The nonprofit sector has really stepped up to the plate in responding to the crises left in the wake of Hurricane Katrina. Now the federal government is responding with laws and regulations that will assist nonprofits providing relief in the Gulf Coast. The House and Senate have each passed legislation providing Katrina tax relief that will directly affect nonprofits. The bills, an overall description of which is available here, offer short-term tax relief to evacuees and residents of the devastated areas along with a series of charitable giving tax incentives to promote charitable aid for hurricane victims. The differences between the House and Senate versions, which are very similar, will likely be hashed out early this week, and the bill will immediately be sent to the president for his signature. Key provisions relating to charitable giving are:

• IRA Charitable Rollover: The Senate bill excludes Individual Retirement Account (IRA) withdrawals from a traditional or a Roth IRA for qualified charitable distributions from otherwise-taxable gross income. Taxpayers who are 70 or older would be allowed to rollover amounts from their IRA accounts directly to a qualified charitable organization on a tax-free basis. In addition, the provision allows taxpayers aged 59 or older to transfer IRA funds to a charitable remainder trust and give a remainder interest in the trust to charity without tax consequences. This provision is effective through December 31, 2005. The House bill does not have a similar provision. Charities may have difficulty maximizing the utility of this tax break, given the short time frame. Groups who can benefit will need to educate the public to make donors aware of it. That means using resources on fundraising rather than relief, given the short timetable for the tax break. This provision was a key item in the CARE Act, which has had difficulty moving in Congress. Passage through this Katrina Relief package may be the means for extending it next year.
• Increases Individual Charitable Deductions: The Senate bill raises the permitted cash contribution level for individuals seeking a charitable deduction from fifty percent to sixty percent of adjusted gross income for tax years ending on or before December 31, 2005. The House bill would exempt cash donations related to Hurricane Katrina relief made before January 1, 2006 from the 50 percent of adjusted gross income limit as well as a phase-out of itemized deductions.
• Food and Book Donations: The Senate bill adds a provision from the CARE Act to encourage food and book donations from surplus inventories, by increasing the deductions donors will receive. The tax break would be in effect until December 31, 2005. The House version does not address food and book donations.
• Corporate Charitable Contributions: Currently, the charitable deduction for a corporation in any taxable year may not exceed 10 percent of the corporation's taxable income. Both the Senate and House bills temporarily increase the percentage limitation to 15 percent of the corporation's taxable income for one taxable year ending on or before December 31, 2006. Of course, the history of corporation charitable contributions shows that corporations, on average, have never come close to the 10 percent limit on contributions.
• Encourage IRS Information-sharing with State Charity Officials: The Senate allows the IRS to disclose information regarding organizations for which the IRS has denied or revoked tax-exempt status or certain other disciplinary actions the IRS may have taken to appropriate state officials. The objective is to address potential scams in the wake of Katrina, although there is no specific expiration date for this provision. The House does not have a similar provision.
• Increased Mileage Rate for Calculating Charitable Contribution Mileage Deduction: Both the Senate and House versions increase the mileage rate individuals may use to compute a tax deduction for personal vehicle expenses. The Senate increases it to 60 percent of the standard business mileage rate; the House to 70 percent [until Dec 31].

In related legislation, the House passed by voice vote H.R. 3736, the Katrina Volunteer Protection Act, authored by Rep. James Sensenbrenner (R-WI). The bill provides liability protection for the actions of unaffiliated volunteers or those working through a nonprofit assisting in Hurricane Katrina relief. Currently, there are few legal protections for volunteers or nonprofit organizations. Only an extremely small percentage of the some 1.4 million nonprofit organizations in the United States actually purchase liability insurance, due to excessive costs. As the Los Angeles Times recently reported, "The lack of liability protection was one of several concerns delaying some 900 churches from joining the evacuation network." According to recent press accounts, the Red Cross feels constrained in giving out the names of refugees to those who want to offer their homes for shelter because of liability concerns. The IRS has also temporarily changed some of its regulations concerning nonprofits. For example, it is expediting reviews of applications from new disaster relief organizations seeking tax-exempt status. The IRS has also recently announced special relief intended to support leave-based donation programs. Under these programs, employees donate their vacation, sick or personal leave in exchange for employer cash payments made to nonprofits providing relief for victims of Hurricane Katrina. This provision expires on Dec. 31, 2005. Other agencies are also taking action. The Department of Justice (DOJ) has established the Hurricane Katrina Fraud Task Force, designed to deter, investigate and prosecute disaster-related federal crimes, such as charity fraud and insurance fraud. DOJ has also set up a page on its website to inform citizens of ways to protect themselves from fraud. Donations to nonprofits have poured in as Americans respond to the devastation in the Gulf Coast. As of September 17, charities have raised over $1.06 billion in aid. Consequently, many nonprofits that are not participating in the relief efforts are worried whether donations for the remainder of the year will decline. According to the Chronicle of Philanthropy, such dips occurred after the 2001 terrorist attacks and December tsunamis. Charities and foundations are currently scrambling to figure out how to aid the victims of Hurricane Katrina, helping them get new homes, jobs, transportation, health care, education for their children, post-trauma counseling, and other services. Charities will also be focused on the long-term, how the work their organization does can help prevent massive devastation like that caused by Hurricane Katrina. The charitable giving legislation is Congress' first step in aiding charities in getting the resources they need when Congress and the nation is asking so much of them. However, Congress must do more than rely on the nonprofit sector. Disaster preparedness and relief programs are a federal responsibility that must be supported with adequate resources.