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IRA Rollover is Back

The Emergency Economic Stabilization Act of 2008 signed into law on October 3, contains features extending certain portions of the Pension Act of 2006 that expired on December 31, 2007. The centerpiece of the legislation from a gift planning perspective is the IRA Rollover.

This law provides that, in each of the years 2008 and 2009, an owner of a traditional or Roth IRA may instruct the trustee to distribute directly to a public charity up to $100,000 without the distribution being included in taxable income, and that distribution will count toward the IRA owner’s mandatory withdrawl amount.

To qualify for IRA rollover treatment, the donor must direct the IRA manager to transfer funds directly to a charity. A withdrawl followed by a contribution will still have to be reported as income. The donor must be at least age 70-1/2 and the donee must be a tax-exempt organization to which deductible contributions can be made. Donor-advised funds and supporting organizations are not eligible.

The gift must be outright; rollovers to a planned gift, such as a gift annuity or a charitable remainder trust, do not qualify. Similarly, outright distributions to a charity from employer-sponsored retirement plans, such as Simple IRAs, 401(k)s, and 403(b)s, do not qualify. Also note that IRA rollovers may be included in a donor’s income for state and local tax purposes and may not earn an offsetting charitable deduction, depending on state and local law.

If you are already required to take distributions from your IRA, have a small IRA you no longer need, or wish to reduce your minimum required distributions and thus reduce your taxable income, a charitable rollover from your IRA may be a convenient way to make a substantial gift to charity. If you would like to know more about this opportunity to give to Princeton Theological Seminary, contact John McAnlis, Director of Planned Giving, at 609.497.7756 or by email at john.mcanlis@ptsem.edu.