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IRA Charitable Rollover

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 reinstated retroactively for only the 2014 tax year, but were set to expire again on January 1, 2015.


Latest News

Congress restores giving incentives for 2014 tax year
The Senate signed off on legislation (H.R. 5771) on December 16, 2014 to reinstate retroactively dozens of expired tax provisions, including the IRA charitable rollover and the enhanced deductions for donating land conservation easements and food inventory. While taxpayers will be able to employ these provisions in the upcoming filing season for the 2014 tax year, the package will expire again in roughly two-weeks' time, on January 1, 2015. The House passed the measure on December 3 and the president signed it into law on December 19.

House fails to advance permanent bill for charitable giving incentives

On December 11, the House failed to advance the Supporting America's Charities Act (H.R. 5806), a bill that would have made permanent the IRA charitable rollover and the enhanced deductions for donations of land conservation easements and food inventory. The vote was 275 in favor and 149 opposed, just eight votes shy of the two-thirds supermajority needed under the expedited procedural rule used to consider the legislation.

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.

Shortly after returning for a lame duck session in 2014, Independent Sector and 1,031 organizations sent a letter to every Member of Congress in support of legislation that would make the IRA charitable rollover and other extenders permanent in any year-end deal. IS President and CEO also joined with sector leaders to send a letter published in POLITICO to the President and leaders in Congress, on December 2.

Legislation in the 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).

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

On July 17, the House passed 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. All five provisions were reported out of a May 29 markup in the Ways and Means Committee.

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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