Charitable Gift IRA Rollover: The Past
In 2006 I was visiting with a donor who was very excited about the recent Pension Protection Act that enabled him to give from his IRA to charity. The Charitable Gift IRA Rollover allowed many donors like him to give a Qualified Contribution Distribution (QCD) to a qualified charity without having to count the funds distributed from his IRA as ordinary income. For an individual like him, with a modest income, conservative saving/spending principals, this was the only opportunity he had to create an endowment for his alma mater and see it award scholarships while he was alive. Or, as the IRS puts it
A Qualified Contribution Deduction (QCD) is a distribution made directly by the trustee of an individual’s retirement arrangement (IRA), other than a SEP or SIMPLE IRA, to certain qualified organizations. The donor must have been at least age 70½ when the distribution was made. The total QCDs for the year can't be more than $100,000. If all the requirements are met, a QCD is nontaxable, but the donor can't claim a charitable contribution deduction for a QCD. (IRS Pub. 525)
At that time the Charitable Gift IRA Rollover’s stability from year to year was subject to the whims of Congress. Each year Congress, at the last hour it seems, would reinstate the provision. For donors age 70½ or older who wanted to contribute at the least their Required Minimal Distribution this made planning a gift from your IRA nearly impossible.
Charitable Gift IRA Rollover: The Present
Finally in 2015 Congress decided to stop playing the last minute game and made the Charitable Gift IRA Rollover permanent. This act potentially should impact the annual fund (a.k.a. the tithe) of churches everywhere if stewardship campaigns understand the factors involved. Donors can now count on the eligibility of their Required Minimal Distribution (and possibly more) going to their church or favorite charity with tax benefits. Like the previous IRA acts, the gift is not tax deductible but the gift itself is not counted as income taxable. For donors who do not need their Required Minimal Distribution and who have a pledge or consistent history of tithing to their church they can now, year after year, fulfill that pledge or tithe with income that will not be taxable.
Charitable Gift IRA Rollover: The Future
What’s next for the Charitable Gift IRA? Certain groups across the country are lobbying Congress to create the Legacy Charitable IRA. If they are successful in their efforts donors can create income-producing gifts that have tax benefits as well. Speculation is that we may see this in 2018 as there has been a favorable support of this option for donors and charities. My only request is that they make it permanent as well so that we can best serve our donors.
For more information about the Charitable Gift IRA Rollover and how it can impact your fundraising or your own giving strategy I highly recommend you spend time reading IRS Pub. 590¬B.