Today, leadership of Congress’ tax writing panels provided more detail in a news release about the legislative intent governing the implementation of H.R. 241, the Indian Ocean Tsunami Relief Act. The measure which passed the Senate and House on January 7, 2005 and was signed by the President last Friday is discussed in this previous post here. Excerpt from the news release:
- The Act applies only to charitable contributions of cash, whether by an individual or a corporation. Marketable securities and other property are excluded from the Act. Contributions made by credit card generally are treated as contributions of cash made at the time of the charge.
- Under the Act, taxpayers may choose whether to treat a contribution made in January 2005 as made on December 31, 2004, or as made in January of 2005. However, the deduction may be claimed only with respect to one taxable year. Taxpayers taking advantage of the Act are advised to make a notation to that effect on their 2004 tax return.
- The Act does not change any other present law rules with respect to charitable contributions. For example, the contribution must be a charitable contribution as defined in the Internal Revenue Code. Thus, the contribution must be made to an eligible organization, which, as under present law, generally does not include contributions to foreign organizations.
- The Act does not change the percentage limitations and carryover rules of present law. If a taxpayer takes advantage of the Act, the 2004 percentage limitations of a taxpayer apply to such contribution and any excess amount is treated as a carryover of a contribution made in 2004.
- Under the Act, contributions must be made for the Indian Ocean tsumami-related disaster relief. The taxpayer must substantiate that the contribution is made for such purpose.
- Taxpayers are not permitted under the Act to allocate a portion of a contribution to more than one taxable year. Thus, taxpayers are required to treat the entire contribution as made in January 2005 or as made on December 31, 2004. A taxpayer who makes multiple contributions may treat each contribution separately. For example, a taxpayer making three separate gifts of $100 each may treat two gifts as made on December 31, 2004, and one gift as made on the actual date of gift (in January 2005).
The news release makes some interesting points about substantiation of the tax deduction. For example, a receipt from a charity acknowledging that a contribution is intended to be used for tsumami-related purposes generally would be sufficient. Other forms of substantiation could include a taxpayer making a notation on the taxpayer’s check of the intended use of the contribution. While writing a notation on the check is acceptable, the news release makes it clear that, if the donee organization is not involved in assisting victims of the disaster, a notation on the check would not be sufficient in that case–in other words, one can’t turn a charitable contribution made in January of 2005 into a a 2004 charitable deduction by simply writing “tsunami” on the check.