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IRA Charitable Rollover
TAKE ACTION to support extenders: Add your name to this letter to Congress.
Deadline: COB Wednesday, November 5 (View the current list of signers)

Congress Expected to address extenders in lame duck
When lawmakers reconvene for a post-elections session in November, they are expected to address the package of expired tax provisions known as extenders, among which are three critical charitable giving incentives. In order to provide certainty to taxpayers by the end of the calendar year, the House and Senate will need to reconcile their differing approaches on the issue and decide whether to renew the full package of nearly 55 extenders temporarily and/or make permanent only certain provisions. In July, the House passed legislation (H.R. 4719) that would in part make permanent these charitable provisions, while the Senate Finance Committee has proposed extending the full extenders package through 2015. View our 2014 Action Guide on Extenders

The Issue
The IRA Charitable Rollover provision allows individuals who have reached age 70½ to donate up to $100,000 to charitable organizations directly from their Individual Retirement Account (IRA), without treating the distribution as taxable income. The provision is part of a package of 55 temporary tax extenders that were allowed to expire on January 1, 2014.

Latest News

House approves legislation to make permanent IRA charitable rollover
On Thursday, July 17, the House the America Gives More Act (H.R. 4719), a package of five charitable provisions that includes making permanent three expired tax extenders: the IRA charitable rollover, the enhanced deduction for donating land conservation easements, and the enhanced and expanded deduction for donating food inventory. Also included is a measure to extend through April 15 the deadline for claiming charitable donations on the previous year's tax filing and a measure to simplify to 1 percent the excise tax rate for private foundations' investment income.

House lawmakers voice support for IRA charitable rollover
The Ways and Means Committee reported out legislation (H.R. 4619) on May 29 that would make permanent the IRA charitable rollover and other provisions. Rep. Alan Grayson (D-FL) had introduced legislation (H.R. 3944) January 28 that would renew the provision for one year, along with 11 other temporary tax provisions that have expired or will expire in 2014.House Ways and Means Committee members Aaron Schock (R-IL) and Earl Blumenauer (D-OR) introduced legislation (H.R. 4619) on May 8, 2014 that would make permanent the IRA charitable rollover provision. 

IRA charitable rollover introduced in 113th Congress
Senior Senate Finance Committee member Charles Schumer (D-NY) introduced the Public Good IRA Rollover Act (S.1772) on November 21, 2013 to renew and make permanent the IRA charitable rollover, which was set to expire January 1, 2014. The measure was introduced with five bipartisan cosponsors: Senators Susan Collins (R-ME), Tim Johnson (D-SD), Carl Levin (D-MI), Mark Pryor (D-AR), and Kirsten Gillibrand (D-NY). Independent Sector continues to work on the introduction of a companion bill in the House.

IS Position
Independent Sector supports the reinstatement and permanent extension of all charitable tax extenders, including the IRA charitable rollover. The uncertainty caused by the need for an annual extension, as well as the fact that the provisions have been allowed to lapse, diminish the incentive effect of the IRA charitable rollover and other giving incentives, thereby reducing charitable giving and increasing the tax burden on older Americans.

In February 2014, Independent Sector organized a sector-wide letter that was sent to all U.S. Senate offices in support of legislation to renew and enhance the expired IRA charitable rollover. Nearly 500 organizations from across the country signed on. In advance of a House Ways and Means Committee markup in May 2014, IS and 252 organizations sent a letter to the panel, urging them to extend permanently the three charitable giving incentives.

Background
The IRA Rollover was first enacted in 2006 as part of the Pension Protection Act. The provision expired and was reinstated multiple times, most recently as part of the American Taxpayer Relief Act of 2013 through December 31, 2013. The provision allows individuals aged 70½ and older to donate up to $100,000 from their IRAs to public charities without having to count the distributions as taxable income.

Individuals may begin taking distributions from their IRAs as early as age 59½, but are required to begin taking them at age 70½. Normally, these distributions are subject to income taxes.

Since the provision was first enacted, Americans have made millions of dollars of new contributions to nonprofits -- including social service programs, religious organizations, arts and cultural institutions, schools, and health care providers -- that benefit people every day. 

  • Eligibility Age. Taxpayers age 70½ and older are required to make annual distributions from their IRAs which are then included in the taxpayers’ adjusted gross income (AGI) and subject to taxes.The IRA Charitable Rollover permits those taxpayers to make donations directly to charitable organizations from their IRAs without counting them as part of their AGI and, consequently, without paying taxes on them.

  • Annual Cap. A donor’s total combined charitable IRA rollover contributions cannot exceed $100,000 in any one year.

  • Eligible Charities. Charitable contributions from an IRA must go directly to a public charity that is not a supporting organization. Contributions to donor-advised funds and private foundations, except in narrow circumstances, do not qualify for tax-free IRA rollover contributions.

  • Eligible Retirement Accounts. Distributions can only be made from traditional Individual Retirement Accounts or Roth IRAs. Charitable donations from 403(b) plans, 401(k) plans, pension plans, and other retirement plans are ineligible for the tax-free treatment.

  • Directly to the Charity. Distributions must be made directly from the IRA trustee payable to the public charity.

  • No Gifts in Return. Donors cannot receive any goods or services in return for charitable IRA rollover contributions in order to qualify for tax-free treatment.

  • Written Receipt. In order to benefit from the tax-free treatment, donors must obtain written substantiation of each IRA rollover contribution from each recipient charity.

Resources

IRA charitable rollover one-pager

CRS Report: "Qualified Charitable Distributions from Individual Retirement Accounts: Features and Legislative History" (January 2014)


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