Question

Under the Tax Cuts and Jobs Act (TCJA) which of the following statements is true regarding changes to charitable contributions?

A. The new law provides that for charitable contributions made after December 31, 2017 until January 1, 2026, the limitation for cash contributions to public charities and certain private foundations is decreased to 25% of adjusted gross income (AGI)

B. A charitable deduction is allowed for any payment to an institution of higher education in exchange for which the payor receives the right to purchase tickets or seating at an athletic event

C. The new law repeals the donee-reporting exemption from the contemporaneous written acknowledgment requirement for tax years beginning after December 31, 2017

D. Under the new law contributions exceeding the annual limitation are not allowed to be carried forward

Answer 1

The answer is option(c).The reason is as follows :

  

Prior law authorized Treasury to issue regulations exempting donors from this requirement if the organization receiving the donation instead filed a return reporting the same information the donor would have received in the written acknowledgement. In 2015, proposed regulations were issued, which provided this very exception. Unfortunately, the regulations were promptly withdrawn due to privacy concerns surrounding the fact that charitable organizations would have been required to collect and maintain donors’ taxpayer identification numbers. Consequently, without regulations providing an exception, most commentators asserted that donors had to obtain a contemporaneous written acknowledgment to substantiate their donation.

TCJA

The TJCA expressly removes all doubt. The donee reporting exception is eliminated. As a result, donors must continue to substantiate donations through contemporaneous written acknowledgments.

The answer is not option (a) because :

The TCJA has made several changes to this framework. For cash donations—only cash—“to” 50 percent charities, the TCJA has increased the limitation from 50 percent to 60 percent of a taxpayer’s contribution base.

Additionally, cash contributions taken into account for purposes of applying the 60 percent limit are not taken into account again in applying the 50 percent limit for non-cash contributions. However, both the 30 percent and 50 percent (now non-cash) limits are applied by reducing them to take into account the aggregate cash contributions allowed under the 60 percent limit. Taxpayers can still carry forward amounts in excess of the contribution limits for up to five tax years—so long as the taxpayer’s contributions in those years fall within the contribution limits, taking into account the carryovers.

The answer is not option (b) because :

   The individual changes to the tax law will affect colleges and universities who accept tax-deductible donations. Although the TCJA increases the allowable deduction from 50% of adjusted gross income to 60%, another change doubles the standard deduction, significantly reducing the number of taxpayers that will itemize going forward. One additional provision of the law, specific to higher education institutions, repeals the deduction allowing individuals a charitable donation for their payment for the right to purchase tickets or seats at athletic events.

The answer is not (d) because:

  

The carry forward rules pertain to the limit on charitable contributions that can be deducted in a single year, which the new tax law increased to 60% of AGI. The carry forward rules allow donors who contribute more than 60% of AGI in a single year to carry forward the excess part of the gift as a deduction for the next five years.

Impact on charitable giving: These rules allow donors to deduct charitable contributions that exceed contribution limits in a given year and provide opportunities for tax planning.