Maximizing Year-End Charitable GiftsOne impact of the Tax Cuts and Jobs Act (TCJA), signed in to law at the end of 2017, was the doubling of the standard deduction. The TCJA increased the standard deduction to $24,000 for taxpayers filing jointly or for a surviving spouse, $18,000 for a head of household and $12,000 for single filers. As a result, many taxpayers who previously found it advantageous to itemize their deductions on their federal income tax returns no longer do. By one rough, unattributed estimate, 30 percent of taxpayers itemized on their 2017 income tax returns, and that figure may decrease to 8 or 9 percent for 2018!

If you and your tax professional have determined that it is no longer advantageous for you to itemize your deductions, which would include deductions for your charitable contributions, there are still ways to maximize the impact of your year-end charitable gifts.

1. Develop a plan to “bunch” your regular charitable contributions.

If you regularly make a charitable contribution to one or more specific charities every year, consider “bunching” the charitable contributions you would have otherwise made over the next two or more years into this year. Following this strategy could produce aggregate itemized deductions this year in excess of the standard deduction. This may have the effect of generating income tax savings this year that would otherwise have been unavailable had you made the same charitable contributions evenly over the next several years.

For example: Generous John and his spouse, Kind Kim, file jointly and give $12,000 to their church each and every year. After consulting with their tax advisors, John and Kim decide to bunch the contributions they would have made to the church over the next three years by making a gift of $36,000 to the church this year. As a result, and based on their specific tax profile, they produce aggregate itemized deductions in excess of their $24,000 standard deduction. Their tax preparer recommends that they itemize their deductions on this year’s return, which may result in income tax savings to the couple this year that would otherwise have been unavailable. They have also decided to notify the church of their plan to bunch contributions, so the church can plan on a single $36,000 gift this year, rather than the usual $12,000 gift each year.

2. Create a donor advised fund.

If you typically change up the charities you contribute to each year, consider “bunching” the total amount you give annually to create a donor advised fund this year. Once you fund the donor advised fund, you can take your time identifying the charities to receive those funds over the next several years. You will be able to take a charitable deduction for the total amount that you contribute to the donor advised fund this year, and decide later which organizations you want to recommend to receive those funds.

For example: Donor Diane, a single filer, usually makes $6,000 in contributions to charities each year. The charities that she chooses change from year to year based on the needs she sees in her community (and which charities come a-callin’). After consulting with her tax advisor, Diane decides to create a donor advised fund at her local community foundation. She bunches the charitable contributions she would have made over the next five years, and makes a gift to her new donor advised fund of $30,000 this year. Her accountant recommends that she itemize her deductions on this year’s return, which may result in income tax savings for Diane that she would not have received if she kept making $6,000 in gifts each year. As the advisor to her fund, Diane looks forward to selecting charitable organizations to recommend to receive grants from her fund each year.

Note: This strategy also works if you already have a donor advised fund. If you make a regular contribution to your fund each year, you may want to consider “bunching” the contributions you would have otherwise made to your donor advised fund over two or more years into this year.

3. If you are age 70 ½ or older, make a direct rollover of your IRA to charity.

A charitable giving strategy that avoids the impact of the new standard deduction on taxpayers’ use of itemized deductions is a charitable IRA rollover. An individual age 70½ or older can direct the custodian of his or her IRA to distribute up to $100,000 from the IRA directly to charities selected by the individual. This essentially creates a charitable contribution income tax deduction for the IRA owner, because assets of an IRA, if distributed to the IRA owner, constitute taxable income to him or her. By directing an IRA custodian to make gifts directly from your IRA to charities of your choice, such funds are not included the taxpayer’s taxable income. Note, pursuant to federal regulations, a charitable IRA rollover cannot be made to a donor advised fund. Also, it is important that the funds roll directly from the IRA to the charity. If the IRA owner withdraws the funds and then distributes them to the charity, the tax savings are not realized because the funds must be included in the taxpayer’s taxable income.

Aircraft Purchase, Ownership and Operation: Protecting the Interests of a Family Business Owner – Part 3As noted in Part 1 of this series, Federal Aviation Administration (FAA) rules govern the ownership, operation and use of private aircraft. Most private aircraft are operated under Part 91 or Part 135 of the Federal Aviation Regulations. For reasons discussed below, it is imperative for the family business owner of a private aircraft to determine whether the Part 91 or Part 135 rules govern the owner’s operation of the aircraft and to strictly comply with such rules at all times.

The Part 91 rules govern the operation of a private aircraft for non-commercial purposes. Examples of Part 91 operation of a private aircraft would be flights taken by employees on aircraft owned by their employer for business purposes; personal flights taken by the owner of the aircraft; flights taken by the owner’s family members or friends; and other similar flights that do not involve any charge or fee paid by the passengers for the value or costs associated with the flight. The Part 91 rules are generally less restrictive and less costly from a compliance standpoint than the Part 135 rules, which are discussed below. In most cases, the owner of a private aircraft will structure the ownership, operation and use of the aircraft to fall within the Part 91 rules.

