The IRS has announced new inflation-adjusted rates for 2011. The following highlights the adjusted rates which are of particular interest to nonprofits.
Mileage. Effective January 1, 2011, the mileage rate use of a vehicle are as follows:
- Business Use – 51 cents per mile, up from 50 cents per mile
- Medical Use – 19 cents per mile, up from 16.5 cents per mile
- Volunteer or Charitable Use – 14 cents per mile which is unchanged
Low Cost Article. The distribution of “low cost articles” related to charitable solicitations (such as mugs or key chains imprinted with the organization’s logo) is excluded from an organization’s taxable unrelated business income.
For the 2011 tax year, the value of a “low cost article” is $9.70 or less an increase of 10 cents from 2010.
Other Insubstantial Benefits. The IRS has provided guidelines for nonprofit organizations on the amount deductible from contributions made by donors who receive something in return for their payments. The guidelines stated that a contribution will be fully deductible even if the donor receives goods or other benefits in return, so long as the benefits conferred on the donor are insubstantial. Benefits received by a contributor are considered insubstantial where:
- the fair market value of all the benefits received does not exceed the lesser of 2% of the contribution or $97.00 (up from 96.00 in 2010); or
- the only benefits received by the donor during the year in return for a contribution of $48.50 or more have an aggregate cost of not more than $9.70 (up from 42.00 and 8.60 in 2010, respectively);
Annual Exclusion for Gifts. The annual $13,000 gift tax exclusion is unchanged from 2010. Thus, the first $13,000 of gifts to any person (other than gifts of future interests in property) will be excluded from the total amount of taxable gifts made during calendar year 2011.
Retirement Plan Limits. In 2011, the maximum amount of elective contributions a person can make to their retirement plan continues to be $16,500. The maximum amount of “catch-up contributions” remains $5,500.
The maximum limit on the annual benefit under a defined benefit plan remains unchanged from 2010 at $195,000. Also, the maximum limit on the amount of annual contributions and additions that can be made to a defined contribution plan is unchanged at $49,000.
The maximum amount of annual employee compensation that can be taken into account under a qualified pension, profit-sharing or stock bonus plan also remains unchanged in 2011 at $245,000. Finally, a “highly compensated employee” continues to be someone who is compensated $110,000 or more per year.
Lobbying Expenditure Notice Exemption. Internal Revenue Code section 6033(e) requires certain tax-exempt organizations that incur non-deductible lobbying expenses to provide their members and supporters, at the time dues (or other similar amounts) are assessed or paid, with a reasonable estimate of the portion that is allocable to the nondeductible portion of the lobbying expenditures. In 1998, the IRS issued Revenue Procedure 98-19, which established that section 501(c)(4) and 501(c)(5) organizations are exempt from this notification requirement if more than 90 percent of their annual dues (or similar payments) are received from persons, families, or entities who each pay $75 or less. This annual dues limitation is indexed for inflation and, for the 2011 tax year, increases to $103 or less from $101 or less for the 2010 tax year.
Ellis Carter is a nonprofit lawyer licensed to practice in Washington and Arizona. Ellis advises tax-exempt clients on federal tax matters nationwide.