Non-Profit Law

IRA Charitable Rollover Made Permanent

Authors: Jill S. Dodd | Claire F. Hofbauer

On December 18, 2015, Congress passed and President Obama signed into law the "Military Construction and Veterans Affairs and Related Agencies Appropriations Act." Section Q of the Act amends the tax code in several ways in order to incentivize charitable giving. Most notably, the bill makes permanent the "IRA Charitable Rollover"—that is, the ability of an individual over the age of 70 1/2 to make direct gifts of up to $100,000/year to charity from his/her IRA without having to take such amount into taxable income.

Background: The prior law that permitted the IRA Charitable Rollover expired on December 31, 2014. Section Q of the Act amends the tax code by eliminating the 2014 termination date. The new law provides that all distributions made after December 31, 2014 (and beyond) will qualify for the $100,000 exclusion from gross income.

Distributions count toward an individual's "required minimum distribution." If you have already made your RMD for the year, you can still take advantage of this law in 2015 and make a contribution to a charity from your IRA that will not be taxable to you.

The restrictions on permissible charitable recipients still stand. Thus, distributions under this provision may only be made to public charities (except for supporting organizations), and may not be made to donor-advised funds at such public charities or to private foundations. Donors may not get any benefits from such contribution that would have served to reduce their charitable income tax deduction had they made the gift directly (for example, a dinner at a charity event). And distributions must be made directly by your plan administrator to the charitable recipient.

This tax incentive to make charitable gifts from IRAs is finally a permanent part of the tax code, and retirement plan owners finally have certainty in planning for such charitable gifts.