Tax-Exempt Status and Legislative Updates

A strategic approach to philanthropy can enable you to take advantage of changing tax laws and other legislative developments, which can help you maximize your charitable deductions and in turn help your giving have a more profound effect on your chosen causes. As part of our effort to continuously improve the effectiveness of giving in the United States, we offer updated information on the philanthropic environment, as well as insight into ways to enhance your charitable giving experience.

Recent updates include:

• IRS Revokes Tax-Exempt Status of 275,000 Charitable Organizations
• Detail on the December 2010 Tax Bill

IRS Revokes Tax-Exempt Status of 275,000 Charitable Organizations

The IRS has revoked the tax-exempt status of 275,000 charitable organizations because they failed to file a required annual information return for three consecutive years. The move took effect in early June and stemmed from provisions of the Pension Protection Act of 2006, which requires most tax-exempt organizations to file the annual information return.

Schwab Charitable donors may continue to recommend grants to any IRS-approved public charity, and we have set up safeguards so that funds to non-compliant organizations will not be granted. We will continue to update our information so that we can avoid granting to non-compliant organizations. Schwab Charitable donors may resubmit grant recommendations to any organizations that have their tax-exempt status re-instated.

The IRS has posted the full list of nonprofits that have lost their tax-exempt status as of June 9, 2011, for failure to file their Form 990. The Chronicle of Philanthropy provides more detail about the revocations and what organizations can do to get re-instated. In addition, Schwab Charitable provides CharitySearch from GuideStar, which allows you to search for and confirm IRS-approved public charities that continue to receive tax-exempt status.

Detail on the December 2010 Tax Bill

The tax bill signed by President Obama in December 2010 maintains current income tax rates and the 15% rate for capital gains and dividends, introduces a lower estate tax of 35% (with a $5MM per individual exemption) and provides for an Alternative Minimum Tax (AMT) patch and a payroll tax cut for 2011. In addition, the plan calls for an extension of the tax provisions that expired in 2009, including the IRA charitable rollover, enabling those over 70½ to once again transfer money tax-free from an IRA directly to charity in lieu of taking taxable required minimum distributions. IRA distributions made before Feb. 1, 2011 will be treated as being made in 2010, but they are not allowed to donor-advised funds, supporting organizations, or private foundations.