Two generous tax breaks expire soon for charitable donors

Date: September 28, 2007

Author: Kauffman Center

Potential donors take note:  two very favorable tax scenarios for gifts to the Kauffman Center expire on December 31, 2007.  If your donation qualifies in either of these categories, making a gift now may be even more attractive than you thought.

In the first option, Missouri state tax credits are available for donors a) making a contribution of $50,000 or more and b) who pay certain taxes to Missouri.

In the second option, donors who are 70 ½ or older have until the end of the year to make a tax-free charitable contribution from their IRA.

Increase the power of your gift through these options

Tax credits are a partnership with state government to support charitable projects.  For the capital campaign, the Kauffman Center applied for and received $25 million in tax credits from the Missouri Development Finance Board.  These tax credits are available for donations of $50,000 or more, but they expire on December 31 of this year.

Here’s how it works:  say a donor makes a contribution of $50,000 to the Kauffman Center.  In return, the donor receives a tax credit of $25,000 to be applied against an existing tax liability.  In essence, the $50,000 contribution only “costs” the donor half of that amount.  The credits may be used to offset income tax, franchise tax or financial institution tax.  They may also be transferred to another taxpayer.

The second opportunity relates to making a tax-free donation from your Individual Retirement Account (or IRA).  In 2006 Congress enacted the Pension Protection Act permitting individuals to roll over up to $100,000 from an IRA directly to a qualifying charity without recognizing the assets transferred to the charity as income. 

This smart giving option is available to individuals who are 70 ½ or older.  The donor may exclude up to $100,000 from his or her gross income for each qualified distribution.

Unfortunately, unless Congress renews this legislation, the PPA is time limited and only applies to distributions made in taxable years beginning after December 31, 2005 and before January 1, 2008.

Note:  This information has been summarized for informational purposes only and is not offered as legal advice.  We recommend that you talk with your financial advisor about tax implications of any gift.  At the Kauffman Center, Marcy Chiasson at 816-994-7235 is available to help with these types of gifts.