CARES Act: Special Rules for Use of Retirement Funds + Unlimited Charitable Contributions Deductions

Preface: The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress with overwhelming, bipartisan support and signed into law by President Trump on March 27th, 2020.  This $2+ trillion economic relief package delivers on the Trump Administration’s commitment to protecting the American people from the public health and economic impacts of COVID-19. This blog highlights two small tax benefits of the Act.

CARES Act: Special Rules for Use of Retirement Funds + Charitable Contributions

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides relief designed to increase liquidity in the economy including modifications to the rules on the use and distribution of qualified retirement funds.


The CARES Act waives the 10-percent penalty on early withdrawals up to $100,000 from qualified retirement plans for coronavirus-related distributions. For purposes of the penalty waiver, a coronavirus-related distribution is one made during the 2020 calendar year, to an individual (or the spouse of an individual) diagnosed with COVID-19 with a CDC-approved test, or to an individual who experiences adverse financial consequences as a result of quarantine, business closure, layoff, or reduced hours due to the virus.

Any income attributable to an early withdrawal is subject to tax over a three-year period, and taxpayers may recontribute the withdrawn amounts to a qualified retirement plan without regard to annual caps on contributions if made within three years


The maximum loan amount is increased from the lesser of $50,000 or 50% of vested balance to the lesser of $100,000 or 100% of vested balance. This increase applies to loans made between March 27, 2020 (the date of enactment of the CARES Act) and December 31, 2020.

In addition, if a qualified individual has a loan repayment due date after March 27, 2020 and before December 31, 2020, on an outstanding loan, the payment due date is delayed one year (or, if later, until the date which is 180 days after March 27, 2020). Any subsequent repayments with respect to the loan will be adjusted accordingly and the five-year period for repayment is disregarded.

Similar to the rules on withdrawals, a qualified individual is an individual (or the spouse of an individual) diagnosed with COVID-19 with a CDC-approved test, or to an individual who experiences adverse financial consequences as a result of quarantine, business closure, layoff, or reduced hours due to the virus.

Required Minimum Distributions

The CARES Act also waives required minimum distributions, regardless of whether the taxpayer has been impacted by the pandemic. The waiver applies for calendar year 2020 to defined contribution plans, certain annuity plans, and traditional or Roth IRAs. The waiver allows seniors to hold on to their plan assets when they might otherwise have to sell at market lows.

Additional Modifications

IRA Contribution Deadline. The deadline to make an IRA contribution is extended to July 15, the extended due date for tax returns.

Mandatory 20% Withholding

The mandatory 20% income tax withholding on rollovers is also suspended for 2020.

Increased Tax Deduction Limits for Charitable Contributions

The CARES Act offers enhanced tax incentives for making charitable contributions for the 2020 tax year.


 In general, the itemized charitable deduction for individuals is limited to a percentage of the taxpayer’s adjusted gross income (AGI). The percentage is determined by the type of organization receiving the donation and the type of property donated. For the 2020 tax year, individuals can claim an unlimited itemized deduction for charitable contributions which are normally limited to 50 percent of AGI.

Also, beginning in tax year 2020, an individual who does not itemize deductions can deduct up to $300 in charitable contributions made to churches, nonprofit schools, nonprofit medical institutions, and other organizations as an above-the-line deduction in calculating adjusted gross income. This allows an individual to claim a deduction for a charitable contribution even if the individual does not itemize deductions.


 A corporation’s deduction is generally limited to 10 percent of the corporation’s taxable income, computed with certain adjustments. The percentage limit was temporarily waived for qualified contributions made by a corporation after December 31, 2017, and before February 19, 2020, for relief efforts in qualified disaster areas. Under the CARES Act, the percentage limitation on the charitable contribution deduction for corporations is increased to 25 percent for the 2020 tax year.

