January 30, 2024

Tax law twists and turns: Four developments impacting charitable giving

Here’s a recap of last year’s key developments that are worth keeping an eye on in 2024.

Charitable Act

Senate Bill 566, which is still pending, was introduced in early 2023 to address what is sometimes called the “universal charitable deduction,” meaning that even taxpayers who do not itemize their deductions would be able to claim a charitable deduction, potentially in an amount up to one-third of the taxpayer’s standard deduction. Keep an eye on this; the bill enjoys broad support and, if it becomes law, could be a real perk for your clients and the charities they care about.


Proposed Regulations

Proposed regulations issued by the IRS are not binding, and often, they are revised–or even shelved or canceled entirely–before they go into effect. Still, the Foundation team is always watching for these and other forms of IRS rulemaking that could potentially affect your work with your charitable clients. A recent example of this type of IRS activity is a set of proposed regulations concerning donor-advised funds issued in November 2023. The public comment period ends in mid-January 2024, and then the IRS will take time to review the comments, so we won’t know anything definitive for quite some time. For those interested, we like the detail provided in this podcast series on the topic. You can take a long winter walk and learn everything about what’s being proposed! And, of course, you’ll hear from us when (and if) the proposed regulations ever go into effect and what to do about it.


Exempt Purpose

It seems that at least once a year, the IRS issues guidance on what it means for an organization to be organized for an exempt purpose under Section 501(c)(3). In Private Letter Ruling 202349014, we are reminded that personal activities that have no direct public benefit will not be viewed by the IRS as exempt. While private letter rulings are not binding, they are nevertheless useful tools to provide to a client to show specific examples of what the IRS considers non-exempt. Estate planning attorneys and CPAs tell us that every few months, a client comes to them with an idea for starting a nonprofit, and it’s easier to tell a cautionary tale than it is to recite Internal Revenue Code sections!


Donations of Cryptocurrency

It’s still a thing! At least a few of your clients are likely still invested in cryptocurrency despite the whirlwind in that industry over the last year or so. You should know that in early 2023, the IRS published guidance confirming taxpayers cannot take a charitable deduction for a gift of cryptocurrency over $5,000 without submitting a qualified appraisal. Cryptocurrency, in the eyes of the IRS, is treated as property, not cash. And it is not a security, either. The IRS also said that a price quotation from a cryptocurrency exchange (such as FTX!!) doesn’t count; a qualified appraisal is still required.