IRA Charitable Rollover
NOTICE: ATRA Extends the IRA Charitable Rollover Through 2013
On January 1, 2013 Congress passed and President Obama signed into law H.R.8, the American Taxpayer Relief Act of 2012 (ATRA). ATRA extends the IRA Charitable Rollover through calendar years 2012 and 2013, and provides special provisions for January 2013 (click to learn more about all the charitable provisions of ATRA).
The Pension Protection Act of 2006 created the "IRA Charitable Rollover," allowing owners aged 70½ or older of traditional and Roth IRAs the ability to distribute directly, or "rollover," to certain public charities (including Clarkson) up to $100,000 per year without the distribution being included as taxable income, but allowing the distribution to count towards the annual mandatory withdrawal amount for years 2006 and 2007. The Emergency Economic Stabilization Act of 2008 extended the charitable rollover through 2009. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 extended the IRA Charitable Rollover through 2011.
ATRA and the IRA Charitable Rollover
ATRA has extended the existing provisions of the IRA Charitable Rollover into calendar years 2012 and 2013. In addition, at the election of the taxpayer:
- A distribution made directly from your IRA to Clarkson in January 2013 may be deemed to have been made in December 2012
- Any portion of a distribution to a taxpayer in December 2012 may be treated as a qualified 2012 charitable distribution if such portion is transferred in cash to Clarkson before February 1, 2013. (see the bottom of this webpage for the language from ATRA)
Depending on your circumstances, it may be possible for you to make a charitable rollover gift of up to $200,000 to Clarkson in calendar year 2013. Since ATRA extends previous law, charitable rollovers are still not allowed to fund gift-with-income plans such as gift annuities and charitable trusts.
Qualifications for the IRA Charitable Rollover
Based on the original provisions of the Pension Protection Act of 2006:
· The donor (IRA owner) must be at least 70½ years old at the time a transfer (rollover) is made from the IRA to charity
· The transfer must be made from the IRA directly to a qualified charity
· The combined value of all transfers made (whether to one or more charities) cannot exceed $100,000 per taxpayer per taxable year
· A qualified charity is an organization described in section 170(b)(1)(A), other than an organization described in section 509(a)(3)
· Transfers are not included in your adjusted gross income for federal income tax purposes
· Transfers to charity may count as part of your annual mandatory IRA withdrawal amount
· IRA transfers to charity are not taken into account in determining the deduction eligibility of other charitable contributions
The IRS issued these clarifications of the IRA Charitable Rollover in 2007:
· Charitable IRA distributions can satisfy pledges
· A person over age 70½ who is the beneficiary of an inherited IRA may make charitable transfers from that IRA
· Charitable transfers may be made from a SEP IRA or a SIMPLE IRA if no employer contributions were made to the IRA in the year of the transfer
· A qualified charitable distribution is not subject to withholding of income taxes
· The maximum total qualified charitable distribution amount each year is $100,000 per person, not per household, or per IRA account.
· The IRA administrator may issue a check payable to the charity and present it to the donor to deliver to the charity. The gift date then becomes the date the donor mails the check via the USPS or hand-delivers it to the charity
· Transfers cannot be made from 401(k) plans, but it appears allowable under certain circumstances for the donor to move a portion of the 401(k) into a Rollover IRA and then make a subsequent qualified charitable distribution from there
There are several restrictions and issues to keep in mind:
· The transfer must be made from your IRA directly to charity, otherwise you must declare the distribution as income
· The IRA must be a traditional IRA or a Roth IRA; it cannot be an employer sponsored plan such as a SIMPLE IRA, a 401(k) or 403(b) plan or a simplified employment pension (“SEP”) plan
· Distributions from Roth IRAs are not taxed to the account owner, so it is still wise to determine if some asset other than the Roth IRA is best to give to charity
· Transfers are not deductible as charitable gifts
· You may receive no benefit from the charity for your transfer (e.g. tickets, dinners, etc.)