Food Inventory

Corporate and non-corporate taxpayers are entitled to an enhanced deduction for charitable donations of food inventory from any trade or business. The food inventory must consist of items fit for human consumption and be contributed to a qualified charity or private operating foundation for use in the care of the ill, the needy, or infants. Normally, a non-corporate taxpayer’s total deduction for food inventory donations during the tax year is limited to a maximum of 15 percent of the taxpayer’s net income from all trades and businesses from which the donations are made during the tax year. In the case of a C corporation, the deduction is limited to 15 percent of the corporation’s taxable income. Under the CARES Act, the deduction for the contribution of food inventory is increased from 15 percent to 25 percent for the 2020 tax year.

If you would like more information on how you may benefit from the CARES Act, please call our office.

Dig Your Well Before You’re Thirsty

Dig Your Well Before You’re Thirsty– Book Summary                                             Author: Harvey Mackay

Donald J. Sauder, (2016)

Harvey Mackay has been giving great business advice for years, speaking from both the head and the heart. In his book, Dig Your Well Before You’re Thirsty, Harvey gives solid advice on the value of networking, and how to do so effectively.

Building a network is a lot like digging a well. It begins with the realization that, “Guess what? I might be thirsty one day. I just might need a well to draw on. I think I will work on that.” Then the homework begins. “Like all new behavior, the more you practice the skills of networking, the easier it gets.” Up the proverbial creek? If you’ve got a network, you’ve always got a paddle.

“Why should you network? Well first, in today’s economy, talent alone will not save you. Secondly, the traditional advice, more training and education, will not save you. The government will not save you. In fact, the more successful you are, or prepared for the real world, you still cannot save yourself in some situations. You need a network”. Harvey states that he were to name the single characteristic shared by all the truly successful people he’s met, that characteristic is the ability to create and nurture a network of contacts. No matter how smart you are, no matter how talented, you cannot do it alone. A network replaces weaknesses of individuals with the strength of the group.

Your car just gets you to work, your network can determine whether or not you’ve got work to get to. When Harvey graduated from college he began looking for a job. After exhausting – unsuccessfully – all possibilities, his dad said he should go see Charlie Ward. Harvey had no idea his dad, an Associated Press reporter, knew anyone other than politicians and athletes. Charlie was president of Brown & Bigelow, the world’s largest manufacturer of calendars, playing cards, and anything else with a logo. Harvey called Wards office. At the interview he was ushered into a room with enough space to hold 250 for cocktails. Charlie did most of talking…and then uttered the magic phrase, “I’m going to put you to work in our ‘goldmine’ across the street”. It was an envelope company. The job consisted of using a wooden handle like a miner’s ax, only there was straw on the end of it. Decade later, Charlie is still in the envelope business, still looking for that goldmine, albeit very successful. Harvey’s dad helped Charlie when the chips were down, and as they say, the rest is history. The point is, Harvey’s career success and first job were from a network.

Your best network will develop from what you do best. For most people networking is a learned behavior, like learning to swim. It is gradual – and often painful, even scary – process of trial and error, small incremental steps, and finally a few breakthroughs. The more you practice networking, the easier networking becomes, and more successful you will be at networking. A network provides a path, a way of getting from point A to point B in the shortest possible time over the least possible distance.

Positive networking is things like helping others prepare for life events, helping people develop, thanking people for how they have helped you, doing the drudgery work when someone is snowed with work. Negative networking is sharing gossip or inside information that you learned in confidence, collusion, or work that violates federal laws.

The really big networking mistakes people make in their lives come from the risks they never take. People aren’t strangers if you’ve already met them already. The trick is meeting the people before you need their help.

Ray Kroc, the founder of McDonald’s, sold malted milk machines in California in the 1940’s. His best customers were two brothers who ran a drive-in, a relatively new concept. Kroc knew these brothers were on to something and tried to persuade them to expand so he could increase his sales to them. When that didn’t work, he persuaded them to sell him the entire business, and kept the name. Kroc found a Calvin Coolidge quote that expressed his business philosophy and posted it on the wall of every McDonalds. It’s important to every networker. “Press on. Nothing in the world can take the place of persistence. Talent will not. nothing is more common than unsuccessful men with talent. Genius will not, unrewarded genius is almost a proverb. Education alone will not; the world if full of educated derelicts. Persistence and determination alone are omnipotent.”

