This month, the Obama administration released its 2017 fiscal year revenue proposals, which included a proposal to streamline the current charitable deduction limitations and a proposal to extend the carry-forward period for contributions in excess of the charitable deduction limitations from five years to fifteen years.

Current Law:

A donor's charitable deduction is limited based on the type of charitable organization receiving the donation, the type of property donated and how the property donated will be used by the charitable organization.

If a donor contributes cash to a public charity, the donor's deduction is limited to 50% of his/her adjusted gross income. If the same cash contribution is made to a private foundation, the donor's deduction is limited to 30% of his/her adjusted gross income.

Donations of appreciated long-term capital gain property to a public charity are limited to 30% of the donor's adjusted gross income, while the same donation to a private foundation is limited to 20% of the donor's adjusted gross income. Donations of certain property to be used by either a public charity or a private foundation in their daily activities are limited to 20% of the donor's adjusted gross income.

If a donor's charitable contribution exceeds the limitations discussed above, the donor can carry-forward the excess amount of the charitable contribution (and deduct it in later years) for up to five years.

Proposed Changes:

In an effort to simplify the current landscape, the Obama administration has proposed the following:

  • Retain the 50% adjusted gross income limitation for cash donations to a public charity;
  • Subject all other donations (except donations of qualified conservation easements) whether to a public charity or a private foundation to a 30% adjusted gross income limitation; and
  • Increase the current carry-forward period from five years to fifteen years.

If approved, these changes to the charitable deduction limitation rules would be effective for contributions made after December 31, 2016.

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