IRA Charitable Rollover: Consider Acting Now

 

The IRA Charitable Rollover is a proven charitable giving incentive and it enjoys wide bipartisan support on Capitol Hill. However, for the fourth time since it was enacted as a temporary two-year measure, it has been allowed to expire. In prior instances, Congress has reinstated it, when necessary, retroactively to the beginning of the calendar year. It is widely expected to be reinstated retroactively to January 1, 2014, but for every day that Congress fails to act, some Rollover gifts are delayed and some may not take place at all.

 

If you have made prior Rollovers or qualify to do so (you are over 70 ½), consider the following:

 

  • Go ahead and authorize a Rollover gift now as if the provision had not expired. Ask your IRA administrator to make a direct distribution now to a qualified charitable organization, such as a Federation (other than to a donor advised fund or a supporting organization). If Congress reinstates the Rollover retroactively as it has in prior instances, the distribution will qualify for Rollover treatment.
  • Be careful regarding required minimum distributions (RMDs). If you take a RMD payout yourself and then attempt to transfer that amount to a qualified charitable organization, even retroactive reinstatement may not qualify the payout for IRA Charitable Rollover treatment.  In the past, Congress has enacted special rules to permit RMDs at year-end to qualify for Rollover treatment, but such treatment is not guaranteed. It is much safer to instruct your IRA plan administrator to make direct distributions to qualified charities than to take your RMD and then use it to make charitable gifts later.
  • The worst case scenario for direct distributions now:  In the unlikely event that Congress fails to reinstate the Rollover retroactively, an IRA distribution to Federation would be considered gross income to you, but you would be eligible for a charitable income tax deduction.  This may result in a somewhat less favorable tax benefit than a qualified Rollover due to various factors, but a direct distribution to Federation would not worsen your position, and Federation would receive the funds sooner.

 

For more information, please contact Pamela Eicher at 317.715.6981.

 

The Indianapolis Jewish Federation does not provide legal advice. Donors are encouraged to seek independent tax and legal counsel.