Federal Law Permits Tax-free IRA Distributions to Charity

A new federal law, enacted on August 17, 2006, includes a number of items related to charitable giving.  A provision of the Pension Protection Act of 2006 provides individuals with a unique opportunity to use retirement plan assets to make a significant gift to an organization or cause.  Specifically, the law permits people who have reached age 70½ to exclude from income up to $100,000 per year in retirement plan assets if it is contributed to a qualifying charity.  These IRA charitable rollovers will be allowed in 2006 and 2007 only, and the gifts must be made from an IRA and not from any other type of retirement plan.  Gifts of this nature qualify for an individual’s minimum required distributions from their IRA. 

The new law makes no change to the rules that govern charitable bequests of IRA assets, either outright to charities or to deferred giving arrangements.  Such transactions have qualified for favorable income tax consequences in the past and will continue to be an attractive planning strategy in the future.  The new law only changes the rules for lifetime charitable gifts from IRAs.

Qualified charities under this law include scholarship funds, designated funds, field-of-interest funds, and unrestricted funds at community foundations.  However, donor-advised funds, supporting organizations and private foundations are not eligible charitable beneficiaries of IRA rollovers.

For more information about this legislation or about how we can assist you in planning your charitable giving, please contact the Foundation’s Philanthropic Services Department at (860) 548-1888 or giving@hfpg.org.