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On the ACGA Support for Tax Initiatives

By Children’s Home Society of Florida Foundation

A Senate Finance Committee hearing was held on October 18th, 2011 to discuss potential changes in the tax law relating to charitable deductions. Conrad Teitell, volunteer counsel to the American Council on Gift Annuities, prepared a statement for the record that was submitted to the Senate Finance Committee.

Teitell outlined five principles for considering changes to charitable deductions; including the following:

1. Tax Incentives – A reduction in tax incentives would harm a broad spectrum of Americans served by charities.

2. Current IRA Rollovers – The option for an IRA rollover up to $100,000 per IRA owner over age 70½ will expire on December 31, 2011. This should be made permanent.

3. IRA Nonitemizer Deduction – For IRA owners over age 70½ who do not itemize (about 70% of taxpayers), the IRA rollover functions in a manner similar to a nonitemizer deduction. While the IRA transfer is not deductible, an IRA owner’s taxable required minimum distribution is reduced by the amount of the qualified charitable distribution (QCD). This reduces taxable income by the amount of the IRA rollover.

4. Expanded IRA Rollover – The IRA rollover should permit the transfer from an IRA trustee to a charitable organization for a charitable gift annuity or to a trustee of a charitable remainder trust.

5. Decreased Federal and State Support – Budget cuts at both the Federal and the state level are frequently targeting social services and the most vulnerable citizens of our nation.

Teitell also outlined a proposed “All-American Charitable IRA Rollover Act of 2012.” His proposed bill permits the current tax-free distributions to charities of $100,000 per year for IRA owners over age 70½.

Expanded Rollover

However, he advocates an expanded rollover that would enable IRA owners over age 59½ to make QCDs up to $500,000 for a charitable gift annuity or to a charitable remainder trust. The QCD would be available for a one life gift annuity or CRT, or two lives for an IRA owner and spouse.

Assessment

QCDs would not be deductible charitable gifts, but they are also not included in taxable income. A QCD is permitted for a public charity gift, but not for transfers to a donor advised fund or supporting organization. All payments from a life income agreement will be ordinary income.

Conclusion

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Filed under: Retirement and Benefits, Taxation | Tagged: ACGA, All-American Charitable IRA Rollover Act of 2012, American Council on Gift Annuities, charitable gift annuity, charitable remainder trust, Conrad Teitell, CRT, Gift Annuities, IRA, QCDs |