On July 17, 2014, the House of Representatives approved H.R. 4719, the America Gives More Act, a package of five tax provisions aimed at increasing charitable giving.
IRA Charitable Rollover
Notably, H.R. 4719 includes a retroactive and permanent extension of the current-law IRA Charitable Rollover. Congress has previously extended the Rollover three times since its enactment in 2006, though the current provision expired at the end of 2013, and Congressional action is required to revive it for 2014 and beyond. H.R. 4719 would end any uncertainly around the temporary provision and make the Rollover a permanent part of the tax code once and for all.
Under the Rollover provision, individuals age 70½ and older can donate up to $100,000 to charitable organizations directly from their Individual Retirement Account without having to treat the distribution as taxable income. In order to qualify, contributions must go directly to a public charity and be made from traditional IRAs or Roth IRAs. Donors may receive no goods or services in return for their contributions and must obtain written documentation of their contribution from each recipient charity.
In addition to the permanent IRA Charitable Rollover extension, the legislation included four other charitable giving incentives.
One such provision would give taxpayers until April 15 to make charitable contributions eligible for the charitable deduction, instead of requiring those gifts to be made by the end of the calendar year.
Another provision would modify the excise tax rate on the investment income of private foundations. Under current law, private foundations are required to pay a 2 percent excise tax on investment income. The excise tax rate is reduced to one percent in any year in which the foundation’s distributions for charitable purposes exceeds the average level of the foundation’s charitable distributions over the preceding five tax years. Private foundations must determine each year whether they should calculate a 1 percent or 2 percent excise tax, but H.R. 4719 restructures the excise tax from this dual-rate system to a single rate system of 1 percent.
The remaining two provisions provide for enhanced deductions for conservation easements and enhanced deductions for food inventory.
At this point, it is unlikely the Senate will consider H.R. 4719 as currently drafted. Instead, the Senate is expected to address the issue of tax “extenders” (i.e., provisions like the IRA Charitable Rollover that expired at the end of 2013) either in the fall or perhaps after the mid-term elections in November. The Senate will likely put forward a two-year retroactive extension of the Rollover, bringing the provision back for all of 2014 and 2015, rather than a permanent extension as provided for in the House-passed bill.