Businesses frequently make cash donations to charitable organizations. But what happens to the deductibility of those donations under the state and local tax limitations imposed by the 2017 tax law? This issue continues to be the subject of discussion, but your business clients should be encouraged by the IRS’s commentary. The IRS has taken the position that a business taxpayer can usually deduct payments to a charitable entity by treating them as Section 162 ordinary and necessary business expenses. Indeed, reducing the impact of state and local taxes itself constitutes a business purpose.
The continuing relevance of this topic is a reminder that philanthropy remains a priority in advising your corporate clients.