IRA Charitable Rollovers Now Permanent

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

Under current law, an IRA owner aged 70½ years or older may donate up to $100,000 per year to certain charities through transfers called “qualified charitable distributions.” These transfers are tax-free and not included in the taxpayer’s adjusted gross income.

Since these gifts are made with pretax dollars, a taxpayer cannot gain an income tax deduction (usually applied to charitable gifts) from them. However, they may be applied to the taxpayer’s required minimum distribution (RMD) amount in the year of the gift.

IRA rollovers of this type may be made only to public charities. The qualified charitable distributions may not be made to a supporting organization or a donor-advised fund. Private foundations are also excluded, with the exception of conduit private foundations.

Many people in the philanthropic community had hoped the new provision would allow for funding charitable remainder trusts, charitable gift annuities, and pooled income funds with IRA assets. Unfortunately, the current law does not do that. 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. Most IRA custodians, after they receive the completed distribution form, will distribute the money by a check paid directly to the qualified charity.

The permanent extension of the IRA charitable rollover option has opened the door for many gift opportunities for public charities across the country, including the Mackinac Center for Public Policy.