The IRS reminded corporate taxpayers this week that a February 25, 2021 deadline is approaching for taking a deduction for up to 100 percent of qualified disaster relief contributions.

Background. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Dec. 27, 2020) increased the deduction limit up to 100 percent (from 10 percent) of taxable income for corporate cash contributions for disaster relief, and provided for a temporary waiver for recordkeeping requirements for such contributions. To qualify for the increased deduction under the new law, cash contributions must meet the following requirements:

1. A “qualified disaster area” must have been declared under Section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act and cannot be related to COVID-19.
2. The major disaster declaration must have been made by the President between 1/1/20-2/25/21 for an occurrence specified by FEMA after 12/27/19 but no later than 12/27/20. FEMA.gov has a list of the qualifying disaster declarations.
3. Corporations must pay qualified contributions in cash between 1/1/20 and 2/25/21 to a charitable organization. Contributions to supporting organizations or donor advised funds do not qualify.
4. Corporations may claim the increased deduction on its return for the taxable year in which the contribution was made and must obtain a contemporaneous written acknowledgement (CWA) from the charity before it files its return, but no later than the due date (including extensions) of the return. The CWA must include a disaster relief statement that states the charity will use the funds contributed for relief efforts in one or more qualified disaster areas. Note that for some CWA issued prior to the guidance requiring the disaster relief statement (prior to 2/1/21), the IRS will not challenge the deduction solely for failure to have an adequate disaster relief statement.