KETRA allows tax benefits for charitable donations

By RENEE WEBB, Globe editor
October 20, 2005

The Katrina Emergency Tax Relief Act was passed by Congress on Sept. 21 and signed by the president on Sept. 23. Primarily, it is designed to extend temporary tax relief to individuals and businesses suffering from the devastation of Hurricane Katrina.

Along with helping victims of the hurricane, KETRA also helps those who have volunteered or donated to the relief efforts. The new act contains some provisions that may benefit individuals who are considering making a charitable gift to any qualified charity before the end of the year.

The development director of the diocese said Congress wanted to give people a way to respond to those needs without hurting other charities that could suffer funding setbacks due to the shifting of gifts to disaster relief efforts.

"What this act does is allow unlimited gifts to a charity up to a donor's total income until the end of 2005 - through Dec. 31," explained Steve Elbert, director of development for the Diocese of Sioux City and Catholic Charities. "This is a milestone, because never before have Americans had this situation where they can gift this amount."

Bob Houlihan, a CPA with Houlihan and Associates, PC, agreed that KETRA does create a unique gifting environment. In his 30 years in the profession, he mentioned that he has never seen this, basically the lid taken off of charitable giving.

"The important thing in what this does is eliminate the normal limitation when you make gifts. Normally when you make a gift to charity, the most you can give is 50 percent of your adjusted gross income. Now it is 100 percent of your adjusted gross income," he explained.

For individuals, KETRA does not require that your gift go to a charity that is engaged in providing direct relief to Katrina victims.

If people have been considering a major gift to a parish, Catholic school, the Diocesan Annual Appeal or other Catholic entity such as Catholic Charities - Elbert stressed that now is the time to do it because of the tax benefits.

He pointed out that Iowa's Senator Chuck Grassley helped to pass this act.

"The senator was instrumental in making sure there was support for Katrina, which was a horrific situation in our country, but in addition to that Senator Grassley was well aware of the situation that happened after 9-11. There was an outpouring of support for that tragedy, but statistics showed that it did hinder existing charities," said Elbert.

The diocesan development director stressed the fact that the need is great with Hurricane Katrina as it was with 9-11, so people are certainly encouraged to help out there where they can.

Elbert referred to a quote from Senator Grassley, chairman of the Senate Finance Committee, which was released on Sept. 20, a few days before President George W. Bush signed KETRA into law. Senator Grassley said, "We also need to make sure the national economy stays strong in light of high energy prices and other uncertainties. Also, with many of the charitable provisions in the tax bill, our goal is to encourage charitable giving outside of Katrina relief to prevent the rest of the nation's charities from seeing a downturn in giving as they did after Sept. 11."

A report that listed the nation's contributions to nonprofits in 2004 showed that when adjusted for inflation, giving had still not recovered to pre-Sept. 11 levels.

The diocesan development director asked that people keep in mind the small window of time to gift at this level.

Retired persons, 59 1/2 years or older, may opt to make an IRA withdrawal, but people are reminded that it may take two to three weeks to process and then time is needed to actually make the donation. Through the end of the year, 100 percent of that withdrawal is tax deductible, if gifted to a qualified charity by Dec. 31.

Houlihan mentioned that from a tax standpoint many people like to gift appreciated securities, but KETRA is specific to cash donations. With KETRA there may be no private foundation gifts, no supporting organization gifts, no donor-advised gifts and no gifts of property such as stock or land.

"It has to be contributions made Aug. 28 through Dec. 31 of 2005. Cash given in that timeframe qualify for the 100 percent of the AGI deduction," noted Houlihan. He pointed out that with this act the big distinction for a gift made by corporation is that their donation must go directly for the hurricane relief effort.

Elbert urged people to contact their CPA or tax advisor for more information about the tax benefits of giving through KETRA.

For more information check out http://www.irs.gov/newsroom/article/0,,id=149391,00.html