What do you have to offer that makes you memorable? What connects you with the person you most want to be remembered by? There are not dead-end jobs. There are only dead-end people. If you build a network, you will have a bridge to wherever you want to go.

In networking, you’re only as good as what you give away. It all comes down this: If you want one year of happiness, grow grain. If you want 10 years of happiness, grow trees. If you want 100 years of happiness, grow people. It takes years to become an overnight success. You can build a network with any set of tools, so long as you know how to use them. “Any competent carpenter can build a house, but no two carpenters have the same tool kit.”

“You can’t always be an expert. You can’t always know an expert. But you can always hire an expert”. Never assume a junior person is a meaningless person; he or she may be or may end up being more important than the big name. Treating everybody with dignity and courtesy is not only good manners, it is good business policy.

Two things people never forget: Those who were caring to them when they were at a low point, and those who weren’t. Elevators go up and down. “When God close a door, somewhere God always opens a window”.

In Harvey’s career, he has never once heard a successful person say he or she regretted the time and energy put into keeping a Rolodex file. Often the people who are closest to you, and those you need the most are the ones you most likely take for granted. What you are is God’s gift to you. What you make of yourself is your gift to God.

“I hope your network can help you find a job or earn a promotion or close a sale, or make money. But even if it never does, if your network can do what Mackay’s did – if it can help you help someone who needs it – then you have the best network of all”.

How to Discover Your Core Values

Preface: Just defining your core values is a huge step forward. But they will do you little good if you do not require each person in your company to live them out day-to-day. Culture is created by what people do, not by words on a page. 

How to Discover Your Core Values

Credit: Roy Herr

When you know your purpose, mission, and values, you can make good decisions quickly. The first step in knowing your roots is to discover and clarify what they are. Today, we will dive into Core Values. As a reminder, here are the definitions for each of the three Roots to a success enterprise.

Vision: This is your higher purpose. It is your why, the reason your organization exists. This primary root goes deep to the water source and provides energy to keep growing when the short term is dry. It is a clear picture of the new future you intend to create.

Mission: The practical way to move toward the vision. This is what we commonly see as business— building houses, repairing cars, or baking cakes.

Core Values: Priorities for decision making that everyone needs to follow so the vision and the mission can be realized. Core Value roots spread wide and stabilize the organization in the daily winds of external influence. These values are the foundation on which we perform work and conduct ourselves, the deeply ingrained principles that guide all actions.

As Anabaptist Christians, we like the sound of “core values”. We might even think we know what core values we hold. However, when we get down to writing our core values, we realize that we are foggy on the concept. Or at least foggy on how to write down what the core values are for our own business. Have you found it that way? If not, you are the exception!

There are two other types of values that are often confused with core values. This concept is taught by Patrick M. Lencioni in a July 2002 article titled Make Your Values Mean Something. Here are his definitions:

Core values are the deeply ingrained principles that guide all of a company’s actions; they serve as its cultural cornerstones.

Aspirational values are those that a company needs to succeed in the future but currently lacks.

Permission-to-play values simply reflect the minimum behavioral and social standards required of any employee.

Do you see the difference? Core values already exist in your company today. Aspirational values are the ones we wish existed. Permission-to-play values are the basic standard for employment in any company in your part of the world.

When defining what your core values are, it is not a matter of “coming up with them” or choosing them. They already exist. We just need to discover what they are.

Leaders often want to include permission-to-play values because they want to promote honesty, integrity, and a good work ethic in their businesses. Certainly, we want to promote those values. But that should be a given. You don’t need to list honesty as a core value to fire someone for stealing tools.

