BOARD ISSUES AND ACCOUNTABILITY
$100,000 IRA Contributions to Public Charities
BY: Robby Morris, CLU

On August 17th, President Bush signed the Pension Protection Act of 2006. The Act is major legislation designed to strengthen safeguards for employee pensions, and make it easier for people to save for retirement. The Act also contained various provisions dealing with tax-exempt organizations, including incentives for charitable giving and reforms designed to address perceived loopholes.

Tax-free IRA distributions to charity.
This year and next (2006 and 2007), if you are at least 70½, you can direct your IRA trustee to distribute $100,000 to your favorite public charity (for a total of $200,000).  The institution holding your IRA must make the distribution directly to the charitable organization that you select.  The distribution counts toward your required minimum distribution, but won’t be taxable to you; it also won’t qualify for a charitable income tax deduction.  So it’s a wash.  The bottom line - - If you are charitably-inclined and don’t need your IRA, this is a wonderful opportunity to do good and save some tax dollars.  The contribution could be used for a naming opportunity or to satisfy a charitable pledge. So check your databases for donors who may have large pension accounts and inform them of this limited opportunity to make a substantial impact on your organization.

Although there are a number of reforms addressed in the law, there are two that we should all be aware of:

Deduction limited for donations of clothing and household items.
You can no longer deduct contributions of clothing and household items unless the property is in good condition or better. The rule doesn’t apply if it is a single item more than $500 and you include a qualified appraisal with your tax return. The message is that you can still donate your raggedy stuff, but don’t try to deduct it.

Record keeping requirements for charitable contributions.
As of 2007, to deduct charitable contributions of cash, checks “or other monetary gifts,” you must keep your bank record of the contribution or a written receipt from the charity. Thus, the rule that applied to contributions of $250 or more, now applies to all contributions. You might want to think twice about putting cash, rather than a check, in the collection basket. 

Robby Morris, CLU, The Morris Group, Insurance & Financial Planning
70 Old Byram Lake Road, Armonk, New York 10504; 914-273-6301; morrisrw@ft.newyorklife.com