New Charitable IRA Rollover Legislation Introduced 2016

Posted by National Association of Charitable Gift Planners on May 9, 2016 8:00:00 AM

(5/9/2016)  PPP is pleased to announced the recent introduction of The Legacy IRA Act (HR 5171), new federal legislation that would greatly expand the existing IRA Charitable Rollover provision to permit life-income gifts. This legislation was sponsored by Representative Peter Roskam (R-IL), a senior member of the House Ways & Means Committee and chairman of the Oversight Subcommittee.  Representative Earl Blumenauer (D-OR), a senior Democratic member of Ways & Means, is the bill’s lead cosponsor.  Two senior Republicans on the tax-writing committee, Representatives Patrick Tiberi (OH) and Erik Paulsen (MN), along with Kevin Cramer (ND) have also signed onto the bill. 

Take Action: You may visit the website to read the bill, review analysis and register for updates on how you can get involved in recruiting co-sponsors for the bill.

First enacted in 2006 and permitting only direct or outright gifts from an IRA to public charities of up to $100,000 per year, the IRA Charitable Rollover was permanently extended in December 2015.  HR 5171 would now expand this important giving incentive by enabling IRA owners age 65 or older to transfer up to $400,000 per year (for individuals 70½ or older, the combined ceiling for direct and life-income transfers from their IRAs is $400,000, with a $100,000 cap for direct transfers) from their IRA to a life-income plan, including charitable remainder trusts and charitable gift annuities.  Under the authorized life-income plans, the IRA owner will be taxed on income received at ordinary income tax rates.  Because the payout rates on these plans are five percent or more, however, there generally will be more income paid from the charitable life-income plans than under the normal required minimum distribution rules that govern IRAs.  Importantly, the only authorized income beneficiaries of the life-income plans are the individual IRA owner, his/her spouse, or both.  At death, the assets in the plan go directly to the named qualified charity or charities and not to family members.  

HR 5171 is cautious in its approach and the life-income provision would sunset after four years, keeping the score or total cost to the government of this legislation at around $100 million over 10 years.  This figure is significantly lower than previous incarnations of IRA Rollover legislation that included a life-income component.

HR 5171 comes as Congress is debating other bills that would expand the Rollover, particularly to make donor advised funds (DAFs) eligible for IRA Rollover donations.  For example, in the House, several influential Republican members of Ways & Means have introduced the Grow Philanthropy Act (HR 4907) which would strike the existing prohibition for IRA distributions to DAFs beginning in 2017.  Likewise, in the Senate, Senator John Thune (R-SD) and Senate Finance Committee Ranking Member Ron Wyden (D-OR) have introduced Charities Helping Americans Regularly Throughout the Year (CHARITY) Act (S. 2750).  This legislation includes a number of provisions that promote charitable giving including language that would make DAFs eligible to receive IRA funds.  (Incidentally, the proposal balances this expansion to the IRA Rollover by requiring sponsors of DAFs to disclose whether they have an official policy on “inactive” or “dormant” funds, and if so, describe the policy or include a copy of it with the return.  Sponsors of DAFs would also be required to calculate and disclose the average percentage granted or distributed from all DAFs collectively during the current taxable year, as well as the average payout over the most recent three-year period.)

PPP will continue to monitor progress on HR 5171 and the other related bills and advocate for their passage. PPP members should also watch for information in the coming days explaining how to contact their Members of Congress to request they join HR 5171 as a cosponsor.

Topics: Advocacy