Leaders often push for aspirational values to be included in the core values list, because they believe it is important that the company becomes something it is not. The push for becoming something we are not is fine if indeed the change warrants the monumental effort required to change the company’s character. However, telling your team and customers that you value cheerfulness when you have a customer facing employee that is allowed to be somber or grouchy 60% of the time is not being honest with yourself or anyone else.

The problem with naming values that do not already exist at a root level in the company is that your team will not believe what you are saying. You come across as out of touch with reality and will lose credibility with your people.

What Core Values Are Not

        • Core values are not what you wish you were.
        • Core values are not a plaque on the wall or a list in an employee handbook (although both of those are good).
        • Core values are not a goal to achieve.
        • Core values are not identical for any two companies.
        • Core values are not just ideas or philosophy.

What Core Values Are

        • Core values are the beliefs that steer the behaviors of your people.
        • Core values are deeply ingrained and difficult to change.
        • Core values are priorities by which decisions are made.
        • Core values are the basis on which you should “hire, fire, reward and recognize employees.” -Gino Wickman, author of Traction
        • Core values are the GPS that will keep you traveling the right direction to realize the fulfillment of your vision.
        • Core values are the defining characteristics of your company culture.

If core values already exist, why do we need to call them out? When you understand clearly what your company core values are, you can be intentional in perpetuating good company culture. You can screen out a lot of bad hires without learning by experience that they don’t fit your team. You can use your employee development resources to train employees how to live out the core values. You can identify “people issues” and solve them quickly when you have clearly identified core values.

Just defining your core values is a huge step forward. But they will do you little good if you do not require each person in your company to live them out day-to-day. Culture is created by what people do, not by words on a page. As a company leader, it is your job to act when core values are not being followed. Your team will soon learn that you mean business. They will find a lot of security in knowing that the leaders mean what they say. It builds trust in the leaders when they praise actions that support the core values of the company. It also builds trust in the leaders when they refuse to allow actions that undermine the core values.

Defining your core values and communicating them to your team is a great leadership tool. You will find that the employees who share your core values don’t need someone looking over their shoulder every day. They are aligned in their core with the company. They want to make decisions and take action that supports the company core values. When they mess up, they feel bad about it. You can build a company with people like that.

Do You Know Your Core Values?

Pebbles Family Buffet’s core values are:
Joy – Friendliness bubbling from a pleasant,
peaceful atmosphere.

Neatness – Orderly, clean, and safe.
Teamwork – Working and learning together respectfully. Do unto others as we would have them do unto us.
Hospitality – Serving up comfort with genuine service and hearty homestyle cooking—scrum-licious every time.

Their vision statement is: A reflection of a contented family living by the Truth.

Their mission statement is: Pebbles Family Restaurant welcomes guests “home” to enjoy the comfort of homestyle food in a relaxed and refreshing atmosphere. 

Can you see how employees who live out the core values will be making good decisions every day that fulfill their mission statement? Then by accomplishing their mission their vision becomes a reality.

If you don’t have this clarity in your business, I want you to know that it is possible to get it. If you attempted this in the past and gave up, please try again. It’s worth the effort. In fact, creating all three of the Root Statements (Vision, Mission, and Core Values) is the best investment any company can make. If you don’t do this, you will continue to zig-zag and waste time and dollars without making significant progress.

Do you need a little guidance to get through this exercise? Please download a free copy of the  Root Development Guide Click here to help you get clarity on your business roots.

Roy Herr, founder of Rosewood Marketing, thrives in the challenge of leading the team and working alongside clients to solve their marketing problems. He especially enjoys consulting with clients to help them develop their niche, brand, strategy and marketing plan.

Roy’s passion for bringing Biblical values and Christianity into the workplace is a driving motivator in his business relationships.

Realistic Goal Posts

Preface: Now is a great time to take a second look at the business planning you’ve done in the past. Specifically look at how flexible and dynamic your planning has been.

