The final Hurricane Katrina relief bill that President Bush signed Friday left out a provision included in earlier drafts that would have allowed direct, tax-free rollovers of individual retirement account assets to charity.[@@]
However, another provision of the new Katrina Emergency Tax Relief Act of 2005 might provide indirect help for taxpayers who want to arrange charitable rollovers, according to John Fenton and Sonya King, tax law experts at Tax Facts, one of National Underwriter’s sister publications.
KETRA temporarily suspends the 50% limit on cash contributions for contributions made to qualified Katrina relief efforts.
In addition, a deduction for qualified Katrina relief contributions will not be treated as an itemized deduction for purposes of calculating the overall limit on itemized deductions.
Fenton and King say KETRA contains another provision that could be helpful to companies seeking to support Katrina survivors: Employers adopting leave-based donation programs to aid the victims can allow employees to donate their vacation, sick, or personal leave in exchange for employer cash payments to qualified Katrina relief efforts.
The Internal Revenue Service says that employees do not have to include the donated leave in their income and that employers will be permitted to deduct the amount of the cash payment.