Sec. 2203. Temporary waiver of required minimum distribution rules for certain accounts

This provision suspends required minimum distributions (RMD) from certain retirement plans and accounts, including traditional IRAs. Some fundraisers have worried that this suspension will decrease the number of qualified charitable distributions (QCDs) that they receive from their donors this year.

However, even though donors don’t have to take their RMD in 2020, it is still to the advantage of many donors to make a QCD as it could lower the amount of future RMDs and also allows donors to make an impactful gift to charity in a time when they may be cash sensitive. For many older donors, QCDs are still the most tax-efficient way to make charitable gifts. Nonprofits may also be able to motivate donors to give a QCD earlier in the year rather than waiting until the end of the year, which is the typical deadline.

Additionally, repeat QCD donations can open up conversations with donors about planned giving, specifically including an organization as the beneficiary of their IRA. This not only benefits the nonprofit with a substantial legacy gift, but also the donor’s heirs, since they will not have to pay estate taxes on the IRA funds given to charity.

Sec. 2204. Allowance of $300 above the line deduction for charitable cash contributions

The segment of donors that this provision benefits are non-itemizing cash givers. One way to cultivate gifts from this type of donor could be by marketing the nationwide trend to #pledgemycheck or #sharemycheck in your social media posts, both of which represent movements to encourage those who do not need their stimulus check to consider donating a portion of it to charity.

Sec. 2205. Modification of limitations on charitable contributions during 2020

For individuals, the 60 percent of adjusted gross income (AGI) limitation is suspended for 2020 and donors can deduct up to 100 percent of AGI. This stipulation in the CARES Act changes the limitation of deducting up to 60 percent of a donor’s AGI to 100 percent for 2020. Prior to the CARES Act, if a donor earned $100,000 and gave away $100,000 in the same year, the donor could only deduct $60,000 and the additional $40,000 would have to be carried forward and deducted in future years (up to five years).

Under the new legislation, a donor can earn $100,000 and deduct $100,000 for charitable contributions, thus significantly decreasing their taxable income. This provision applies only to cash gifts made directly to charities. The primary fundraising opportunity this provision presents is for donors who are still receiving income and also have excess cash.

Where do we go from here? Here are two ways to further take advantage of the CARES Act’s charitable provisions:

• Schedule a strategy session with Mariah Brook or Beth McCray, our nonprofit gift planning specialists
• For additional resources, read our post, Six Things to Read & Watch about the Changing Fundraising Landscape.