Permanent IRA Rollover
The Protecting Americans From Tax Hikes (PATH) Act of 2015 was passed by votes of 318 to 109 in the House and 65 to 33 in the Senate. With bipartisan support, the bill makes permanent four tax extenders that help donors support their favorite charities. President Obama signed the PATH Act on December 18, 2015.
The four permanent charitable provisions include the following:
1. IRA Charitable Rollover – Each IRA owner over age 70½ may make a transfer of up to $100,000 per year to a qualified charity. IRA charitable rollovers are tax-free and not included in adjusted gross income. An IRA charitable rollover may fulfill part or all of your required minimum distribution (RMD).
2. Conservation Gift Limits – Gifts of property for conservation purposes benefit from increased deduction limits. The normal 30% of adjusted gross income (AGI) limit for appreciated property gifts is increased to 50% and the carryforward limit is extended from five years to 15 years. For qualified farmers and ranchers, the deduction limit is 100% of AGI.
3. Food Inventory Gifts – An enhanced deduction for contributions of “apparently wholesome” food will be available for all donors. The deduction is the lesser of twice the basis or basis plus one-half of the appreciation. The deduction limit is raised to 15%.
4. S Corporation Appreciated Gifts – A Subchapter S corporation may give appreciated stock or land to charity. Only the basis of the S corporation in the donated asset will be used to reduce the shareholder basis, even though the full fair market value deduction is claimed by the shareholder.
Editor’s Note: A permanent IRA Charitable Rollover is very good news for all friends of philanthropy. Donors may now plan with certainty to help their favorite charities through an IRA gift. Because the IRA rollover gift is not reported in taxable income, it is a very convenient and simple way to help charity. It also may simplify your tax return by reducing your adjusted gross income.
PATH Bill Praise
The PATH Act received solid majority support from both parties in the House and Senate. This support is also reflected in public statements made by leaders in Congress and the White House. In a joint release, Senate Finance Committee Chairman Orrin Hatch (R-UT), Ranking Member Ron Wyden (D-OR) and Chairman of the House Ways and Means Committee Kevin Brady (R-TX) gave strong support to the PATH Act.
Chairman Hatch noted, “After years of short-term extensions, good faith bipartisan compromise prevailed. The result? A strong common-sense deal that puts in place permanent and responsible tax relief to help businesses, families and individuals keep more of their hard-earned dollars and promote greater economic growth here at home.”
Sen. Wyden commented, “Millions of working families with children will not find themselves suddenly taxed into poverty. Millions of college students won’t have the rug pulled out from under them when the tuition bill arrives. Charities can confidently plan and expand the good work they do. And small businesses and enterprises on the forefront of innovation now have the economic certainty they deserve.”
Chairman Brady continued, “By delivering permanent tax relief, we are making it easier for Americans to keep more of their own money, find new jobs, and increase their wages. Businesses will also be able to invest with confidence in new equipment, research and jobs to grow the local economy.”
The White House also promptly indicated its support for the bill. A White House release stated, “In addition to making permanent vital improvements to tax credits for working and middle-class families, this legislation also would bring certainty to small businesses, companies investing in U.S. innovation, and charities, while extending important incentives for hiring and investing in the low-income community.”
The Alliance for Charitable Reform is a project of the Philanthropy Roundtable. Alliance Executive Director Sandra Swirski also approved and stated, “We are pleased that the year-end tax bill provides certainty to donors and charities by permanently extending three key charitable giving incentives.” She expressed her appreciation to Congress for listening to the philanthropy sector.
Editor’s Note: Chairman Brady and Chairman Hatch both expressed confidence that making the tax extenders permanent will open the door to major tax reform in 2016. Both have set a goal to lower tax rates, while recognizing that there will be limitations on itemized deductions to achieve that goal. Under the Congressional rules, this bill enables a future major tax reform act to lower rates with substantially fewer reductions in itemized deductions.
Published December 18, 2015
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