Realistic Goal Posts

Credit: Donald S. Feldman, CExP™, CPA, CVA, MBA

Global economic disruption uniquely affects each business. Whether you are being hit with a hammer or expect to suffer a slow burn, your reaction to changes and proactive planning will play a major role in how your future unfolds. Signals indicate that once we start to get COVID-19 under control, the world economy will begin to recover, business will rebuild, and business owners will need to ask themselves if they want to go through another major disruption, or transition out of their business while they can. This is the most crucial time to plan so that your business has the best chance of supporting your personal and financial goals, even if those goals are changing. It’s likely that your timeline is changing too

To get a better idea of the urgency of planning, here is a breakdown of tasks that may be involved in planning for the future of your business and the time each might take to complete.

Setting (or Resetting) Your Goals

No matter what, it’s a good idea to revisit your goals periodically. During times of change, this review is even more important. It’s a good time to look at what your goals have been, especially concerning how much longer you want to stay involved in your business, how much you’ll rely on your business for financial security, and to whom you want to transfer ownership in the future. Have any of your previous goals changed? Are there partners, advisors, or family members with whom you want to discuss possible changes to your goals? This activity is important, so it’s a good idea to give it the time and space it deserves. This may take 30 to 60 days.

Plan Design

Start with your preliminary plan. What aspects of your previous planning still make sense and which of your plans will need to change given new circumstances? Your task here is to get ideas and strategies on the table and start to weigh your options and investigate alternatives. This may require assembling some new data and conferring with specialists. It’s likely that some options previously available to you no longer make sense; it’s just as likely that new alternatives are now worth considering. Depending on how much planning you’ve done in the past, plan on this phase taking anywhere from 90 days to 9 months.


Next you’ll start implementing the strategies you’ve identified that you believe will take you where you want to go and put you in a position to transition your business when and to whom you want. Preparing yourself, your business, your management team, and your personal situation brings your greatest chance of long-term success. Many business owners have a sizable gap between the resources they have and the resources they need to achieve their goals. Your gap may be changing. This is where the really important work gets done. It can take six months (if you’re trying to get out of your business soon) or five years (if you need to build value and prepare team members).

The Ownership Transfer

There are many ways to transition out of ownership when you are ready. Your options tend to fall into one of two primary categories: you can sell to a third party, like a strategic buyer or investor, or transfer to an insider, such as a child or your employees. If you and your business are prepared for the transfer, and you commit to pursuing a third-party sale, you can sell your business and be completely out within a year or so. On the other hand, it’s common for transfers to insiders to take longer, usually because new owners don’t have an immediate ability to cash you out. It may still be possible for you to get the value you want and need for your ownership interest, but it can take time. A well-prepared business can transition to insiders and deliver a fair value to a departing owner in three to five years.

Measuring the Goal Post

Planning for the future of your business, and taking the steps necessary to get there, will have a goal post that is unique to you and your company. It’s common for the process to take anywhere from one to ten years. That’s a pretty big range, but you are probably already applying the process to your situation and getting a sense of your personal timeline.

Now is a great time to take a second look at planning you’ve done in the past. Look at how flexible and dynamic your planning has been. Take this opportunity to build a new path toward your future. When everything is changing, it’s important to change too so that you can react to your situation instead of being a victim of your circumstances.

We strive to help business owners identify and prioritize their objectives for their business, their employees, and their family. If you are ready to talk about your goals for the future and get insights into how you might achieve those goals, we’d be happy to sit down and talk with you. Please feel free to contact us at your convenience.

Credit: Don Feldman is the founder of Keystone Business Transitions, LLC, a Lancaster, PA firm devoted to helping business owners smoothly exit their companies. He has been a CPA for over 25 years and a valuation professional for 20 years. For the last 15 years, Don’s practice has focused on succession and exit planning, including transfers of business interests to family members and key employees, as well as sales to outside buyers.