Laws that govern giving - Changes affect charitable efforts for the holidays

Hurricanes, earthquakes, a tsunami.

People responded generously to those natural disasters, one after the other, during the past two years. Unfortunately, that did not make it easy for charitable groups that, day in and day out, cater to South Florida's people in need.

"Yes, it's been a very difficult time," said Pedro del Sol, who until the start of this month was the chief executive officer of Caridad Center. The Boynton Beach center provides medical and dental services to the working poor and farm workers from Palm Beach County. "People are being tapped from everywhere and not just for local needs."

It's fundraising season at South Florida's charities, including the Caridad Center. This year, you won't be hearing about as many natural disasters. But you probably will be hearing a lot about some important tax law changes related to charitable giving.

Last summer's pension reform brought new tax treatments for charitable contributions. These will be important to the one out of three taxpayers who take itemized deductions on their tax returns.

One change might steer givers to do something never before allowed -- to donate an Individual Retirement Account to charity. Donors will also have to keep track of more paperwork during the coming year. You'll have to get receipts, even for small gifts to charity. And there are changes in the way you should handle the donation of used household goods.

Local needs are big and getting bigger, South Florida's charities say.

For instance, del Sol, who is now CEO of the Center for Nonprofit Excellence in West Palm Beach, estimates that 250,000 individuals in Palm Beach County and more than 1 million from in the three-county region have no health insurance. That's why, even though Caridad Center tended to 7,000 people in its fiscal year that ended in September, he's concerned. "The demand for help is incredible," he says.

Caridad Center is just one of almost 12,000 organizations registered with the state of Florida for the purpose of soliciting your money. Some charitable organizations raise as much as half their annual budgets during the holiday season.

It's important, of course, to check out a charity before giving. Their reports to the state will tell you how much they spend on overhead, for example.

Nationwide, giving jumped 6 percent in 2005 to more than $260 billion, in part because of Hurricane Katrina and the wave of other natural disasters that hit the planet in the previous year.

That uptrend in giving is expected to continue. Linda B. Carter, president and CEO of the Community Foundation of Broward, says, "We have seen growth and it's not just disaster-related. You can feel it. Our nonprofits out there do good work. I think we are seeing philanthropy on the rise." In addition, she says, when the stock market is healthy, people give, especially gifts of stock that's risen in value.

Here, then, are the new tax rules of charitable giving:

IRAs can be given away

Anyone age 701/2 or older can donate up to $100,000 a year to charities directly from an Individual Retirement Account in 2006 and 2007. Until the pension law was adopted last summer, a person who wanted to give what was in his IRA to charity had to first cash out the IRA, pay taxes on that amount, and then donate what was left.

Now, if the money goes directly to charity, it is not taxable. "I have one donor who is going to take advantage of it," says Danielle Cameron, vice president for development at the Community Foundation for Palm Beach and Martin Counties. But a donor cannot take a charitable contribution deduction on money given away in this fashion.

Set a value on used items

If you donate used clothing or furniture to a charitable organization for which you are planning to deduct $500 or less, you cannot take that deduction unless those items are in "good used " condition or "better."

What's "good used?" Congress failed to define the term, although the technical explanation accompanying the pension law said it does not mean used socks or underwear.

The Internal Revenue Service says it will clarify the terms, but it hasn't so far.

And just to make it more tricky, this provision kicks in only for donations made late in the year, starting last Aug. 17, the date the pension reforms became law.

If you gave items to charity after that date, those items had to be "good used" and you have to put a value on each item yourself if you plan to deduct these donations.

"All the charity has to do is say what you gave. They don't have to put a valuation on it," said Mark Luscombe, a principal analyst with the tax analysis firm CCH.

The items will be worth less than what you paid for them, certainly. But how much less? Luscombe's guess is that eventually the IRS may say that the item is worth what it would or did sell for at the charity's thrift store. For now, though, there is no firm guideline.

You can try the Salvation Army's online guide at www.satruck/ValueGuide.aspx or Goodwill Industries at www.goodwillpromo.org has its own version.

Keep in mind that if some day you need to defend this choice in a IRS audit, you should have a reasonable basis for picking a number. Even the Goodwill and Salvation Army lists don't offer one-size-fits-all answers. For example, The Salvation Army says a man's jacket is worth from $7.50 to $25. Which one should you pick? It's your call.

One more point: Let's say you give to charity small items several times a year. Even if the total of all the items exceeds $500, you still have to value each one individually if you plan to take an itemized deduction for the contributions.

If you gave away a single, expensive item worth more than $500, the new law says you have to include an appraisal with your return to back up your deduction.

There's a good reason you want to get this right: There are penalties for inflating the value of your donations. The good news, Luscombe says, is the law indicates the penalties won't apply to small misstatements. But if you overdid it by more than $5,000, watch out.

Remember the car rule

This donation rule was issued in 2005. You cannot deduct the value of a car you donated to charity, unless the charity is using it for its own purposes. If the charity simply accepts your vehicle and sells it, you can only deduct the amount the charity received from that sale.

Get a receipt

Starting next year, if you give any amount of money away, you can only deduct that gift if you have a receipt or a bank record from the charity. The pension law didn't make clear what the term "bank record" meant. It might mean your canceled check, but it might not. So get receipts -- for every dollar, if you plan to deduct it. Luscombe said it used to be that you could maintain a record yourself and deduct what you'd listed there. But no longer.

Taxes might seem more complicated than ever, but all the new rules on charitable contributions may not be too much of a burden to today's givers, who seem to like to delve into the details. Not just on taxes, but of how their money is being put to use.

Cameron of the Community Foundation for Palm Beach and Martin Counties says it's not unusual for a donor to want to know exactly where the money should go and want to watch over it closely.

A community foundation is an organization that allows donors to create a fund that reflects their charitable interests or contribute to a community pool of money designed to improve the well-being of a local area.

Donors have several options. If they make an unrestricted gift, the foundation's directors select the most urgent local needs. Donors can also select an area of interest, such as an environmental fund or a scholarship. Or, with gifts generally of $25,000 or more, a donor can establish a donor-advised fund, in which the donor makes grant recommendations and sets priorities for the money.

One 98-year-old donor, she said, is making recommendations with the help of his children and grandchildren "The whole family is involved. By phone and by e-mail, they decide what their recommendations will be as a family," Cameron said.