HARMON CURRAN NONPROFIT LAW BLOG

During the past several months, the Federal Election Commission (FEC) and IRS each announced inflation-adjusted limits and other rates that went into effect on January 1.

The FEC released updated contribution limits for the 2023-2024 campaign cycle. Some of these campaign contribution limits are indexed every odd-numbered year for inflation.

The limit on what an individual may give to a federal candidate has increased to $3,300 per election, up from $2,900. (Note that a primary and a general election are considered two different elections). The limit on what an individual may give to a national political party committee has increased to $41,3000 per calendar year, up from $36,500. Other contribution limits are displayed in the following chart:

Source: https://www.fec.gov/resources/cms-content/documents/contribution_limits_chart_2023-2024.pdf

In addition, the IRS has announced inflation-adjusted rates and limits for 2023, many of which have changed since last year.

Low Cost Article

The unrelated business income of certain tax-exempt organizations does not include proceeds from the distribution of “low cost articles” related to charitable solicitations (such as mugs or key chains imprinted with the organization’s logo). For the 2023 tax year, a low cost article is an article costing $12.50 or less, an 80 cent increase from 2022.

2023: $12.50

2022 $11.70

2021: $11.30

Other Insubstantial Benefits

In Revenue Procedure 90-12 (as amplified by Rev. Proc. 92-49 and modified by Rev. Proc. 92-102), the IRS provided guidelines for charitable organizations regarding the deductibility of contributions by donors who receive something in return for their payments. The original guidelines stated that even when donors receive benefits in return for their donations, they may still deduct the entire amount donated under one of the following two circumstances:

1. If, for a contribution of $25 or more, the contributor did not receive something in return that costs more than $5, or the rate of a “low cost article,” as described above; or
2. If the fair market value of all the benefits received in connection with the donation is not more than 2% of the payment, or $50, whichever is less.

The $5/$25/$50 schedule is adjusted annually for inflation. For the 2023 tax year, the schedule has been increased to $12.50, $62.50 and $125, respectively.

2023: $12.50/$62.50/$125.00

2022: $11.70/$58.50/$117.00

Mileage

Effective January 1, 2023, the mileage rate for business use of a vehicle is 65.5 cents per mile —an increase from the 62.5 cents per mile rate for the last six months of 2022, which itself increased from the 58.5 center per mile rate effective at the beginning of 2022. The mileage rate for use of a vehicle for medical or moving purposes for 2023 remained steady at 22 cents per mile, consistent with the midyear rate change in 2022. That was increased from 18 centers per mile at the beginning of 2022. The standard mileage deduction rate for volunteer or charitable use of a vehicle remains 14 cents per mile.

2023:

65.5¢/mile for business use

22¢/mile for medical or moving purposes

14¢/mile for volunteer or charitable use

 

2022 – Last Six Months:

62.5¢/mile for business use

22¢/mile for medical or moving purposes

14¢/mile for volunteer or charitable use

 

2022 – First Six Months:

58.5¢/mile for business use

18¢/mile for medical or moving purposes

14¢/mile for volunteer or charitable use

Lobbying Expenditure Notice Exemption

Internal Revenue Code Section 6033(e) requires certain tax-exempt organizations that pay or incur non-deductible lobbying expenditures 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 of dues that is allocable to such expenditures. In 1998, the IRS issued Revenue Procedure 98-19, which established that 501(c)(4) social welfare organizations and 501(c)(5) agricultural and horticultural organizations are exempt from this notification requirement if more than 90% of their annual dues (or similar amounts) are received from persons, families or entities who pay $75 or less. This annual dues limitation is indexed for inflation, and has increased to $132 for the 2023 tax year.

2023: $132

2022: $124

Annual Exclusion for Gifts

The annual gift tax exclusion increased to $17,000, up from $16,000 in 2022. The first $17,000 worth of gifts to any person during the year (other than gifts of future interests in property) will not be included in the total value of taxable gifts.

2023: $17,000

2022: $16,000

Retirement Plan Limits

Some of the key annual limits related to retirement plans have increased for 2023. The limit on total contributions to a defined contribution plan, such as a 401(k) or 403(b), rose from $61,000 to $66,000. Also increasing in 2023 is the maximum amount of an employee’s compensation which can be considered under a qualified pension, profit-sharing or stock bonus plan. The new limit is $330,000, a $25,000 increase over the 2022 limit.

Other key limits have been increased for 2023. The most an employee participating in a 401(k) or 403(b) may contribute to the plan increased to $22,500 in 2023, up from $20,500 in 2022, with a “catch-up” contribution of $7,500 (up from $6,500 in 2022) allowed for employees aged 50 and older. The limit on annual contributions to an IRA has increased to $6,500, up from $6,000 in 2022. The additional catch-up contribution to an IRA for those 50 and older is up to $3,500, up from $3,000 in 2022. The maximum limit on annual benefits under a pension or defined benefit is increased to $265,000, a $20,000 increase from 2022. The compensation threshold for who constitutes a “highly compensated employee” is increased to $150,000, a $15,000 increase from 2022.

Healthcare Flexible Spending Account Limits

In 2023, the amount employees may contribute to a health flexible spending account (FSA) without paying income or employment taxes has increased to $3,050, up from $2,850 in 2022.

2023: $3,050

2022: $2,850