· Transfers cannot be made to charitable gift annuities, charitable remainder trusts or pooled life income funds
· Transfers cannot be made to donor advised funds, private foundations or “supporting organizations”
· The donor is responsible for and must obtain documentation for the transfer as he/she would substantiate any other gift to charity
· Transfers are made from otherwise taxable income first. Non-taxable income in your IRA may not be considered a qualified transfer and should be handled differently
· In some states (check with your advisor), IRA charitable rollovers may be includable in income for state and local tax purposes and may not earn an offsetting charitable deduction, depending on state and local law
· In some states (check with your advisor), IRA withdrawals up to a certain amount may not be includable for state income tax purposes, thus negating some benefit of an IRA charitable rollover at the state level.
Who might use this opportunity?
The “charitable rollover” provides a new method for using certain IRAs in philanthropic and financial planning:
· If the majority of your assets are in IRAs, it may be more convenient to make a direct transfer rather than reporting a withdrawal on your income tax return
· If you do not itemize your deductions, you may be able to make gifts from your IRA without increasing ( and maybe even decrease) your adjusted gross income
· If you already give up to your 50% charitable deduction limit of your adjusted gross income, this legislation may allow you to, in effect, exceed that limit
· If you have accrued a “carryover” of charitable deductions from past tax years, this legislation would allow you to make gifts without impacting those carryover amounts
· If your level of income causes a phase-out of certain deductions, a rollover may allow you to make gifts without increasing (and maybe even decrease) your adjusted gross income
· It may simply be easier to make a transfer from your IRA to charity and not need to worry about the income tax implications
· If you’ve been thinking about making a larger gift, this may provide a tax-advantaged time-frame for doing it
· In some states (check with your advisor) a charitable deduction is not allowed for state tax purposes. A rollover that does not increase your reportable income may result in savings on state taxes as well
Because everyone’s financial position is unique, it is important for donors to consult their tax counsel and plan administrators before making gifts to charity from their IRAs.
Making a gift to Clarkson
IRA charitable rollovers must be requested by the donor directly from his/her IRA administrator. The process is not standardized across the industry, and each company will set its own policies and procedures, so you may wish to contact your administrator early in the process. The proper name to use in a transfer request is “Clarkson University,” and the federal ID number is 15-0543659. You may wish to provide this mailing address
Annie Clarkson Society
Box 5522, Woodstock Lodge
Potsdam, NY 13699
Click for a sample letter to your IRA administrator to request a transfer.
Click for a sample letter to notify Clarkson about your IRA charitable rollover request.
Click to contact the Annie Clarkson Society for help with questions.
SEC. 208 of the American Taxpayer Relief Act of 2012
EXTENSION OF TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT PLANS FOR CHARITABLE PURPOSES.
(a) IN GENERAL.—Subparagraph (F) of section 408(d)(8) is amended by striking ‘‘December 31, 2011’’ and inserting ‘‘December 31, 2013’’.
(b) EFFECTIVE DATE; SPECIAL RULE.—
(b)(1) EFFECTIVE DATE.—The amendment made by this section shall apply to distributions made in taxable years beginning after December 31, 2011.
(b)(2) SPECIAL RULES.—For purposes of subsections (a)(6), (b)(3), and (d)(8) of section 408 of the Internal Revenue Code of 1986, at the election of the taxpayer (at such time and in such manner as prescribed by the Secretary of the Treasury)—
(b)(2)(A) any qualified charitable distribution made after December 31, 2012, and before February 1, 2013, shall be deemed to have been made on December 31, 2012, and
(b)(2)(B) any portion of a distribution from an individual retirement account to the taxpayer after November 30, 2012, and before January 1, 2013, may be treated as a qualified charitable distribution to the extent that—
(b)(2)(B)(i) such portion is transferred in cash after the distribution to an organization described in section 408(d)(8)(B)(i) before February 1, 2013, and
(b)(2)(B)(ii) such portion is part of a distribution that would meet the requirements of section 408(d)(8) but for the fact that the distribution was not transferred directly to an organization described in section 408(d)(8)(B)(i).
This web page does not provide legal or financial advice, nor is it a comprehensive review of the topic. You should consult your legal and financial advisors and Clarkson University before making or planning your gift. (rev. 9/2013)