It is vital to understand that “tax exempt” does not necessarily mean “tax absolutely free.” Nonprofit organizations do must spend taxes on some of their earnings, specifically once they engage in activities that compete together with the private sector.
Having said that, the following provisions inside the PPA cut down the tax burden for some charitable organizations:
- Unrelated home business earnings tax guidelines: A charitable organization that controls a subsidiary organization will no longer be expected to spend unrelated home business earnings tax on specific payments it receives from subsidiary organizations when the payments are meant to cover interest, rent, and specific other sorts of payments.
- Excise tax exemption for blood collector organizations: It may perhaps appear odd to consider that donated blood was ever topic to a tax. Having said that, the PPA now particularly exempts some blood collector organizations from specific excise taxes with respect to activities connected to blood donations.
Requiring written records
The PPA cracks down on undocumented deductions. By way of example, beneath the
new law, charitable deductions for contributions created inside the kind of money or
check has to be accompanied by one particular of your following types of documentation
if they’re going to become treated as deductible:
- A cancelled check
- A receipt or letter from the charity
- Some other trustworthy written records showing the name of your charity, the nature of your contribution, plus the level of the donation
The rule for requiring a written receipt from the charity for money contributions of $250 or extra (which existed before the PPA) is nevertheless in impact.
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