Monday, March 22, 2010
A package of approximately 40 tax extenders has been included in the bill, seven of which directly affect charity and charitable giving. If the bill is passed, it is anticipated that these provisions will be effective retroactively to January 1, 2010 and run through December 31, 2010, in other words, for one year only.
IRA charitable rollovers, born of the Pension Protection Act of 2006, were originally in effect from August 17, 2006 – December 31, 2007 and then extended for 2008 and 2009 via the Emergency Economic Stabilization Act of 2008. However, this provision was not extended prior to its expiration on December 31, 2009. Needless to say, charitable organizations are lobbying hard for the bill’s passage.
The provision will allow IRA owners and inheriting beneficiaries age 70 ½ or older to continue to make a “qualified charitable distribution” of up to $100,000 to an eligible charity directly from their IRAs. A husband and wife could each contribute up to a maximum of $100,000 provided they are made from the separate IRA of each person. Tax filing status is irrelevant, so even those married individuals who file separately could make use of this provision.
Eligible accounts will include Traditional IRAs and otherwise taxable dollars in Roth IRAs. Additionally, SEP IRAs and SIMPLE IRAs will qualify provided no current contributions are made to these accounts for the same tax year as the distribution to charity.
To qualify, the distribution from the IRA must go directly to a qualified charity (one that is not a supporting organization or donor advised fund). Fortunately, while required minimum distributions (RMDs) are back in 2010 for both IRA owners and beneficiaries after having been suspended in 2009, the IRA distribution to charity will count towards satisfying this requirement. Thus, individuals desiring to make a qualified charitable distribution from their IRAs in 2010 should delay taking their full RMD until the outcome of the bill is known. If the bill is passed, they would not pay any income tax on the amount going to charity nor would they receive a charitable income tax deduction. The fact that they don’t have to report the distribution as income is far better than a tax deduction.
While the House and Senate Conference Committee will need to come to an agreement on this bill, it is anticipated that “qualified charitable distributions” will be back in full force in 2010. Either way, we will keep you informed on the status of this bill as it progresses through the House and the Senate Conference Committee.
By IRA Technical Consultant Marvin Rotenberg and Jared Trexler