Charitable Planning Under the Pension Protection Act of 2006

The Pension Protection Act of 2006 paves the way for some long-sought charitable giving incentives. 

Specifically, a donor may now make a direct, outright gift to a public charity from his/her IRA account, and the distribution will be excluded from gross income for tax purposes.  However, the donor will not receive an income tax charitable deduction for the gift.

There are limitations and restrictions:

1. The donor must be at least 70 ½ years of age.
2. The distribution must go directly from the IRA trustee to a qualified charitable organization.
3. There is a $100,000 per taxpayer, per year limit.
4. The law will be effective for distributions made after December 31, 2005 and before January 1, 2008.
5. The donor may receive no economic benefit for having made the contribution. 

Planning Tips - Questions and Answers:

Q. Suppose my retirement plan assets are not in an IRA but in another type of qualified plan.  Can I still take advantage of this opportunity?

A. Let's assume, for example, that you have assets in a 401(k) plan that you'd like to
contribute.  To do so, roll over the amount you want to contribute from your 401(k) to your IRA (or, if you don't already have an IRA, to a newly created IRA).  Thereafter, you will request that your IRA trustee/administrator transfer directly to AmeriCares the amount you want to contribute.

Q. Can I make this contribution from my IRA to a charitable organization to establish a charitable gift annuity?

A. This law does not allow the donor to receive an economic benefit from the gift.  Receiving income in the form of a charitable gift annuity would be an economic benefit that would prevent the donor from avoiding income tax on the distribution of the IRA amount.  Using funds from an IRA to establish a gift annuity will entitle the donor to an income tax charitable deduction, but only for a portion of the transfer, thereby reducing (but not eliminating) the income tax due as a result of a IRA distribution that is not excluded form tax under this act.

Q. Can I direct that the contribution be designated for a particular pre-existing fund, such as the Sudan Relief Fund?

A. As long as there is no control retained by you over the administration and use of the contribution and you receive no economic benefit from the gift, and provided that AmeriCares has absolute ownership of the contribution, you can make your gift to a pre-existing designated AmeriCares fund.

Q. Suppose I have a pledge outstanding to AmeriCares for an annual gift.  Can I pay my pledge from my IRA under the new law?

A. The new law gives you the opportunity to use IRA funds to pay these commitments up to $100,000.00 in each of the calendar years 2006 and 2007 without having to pay income tax on the IRA distributions.  It is an ideal way for you to pay these pledges from IRA funds that you would not have otherwise been able to use tax-free before this new law.

Q. How do I make a gift to AmeriCares?

A. To make a gift to AmeriCares, notify the plan administrator of your IRA account that you want to make a "charitable IRA rollover".  Tell them the amount and the following beneficiary information:

 AmeriCares Foundation, Inc.
 88 Hamilton Avenue
 Stamford, CT 06902
 Tax ID: 06-1008595

To inform us that you have arranged for this gift to be made, please contact Barbara de Courrèges at bdecourreges@americares.org or 1-800-486-4357.

To learn about other ways to make a planned gift to AmeriCares, please click here.