Pension Protection Act of 2006
The Pension Protection Act of 2006 could help you maximize your tax deductions while supporting NEFF and its mission.
Conservation Easements: If you donate a conservation easement or sell one to NEFF as a “bargain sale” in 2006 or 2007, you will be eligible to claim a tax deduction for the donation up to 50% of your adjusted gross income (AGI), and you can carry forward any unused portion of the deduction for up to 15 years. The former law limited deductions to 30% of your AGI with a carry forward of 5 years.
If you are a farmer or rancher (forestry is farming under this law) who earns 50% or more of your income from farming or ranching, you would be eligible to deduct up to 100% of your AGI for donations like the above; the same carry forward applies.
Charitable Giving by S Corporations: If an S Corporation donates a forestland conservation easement to NEFF in 2006 or 2007, every shareholder may be able to get a tax benefit that was not available last year and may not be available after 2007. Each shareholder will be able to deduct their proportionate share of the fair market value of the donation up to 50% of their adjusted gross income and carry any unused forward for 15 years. Each shareholder’s basis in the corporation will be reduced by the pro rata share of the adjusted basis in the donated property. Under the former law, each shareholder would have been allowed a deduction of only up to the value of his or her stock basis.
An LLC as well as a closely held C corporation also may
benefit. The closely held C
corporation could elect S corporation status by March 15, 2007, and then take
advantage of this avenue of donating an easement to NEFF.
Charitable Gifts from Individual Retirement Accounts:
If you have an Individual Retirement Account (IRA) and wish to use it to make a
contribution to NEFF, you could direct the IRA trustee to make up to a $100,000
distribution directly to NEFF. Under
the new law, as long as you are at least 70.5 years of age at the time of the
distribution, the distribution will not be considered as income. Although you
would not get a charitable deduction, you would avoid paying income tax on the
amount distributed. The exclusion
is limited to $100,000 or less per taxpayer per year.
To learn more about supporting NEFF and qualifying for a
long-term tax deduction contact Whitney Beals by e-mail
or phone at 978-952-6856.
Your tax advisor will be able to guide you on the most appropriate structure for applying the changes to charitable giving laws. The changes are in effect only for 2006 and 2007 and may not be extended!