Extending IRA Charitable Rollover Provision

By Jackie Jacobs

Taxpayers age 70½ and older are required to make annual distributions from Individual Retirement Accounts (IRAs).

In 2006, those individuals were for the first time permitted to make direct IRA transfers to charities without having to count the transfers as income for federal income tax purposes.  Since then, Congress periodically extended the legislation, through what has become generically known as IRA Charitable Rollover provisions.

The IRA charitable rollover was allowed to expire on January 1, 2014,  for the fourth time in recent years. On each of the three previous occasions, the entire package of extenders was reinstated retroactively at the end of the following year.

Will the IRA Charitable Rollover Provision be reauthorized this year?  There’s still hope, but it’s still not a slam dunk.

Here’s a recap of where the legislation stands in both Houses of Congress, each of which has its own version.

The Senate Finance Committee approved a two-year extension of many of the so-called “expiring provisions” or “tax extenders” in April, ” including the IRA Charitable Rollover.  Debate on the matter started, but got derailed by partisan politics over certain revenue-raising measures in the Affordable Care Act . The package was withdrawn from consideration and is not expected to return to the Senate calendar until after Congress comes back for a “lame duck” session in November.

The IRA Charitable Rollover fared better in the House, where it is part of H.R. 4719, the American Gives More Act– a package of five charitable provisions, one of which would make the IRA Charitable Rollover permanent, retroactive to January 1, 2014.   The America Gives More Act was approved by the full House by 277-130 vote, but many Democrats voted against it because it contains no revenue-raising offsets.   Despite that, virtually every Democrat expressed support for the substance of the IRA Charitable Rollover provisions because it would bring needed dollars to charities throughout the country.

As an aside, H.R. 4719 contains another interesting provision.  It proposes to extend the annual deadline to make charitable contributions from December 31 until April 15. According to retiring House Ways & Means Committee Chairman Dave Camp (R-MI ) who has become a champion of the April 15th provision, this extension would result in increased charitable giving because many individuals will decide to give more generously at the time they are actually preparing and finalizing their returns.  Actually, it would also be a nightmare for whoever actually prepares your tax return, but that’s another matter.

Although it remains unclear whether the Senate will take up some of the provisions of H.R. 4719, it will be necessary for it to pass some sort of tax extender legislation so that the ultimate fate of the IRA Charitable Rollover (either a two-year extension or enactment as a permanent part of the tax code) can be resolved.

 The tremendous uncertainty by lapses and the subsequent reinstatement of the IRA Rollover legislation makes it extremely difficult for donors and their financial advisors to plan IRA distributions and related charitable giving strategies.  As a consequence,  many donations that might otherwise have been made simply are not. Not surprisingly, charities are pushing for our lame ducks in Congress to resolve this so people can make their 2014 IRA Charitable Rollover contributions in a timely manner.

Will that happen?  Although I am optimistic that Congress will pass the IRA Rollover Legislation, we’ll have to wait for at least another month, and maybe longer, to know for sure.   To quote Otto Von Bismark: “Laws are like sausages. It is better not to see them being made.”

Jackie Jacobs is the Chief Executive Office of the Columbus Jewish Foundation, the Central Ohio Jewish community’s planned giving and endowment headquarters.

Article appears as originally published in the Ohio Jewish Chronicle, October 16, 2014.

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