In 1930 author Watty Piper introduced to the world The Little Engine that Could, coining the now familiar refrain, “I think I can, I think I can.” This timeless adage has taught generations of Americans the powerful truth that positive thinking and continuing efforts make the impossible possible.
Following nearly two decades of Capitol Hill-climbing efforts by thousands in the philanthropic sector, the Pension Protection Act (PPA) crested the Hill and became a reality on Aug. 17, 2006. Signing into law arguably the most significant charitable legislation in 30 years, President George W. Bush exclaimed, “This historic legislation will facilitate charitable giving and provide relief to taxpayers making contributions to charitable programs.”
What does this legislation mean to the charitably inclined friends of the Foundation? A key provision of the PPA 2006 modifies IRC Sec. 408(d), permitting individuals age 70 and older to “rollover” up to $100,000 per year from their Individual Retirement Accounts to fund direct gifts to a favorite charitable organization.
According to the Investment Company Institute, 40 percent of American households own IRAs totaling over $3 trillion dollars! These IRA assets have been one of the fastest growing components of the U.S. retirement market over the past decade.
Previously such rollovers or transfers were taxed as ordinary income to the owner when the owner withdrew the monies from their IRA. Beginning on Aug. 17, 2006, the PPA removed this taxation obstacle for the next two years, permitting owners to maximize the potential of their IRA assets to support their favorite charitable cause now.
How does an IRA owner begin the gifting process? Notify your IRA administrator that you would like to make a distribution from your IRA to your favorite charitable cause. Your IRA administrator will provide you with the forms necessary to complete the transfer.
PPA 2006 modifies IRC Sec. 408(d) permitting individuals age 70 and older to “rollover” their IRAs to fund direct gifts of up to $100,000 during 2006 and 2007.
While there will be a record of a charitable disbursal, your IRA administrator will not report a taxable distribution to the IRS and you will not pay tax on that amount. Additionally, gifts from your IRA are not “includable in gross income” and should not affect any of your other charitable gifts. Now more than ever, using your IRA to advance a charitable gift is “I think I can, I think I can.” If you would like to learn more about the benefits to you, your loved ones or to charity of using IRA assets to fund a direct charitable gift, contact the Foundation.
Highlights of the Pension Protection Act:
• Tax-Free rollovers up to $100k from IRAs to charity during 2006 and 2007
• Rollovers qualify as required minimum distribution (RMD)
• Rollovers cannot be made to donor-advised funds or to deferred gift plans
“Command them to do good, to be rich in good deeds, and to be generous and willing to share.” (1 Timothy 6:18, NIV)