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  • Foundation Innovation

Let's Start the New Year Off Right! FYI: The Cares Act, Tax Deductions and Corporate Documents

Happy New Year! 2021 will be your year as an education foundation. Let’s start the year off right! The following is important information for your foundation to know.

Planning strategically gives your education foundation a road map to success for 2021 and beyond. Not all that happened in 2020 was bad for education foundations that support public education. In fact, a large portion had banner years financially. What did we learn? How did we adapt? What are we going to do as an impactful organization moving into 2021? Contact Foundation Innovation to the get the year started on the right track and engage the board of directors and staff to make 2021 the best year ever. Sessions can be held virtually if preferred.

Have you taken a look at your bylaws, memorandum of understanding, donor agreement, incorporating documents, policies and other corporate documents? Did they allow the education foundation to be nimble enough to adapt to the restrictions brought on by the pandemic? Do you even know what changes need to be made to your corporate documents? Contact Foundation Innovation to schedule a review of your documents and any recommendations for change.

As education foundations it is important to keep up with regulatory information from governing entities such as the IRS and local, state and federal laws. Did you know that with the tax reform changes made a few years ago, the standard deduction was increased to the point that nearly nine in ten taxpayers take the standard deduction instead of itemizing their tax return. Since charitable deductions are only allowed for itemized filers, the CARES Act that was passed allows a $300 deduction for all married filers or $150 per individual or married filing individually who take the standard deduction. What does this mean to you? You should make sure your donors are aware of this deduction for 2020 tax filings. There is also discussions and potential legislation that will increase charitable donations for those using the standard deduction. We should all support this initiative.

For donors who itemize, the CARES Act allows up to 100% of adjusted gross income (agi) for qualifying donations. This is an increase from the 20-60% traditionally allowable. Filers would need to complete 1040-SR.

Not all education foundations receive unrelated taxable income such as advertising, merchandise sales, or other income not directly contributed to the mission of the foundation. Should you receive unrelated taxable income, your education foundation may be subject to unrelated business income tax (UBIT). This is a separate IRS filing and the regulations have been modified.

Please contact Foundation Innovation for all services that will enhance your education foundation. Please contact your financial adviser for counsel on all IRS filings.

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