The congressional elves have been busy this holiday season building consensus and hammering out agreements on a number of tax extender provisions. While much attention has been placed, and rightly so, on the temporary estate tax relief, the recently enacted Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 also includes a number of provisions that are of interest to tax exemption organizations. Among the more significant tax provisions extended to Dec. 31, 2011, are:
- Section 723 – Contributions of Capital Gain Real Property Made for Conservation Purposes under IRC Section 170(e) that allows individuals to deduct the fair market value of a qualified conservation contribution to the extent of the excess of 50% of the contribution base over the amount of all other charitable contributions. Such contributions are not taken into account in determining the amount of other allowable contributions.
- Section 724 – Provides for above-the-line deductions for qualified tuition and related expenses under IRC Section 222.
- Sections 725 – Tax-free distributions for charitable purposes from individual retirement plans under IRC Section 408(d)(8). Any qualified charitable contribution made after Dec. 31, 2010, and before Feb. 1, 2011, shall be deemed to have been made on Dec. 31, 2010.
- Sections 740-42 – Provide for enhanced charitable deductions under IRC Section 170(e)(3)(D) for contributions of food, inventory of books for public schools, and computer inventory for educational purposes under IRC Section 170(e)(6).
- Section 752 – Provides for an adjustment to basis of S Corporations under IRC Section 1367, making charitable contributions of property based on a pro rata share of the fair market value of the contributed property.
- Subtitle D, Subpart a – Provides for a Temporary Disaster Relief Provision on the New York Liberty Zone.
- Section 747 – Modification for the tax treatment of certain payments to controlling tax-exempt organizations. Extends the special rule under 512(b)(13) providing that payments received or accrued before Jan. 1, 2012, may be includable in the controlling organization’s unrelated trade or business income only to the extent that the payment exceeds the amount of the payment determined under the provisions of Section 482 arm’s length negotiations. An important issue for universities and hospitals that have controlled entities that generate income from the payment of rents, royalties, annuities, or interest income.
For further information and a detailed discussion of the newly enacted provisions, look for additional McGuireWoods white papers and legal alerts. Also see the Joint Committee on Taxation Technical Explanation (JCX-55-10).
McGuireWoods’ nonprofit and tax exemption organizations lawyers are available to address your questions and keep you informed as new developments occur in these important areas.
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