The Part 135 rules govern the operation of a private aircraft for “compensation or for hire.” For example, if the owner of a private aircraft takes a group of friends on a ski trip and charges each passenger a proportionate share of the value or costs associated with the flight, the flight is considered as one for compensation or hire and the owner must comply with the Part 135 rules. Similarly, if the business owner of an aircraft makes the aircraft and pilot(s) available to other businesses to use, for a fee or charge, the business owner must comply with the Part 135 rules with certain very limited exceptions. Charter operations involving a private aircraft are governed by the Part 135 rules.

The Part 135 rules for operating a private aircraft are more stringent than the Part 91 rules, involve additional expense for compliance, maintenance and pilot training and certification, and require that the owner-operator of the aircraft hold a Part 135 certificate issued by the FAA. Obtaining a Part 135 certificate involves significant expense and can take six months or longer. The operation of a private aircraft under Part 135 also requires that the operator report and pay the Federal Excise Tax of 7.5 percent on the amount of compensation received by the owner for any flight operated under Part 135.

The failure to comply with the Part 91 or Part 135 rules, as applicable, can have catastrophic consequences for the owner of a private aircraft. For example, if the owner mistakenly believes that the operation of the aircraft is governed under the Part 91 rules when in fact the Part 135 rules apply to the owner’s operation of the aircraft, the insurance coverage for the aircraft may be voided and the owner may be subject to civil penalties of up to $25,000 for each violation of the applicable rules. For these and other reasons, an owner of private aircraft should consult with legal counsel experienced with the Federal Aviation Regulations governing the ownership, operation and use of private aircraft.

Is Your Family Business Getting Political? 5 Things to Consider <i>Before</i> Donating to Political Candidates and Political OrganizationsThe First Amendment broadly protects political speech, and every citizen has a fundamental right to participate in the political process, including making contributions to political candidates and political organizations. However, like any fundamental right, political speech has its limits. Political contributions are heavily regulated by governments and public perception, and you and your family business should consider the following before making a political contribution.

1. It is better to ask for permission than forgiveness.

Campaign finance laws (laws that regulate and restrict political contributions) vary greatly by jurisdiction, and restrictions on political giving can come in many different shapes and sizes. In particular, donors should always be mindful of whether there are applicable contribution limits, prohibitions or disclosure requirements when making a contribution. Penalties for violating these rules can be very significant, including potentially hefty fines and, in rare instances, incarceration. Depending on the circumstances, making a political contribution can even result in canceling a government contract or making a contractor ineligible to bid on government contracts in some jurisdictions. Accordingly, it is critical that donors do their own due diligence or seek counsel to confirm that their political contributions are compliant with the applicable rules before making a contribution.

Also, note that you should not rely solely on a candidate’s or fundraiser’s word that a proposed contribution is OK. They do not represent you and do not always know how the rules apply specifically to you or your business.

2. You are the company you keep.

When you contribute to a candidate or a political organization, you are expressly endorsing them. You may be supporting them for a very specific reason, but you are generally associating yourself and potentially your business with that candidate or organization when you make a contribution. Accordingly, it is critical to seriously vet all political contributions, especially if it is a political organization.

Further, the world of campaign finance is generally very transparent. Despite what you may have heard about “dark money” in politics, there are very few options, if any, to effectively participate in elections confidentially. You should assume that any political contribution that you make will either be reported in a public filing or will otherwise be discoverable by the general public and the media. Accordingly, if you are concerned about being associated with a candidate or an organization – think twice before you contribute.

3. Never reimburse a political contribution.

Although political laws vary from jurisdiction to jurisdiction, one rule is consistent everywhere – it is illegal for an individual or entity to reimburse another individual or entity for making a contribution to a political candidate. Not only is it a violation of campaign finance laws, it is a felony in most jurisdictions. While most campaign finance violations will not result in jail time, this is one violation that could. Simply put, never pay or reimburse anyone for making a political contribution.

4. Give with no strings attached.

Never make a request of a candidate or officeholder when making a political contribution. Similarly, never mention a political contribution when making a request to a candidate or officeholder. Political giving and lobbying requests should not be made contemporaneously. Not only is it frowned upon and makes most candidates and officeholders uncomfortable, it could be a crime depending on the circumstances. There is a time for lobbying and making requests, and there is a time for fundraising. Those times are never the same.

5. Elections can affect you and your business.

Participating in elections and supporting candidates makes a difference. Not only is it a fundamental right, but supporting certain candidates and political organizations can often be in the best interest of both you as an individual and your business. There are risks with everything you do in life, but the risks involved with making political contributions can be mitigated.