Joint Committee Report JCS-1-16: General Explanation of Tax Legislation Enacted in the 114th Congress

Organizations described in section 501(c)(3) (generally, charitable organizations) are exempt from Federal income taxation under section 501(a). A section 501(c)(3) organization must be organized and operated exclusively for exempt purposes, and no part of the net earnings of such an organization may inure to the benefit of any private shareholder or individual. An organization is not organized or operated exclusively for one or more exempt purposes unless the organization serves a public rather than a private interest. Thus, an organization described in section 501(c)(3) generally must serve a charitable class of persons that is indefinite or of sufficient size.

Deduction for charitable contributions

In general, under present law, taxpayers may claim an income tax deduction for charitable contributions. The charitable deduction generally is available for the taxable year in which the contribution is made. The tax benefit of a charitable contribution, however, often is not realized until the following calendar year when the tax return is filed.

A donor who claims a charitable deduction for a contribution of money, regardless of amount, must maintain as a record of the contribution a bank record or a written communication from the donee showing the name of the donee organization, the date of the contribution, and the amount of the contribution.³ In addition to the foregoing recordkeeping requirements, substantiation requirements apply in the case of charitable contributions with a value of $250 or more.⁴ No charitable deduction is allowed for any contribution of $250 or more unless the taxpayer substantiates the contribution by a contemporaneous written acknowledgment of the contribution by the donee organization.

The provision permits a taxpayer to treat a charitable contribution of cash made between January 1, 2015, and April 15, 2015, as a contribution made on December 31, 2014, if such contribution was for the relief of the families of slain New York Police Department detectives Wenjian Liu and Rafael Ramos. Thus, the effect of the provision is to give a calendar-year taxpayer who makes charitable contributions of cash for the relief of such detectives' families between January 1, 2015, and April 15, 2015, the opportunity to accelerate the tax benefit. Under the provision, such a taxpayer may realize the tax benefit of the contribution by taking a deduction on the taxpayer's 2014 income tax return.

The provision clarifies the recordkeeping requirement for monetary contributions eligible for the accelerated income tax benefits described above. With respect to such contributions, a telephone bill will satisfy the recordkeeping requirement if it shows the name of the donee organization, the date of the contribution, and the amount of the contribution. Thus, for example, in the case of a charitable contribution made by text message and chargeable to a telephone or wireless account, a bill from the telecommunications company containing the relevant information will satisfy the recordkeeping requirement.

The provision also clarifies that a contribution described in the provision that is made on or after December 20, 2014, will not fail to qualify for a charitable deduction, or for the acceleration of the deduction under the provision, merely because the contribution is for the exclusive benefit of the families of the slain detectives.

Payment by organization treated as related to organization's exempt purpose

Under the provision, certain payments are treated as: (1) related to the purpose or function constituting the basis for the organization's exempt status; and (2) are not treated as inuring to the benefit of any private individual, if the payments are made in good faith using a reasonable and objective formula that is consistently applied. Such payments include payments made: (1) on or after December 20, 2014, and on or before October 15, 2015; (2) to the spouse or any dependent (as defined in section 152 of the Code) of slain New York Police Department detectives Wenjian Liu or Rafael Ramos; and (3) by an organization that is exempt from tax under section 501(a) (determined without regard to such payments).