Publication

28 March 2016

Permanent Extension of IRA Charitable Rollover

The Protecting Americans from Tax Hikes (PATH) Act of 2015 was signed into law on December 18, 2015. A key provision of this legislation included a permanent extension of the IRA charitable rollover.

Under current law, an IRA owner aged 70½ years or older may transfer up to $100,000 per year directly to a qualified charity. These Qualified Charitable Distributions (QCDs) are tax-free and not included in the taxpayer’s adjusted gross income. Since the rollover gift is a distribution of pre-tax dollars, a charitable income tax deduction is not available. However, the IRA rollover gift may be applied to the taxpayer’s required minimum distribution (RMD) amount in the year of the gift. A qualified charitable distribution may also satisfy a previously existing pledge. IRA rollovers are limited to public charities. Qualified charitable distributions may not be made to a supporting organization, a private foundation, or a donor advised fund.

Many charitable organizations and leaders in the philanthropic community had hoped the IRA charitable rollover provisions would be extended to allow for funding of charitable remainder trusts, charitable gift annuities, and pooled income funds with IRA assets. Unfortunately, the current law does not allow for any of these scenarios. The current IRA rollover provisions are solely limited to outright gifts to public charities.

If an IRA owner aged 70½ or older wishes to make an IRA rollover gift, they should contact their IRA custodian and request the appropriate distribution form. Upon receipt of the completed distribution form, most IRA custodians will make the distribution by check directly to the qualified charity.

The permanent extension of the IRA charitable rollover legislation has opened the door for many gift opportunities for public charities across the country. If you have questions regarding IRA charitable rollovers or the PATH Act, please contact your Miller Johnson estate planning attorney or John McFarland, the author.

Note: For more information on the PATH Act and a summary of the more than 50 tax provisions it addressed, please click on “Year End Gifts from Washington: 2015 Tax Extenders.”