Congress Passes Hurricane Katrina Tax Relief Bill - Major Implications for Charitable Giving On Friday, September 23, President George W. Bush signed the Hurricane Katrina Tax Relief Act of 2005. While the majority of the $6.1 billion tax relief act focuses on providing assistance and tax relief for victims of Hurricane Katrina, it also contains incentives for charitable giving. The Act suspends limits on individual and corporate tax deductions for cash contributions made to charities between August 28, 2005 and December 31, 2005. Generally, individuals are limited to deducting 50 percent of adjusted gross income to charity; contributions made during the August 28 to December 31 timeframe may be deducted up to 100 percent of adjusted gross income. These contributions may be for any charitable purpose and are not limited to donations for Hurricane Katrina relief. "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," said one of the act's authors, Senator Charles Grassley, R-Iowa, in a San Francisco Chronicle article. It is important to note that this temporary suspension of the limitations will not apply to gifts made to donor-advised funds at a community foundation or other entity, to supporting organizations, and to private family foundations. However, donations to unrestricted and field-of-interest funds at community foundations and to private operating foundations will qualify for the enhanced incentive. For example, a donation to a Hurricane Katrina relief fund at a community foundation in the Gulf Coast would qualify, as would a gift to the Grand Rapids Community Foundation unrestricted fund. For corporations, the charitable contribution limitation is suspended during the August 28 to December 31 timeframe, but only contributions made to relief efforts for Hurricane Katrina are eligible for the enhanced incentive. The information contained here is being provided for informational purposes only. In compliance with IRS rules, we advise you to seek your own legal and tax advice in connection with gift and planning matters. This communication, including any attachment, is not intended or written to be used, and cannot be used, for the purpose of avoiding tax-related penalties.