Major and Planned Giving
Pension Protection Act
The extension of the Pension Protection Act was signed into law on October 3, 2008, extending the IRA Charitable Rollover provision originally passed in 2006. The passage is retroactive to the start of 2008 and continues through December 31, 2009.
The legislation allows individuals age 70½ and older to make direct transfers from their IRA of up to $100,000 per year in 2008 and 2009 to the charity or charities of their choice, without having to recognize the transfers as income. (You have to wait until your actual 70½th birthday to make the transfer.)
In addition, the transfers will count towards the minimum required distribution each individual over 70½ is required to take from retirement accounts each year.
Transfers must come from IRAs directly to charity. If donors have retirement assets in a 401(k), 403(b) etc., they must first roll those funds into an IRA, and then can direct the IRA administrator to transfer the funds from the IRA directly to charity.
Donors cannot use the transfer to fund life-income gifts (CRTs, CGAs, PIFs or the like.) Donors cannot use the transfers to fund donor advised funds or supporting organizations.
What are the tax implications?
- Federal – Donors do not recognize the transfers as income, provided it goes directly from the IRA provider to charity. However, donors are not entitled to an income tax charitable deduction for the gift.
- State – Each state has different laws, so donors will need to consult with their own advisors. Some states have a state income tax and will include this transfer as income. Within those states, some will allow for a state income tax charitable deduction and others will not. Other states base their state income tax on the federal income or federal tax paid. Still other states have no income tax at all.