Legislative Update:
Public Good IRA Rollover Act of 2007
Proposal in Congress to permanently extend Charitable IRA Rollover

In March, the U.S. Senate approved its fiscal year 2008 budget resolution to include a reserve fund allowing for new tax relief and the extension of certain expiring tax provisions, including the IRA Charitable Rollover. The reserve fund includes the Public Good IRA Rollover Act of 2007 sponsored by Senator Byron Dorgan (D-ND) and Olympia Snowe (R-ME).

The budget resolution is a non-binding document and sets out a plan for the annual appropriations process. The House will soon consider its own budget resolution and, once approved, will likely go to conference with the Senate to produce a final resolution.

The current Pension Protection Act of 2006, states that holders of traditional and Roth IRAs who are at least 70-½ years old can make direct charitable transfers of up to $100,000 per year from qualifying IRAs. However, this provision is set to expire in December.

This IRA Charitable Rollover has been so successful that support is building for the Public Good IRA Rollover Act of 2007. Democrat and Republican cosponsors are almost evenly divided between party lines, and many of them serve on either the Senate Finance Committee or the House Ways & Means Committee.

If passed, the Public Good IRA Rollover Act of 2007 would permanently remove the $100,000 annual limit on donations. Individuals would also be allowed to roll their retirement accounts into life income gifts; donors aged 59-½ would be able to make distributions directly from traditional or Roth IRAs to create a life-income gift to charity. Such deferred gifts would be charitable remainder trusts, gift annuities or contributions to a pooled income fund, and would permit donors to continue receiving income while providing a charitable gift. The payments from the charity to the donor would be taxable as income, but the amount of the contribution would not have tax consequences.

Additionally, under this act, donors aged 70-½ and over could make direct cash contributions to a charity or charities with no negative tax consequences. Taxpayers who make charitable contributions through IRA Rollovers would not be eligible to claim a charitable deduction on their income taxes, except to the extent that the IRA was funded with after-tax dollars.

At Silicon Valley Community Foundation, a qualified individual can transfer retirement assets from an IRA or Roth IRA to an endowment that will grow over time. We offer several options for individuals interested in transferring retirement accounts to the community foundation:

• Our Community Endowment Fund supports the immediate and operational needs of organizations aiding all types of causes in San Mateo and Santa Clara counties, and allows donors to invest their charitable dollars in a strategic manner;
  
• A named endowed fund at the community foundation may be opened in the name of a person or organization designated by the donor of the IRA. Named endowed funds benefit a donor’s favorite causes, geographical region, or nonprofit organization in perpetuity;
  
• A designated fund at the community foundation benefits one designated nonprofit organization;

For all IRA rollover gifts to funds at the community foundation, it is important to note that the liquidation of the IRA must occur within the charitable fund in order to eliminate the individual’s estate from being taxed.

Most contributions to public charities other than supporting organizations are considered qualified charitable contributions. However, distributions to donor advised funds held by public charities are not considered charitable distributions. Also private non-operating foundations and split interest trusts, such as charitable remainder trusts, are not currently eligible for special treatment as qualified charitable distributions under the new law.

We will keep you informed of the status of the Public Good IRA Rollover Act in the months ahead. If you have any questions, please contact our professional advisor relations officer, Karyn Cilker, at kjcilker@siliconvalleycf.org or 408.278.2287.