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Jack Owen’s Tax-Exempt Alert JANUARY 2024

At the January 2024, Pittsburgh Planned Giving Council (“PPGC”) meeting, I discussed some updates affecting nonprofit charitable organizations.

The updates affecting nonprofit charitable organizations are as follows:

  1. On December 22, 2023, the IRS issued Private Letter Ruling 202351014 about an organization operated to bring the community together for entertainment purposes.  In this ruling, an annual festival consisting of entertainment, crafts, food vendors, live music, games and the like was found to be primarily for social and recreational activities and not an exempt charitable purpose.  Thus, tax-exempt status was denied.  This ruling is a good example that charitable purposes must be primary before IRS can issue a favorable determination of tax-exempt charitable status.
  1. Senate Bill 566 provides proposed legislation for a non-itemized, universal charitable deduction (S. 566).  Representatives of nonprofit organizations may want to contact their federal representatives to urge passage of this proposed legislation.  A sample letter from the Charitable Giving Coalition is attached.
  1. The Secure Act 2.0 made helpful changes to the required minimum distribution (“RMD”) and IRA charitable rollover rules (technically, the qualified charitable distribution or “QCD”).  Effective January 1, 2023, the RMD age was increased from 72 to 73.  This change did not affect the IRA charitable rollover eligibility age of 70 ½.

As of January 1, 2024, the $100,000 annual limit on IRA charitable rollovers is indexed, and IRS announced that the amount for 2024 is $105,000.  This is very good news for donors and will be increased in future years.

Effective January 1, 2023, the IRA charitable rollover was expanded to allow QCDs to be paid into charitable gift annuities and charitable remainder trusts.  Like a regular QCD, these gifts into life income vehicles are also indexed for inflation, rising from $50,000 in 2023 to $53,000 in 2024.

The QCD into a life income gift can be valuable to different types of donors.  One donor type would be the generous donor who has already given up to his or her maximum adjusted gross income limitation as defined in the tax laws (up to 60% for cash gifts and 30% for appreciated property in 2024).  Since a QCD is not included in a donor’s taxable income and does not create a charitable tax deduction, a generous donor can give beyond his or her AGI deduction limits.

  1. Bipartisan legislation (Streamlining Federal Grants Act, S. Bill 2286/H.R. 5934) would reform the federal grants process and hopefully deliver relief to nonprofit organizations from unrealistic reimbursement rates and costly administrative burdens.

As always, the devil is in the details with the above complicated updates.

Please do not hesitate to contact any attorney at Owen Law Group if you have any questions on the above changes or any other matter related to charitable organizations.

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