Complete Tax

By Robert Steere, Toolkit Staff Writer

President Obama signed legislation enacted hastily by Congress to allow American taxpayers to accelerate income tax benefits by claiming a deduction on their 2009 income tax returns for any cash charitable contributions they make in January or February of 2010 to Haiti earthquake relief programs. A taxpayer may now treat any cash charitable contribution made before March 1, 2010 for the relief of victims in areas affected by the January 12 Haiti earthquake as if such contribution was made on December 31, 2009 rather than in 2010.

The House approved the bill, HR 4462, by unanimous consent on January 20. The Senate on January 21 also approved the bill by unanimous consent. After this speedy bipartisan action, Congress quickly sent the legislation to the President for signing, and he obliged on January 25. Under the general law for deducting charitable contributions, taxpayers who make contributions in January or February of 2010 would normally have to wait until 2011 to claim the tax deductions on their 2010 income tax returns. The new law allows taxpayers to accelerate the income tax benefits for Haiti earthquake-related contributions by claiming them on their 2009 tax returns that are due on April 15 this year.

"We all need to do our part," said Senate Majority Leader Harry Reid. "This is a creative way for Congress to support relief efforts that are ongoing in Haiti." Ranking Member of the Senate Finance Committee, Senator Chuck Grassley, declared, "Americans give generously to disaster relief, and I hope this extension will encourage them to give even more." He also noted, "People should be careful to give only to groups they recognize and trust."

Hundreds of millions of dollars have already been donated in America to the relief effort -- tens of millions of dollars were donated via text messaging on cell phones. Obviously, the hope of our lawmakers is that the acceleration of tax benefits will encourage an even greater level of giving. A similar law was enacted in early 2005 to encourage charitable donations for the relief of victims of the December 2004 Indian Ocean tsunami.

Two other things to note about the new law: First, it only applies to cash donations that qualify as charitable contributions. Second, in the case of any qualifying cash donation made by phone via text message, a telephone bill showing the name of the donee organization, the date of the contribution, and the amount of the contribution shall satisfy the record keeping requirements for the deduction.

In a related development, IRS Commissioner Douglas Shulman has designated the Haiti earthquake as a "qualified disaster" pursuant to the tax code. This means that qualified disaster relief payments received by individuals to reimburse or pay for reasonable and necessary expenses for basic living or for repair, rehabilitation or replacement of a personal residence or its contents are not included in gross income, and are not taxable. It also means that employer-sponsored private foundations can assist certain victims in areas affected by the earthquake.

The January 12 earthquake is the worst natural disaster to hit Haiti in centuries. The cost in lives has been great -- an estimated 200,000 presumed dead. Another 1.5 million or more people have been left homeless. The infrastructure, what there was of it, incurred severe damage. Already the poorest nation in the western hemisphere, Haiti lost its capitol building, many of its hospitals, schools and commercial buildings, much of its transportation infrastructure, and many, many homes. Its capital city of Port-au-Prince was devastated.

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Posted January 28, 2010.