Tax Hikes (PATH) Act of 2015 was passed by votes of 318 to 109 in the House and 65 to 33 in the Senate.  President Obama signed the PATH Act on December 18, 2015.

With bipartisan support, the bill makes permanent four tax extenders that help donors support their favorite charities:  IRA Charitable Rollover, Conservation Gift Limits, Food Inventory Gifts, and S Corporation Appreciated Gifts.

Here are some details on the four permanent charitable provisions:

1. IRA Charitable Rollover Each IRA owner over age 70½ may make a transfer of up to $100,000 per year to a qualified charity. IRA charitable rollovers are tax-free and not included in adjusted gross income. An IRA charitable rollover may fulfill part or all of your required minimum distribution (RMD).

A qualified charitable distribution is now permitted for transfers from the IRA custodian directly to a qualified charity. IRA owners over age 70½ may transfer up to $100,000 per year to a Sec. 170(b)(1)(A) charity. The public charity may not be a supporting organization or a donor advised fund.  The PATH Act does not extend to IRA rollovers to charitable gift annuities or charitable remainder trusts.

2. Conservation Gift Limits  Gifts of property for conservation purposes benefit from increased deduction limits. The normal 30% of adjusted gross income (AGI) limit for appreciated property gifts is increased to 50% and the carryforward limit is extended from five years to 15 years. For qualified farmers and ranchers, the deduction limit is 100% of AGI.

Donors who are interested in a deduction for benefiting the environment must meet three specific standards. They must donate a qualified real property interest to a qualified charitable organization exclusively for conservation purposes. Approved conservation purposes include preservation of land for outdoor recreation, protection of wildlife habitat, preservation of open space or preservation of a historically important area or structure.

3. Food Inventory Gifts  An enhanced deduction for contributions of “apparently wholesome” food will be available for all donors. The deduction is the lesser of twice the basis or basis plus one-half of the appreciation. The deduction limit is raised to 15%.

4. S Corporation Appreciated Gifts  A Subchapter S corporation may give appreciated stock or land to charity. Only the basis of the S corporation in the donated asset will be used to reduce the shareholder basis, even though the full fair market value deduction is claimed by the shareholder.