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IRA Rollover Close to Final Approval

(Aug. 7, 2006) After years of work, all that remains for the IRA rollover provision to become a reality is the president’s signature.

Last Thursday, Aug. 3, the Senate passed a pension reform bill (H.R. 4) containing the IRA rollover provision and other charitable giving incentives, as well as a series of charitable reforms. The House had already approved the bill on July 28, 2006. 

Because the Senate did not amend the House version of the bill, a conference committee is not necessary to iron out any differences. The legislation has been sent to the White House and awaits the President’s signature, which is expected in the near future.

The IRA Rollover

The IRA rollover provision included in the pension reform bill provides an exclusion from gross income for certain distributions of up to $100,000 from a traditional individual retirement account (IRA) or a Roth IRA, which would otherwise be included in income. The provision is effective for two years through 2007. 

Fundraising strategies and plans will need to be immediately adjusted to account for the new IRA rollover provisions, which apply only to tax years 2006 and 2007 under the new provision.

AFP has been advocating for the enactment of the IRA Rollover provision for many years and will work to see the provision either extended or made permanent in future years.

Incentives and Reforms

In addition to the IRA rollover provision, the bill contains charitable giving incentives such as:

  • charitable deductions for donations of food inventory
  • charitable deductions for donations of book inventory
  • basis adjustments to stock of S corporation contributing property

At the same time, the legislation includes a number of charitable reforms, including:

  • doubling the excise tax on certain prohibited “insider” activities by charities, social welfare organizations, private foundations and exempt organization managers
  • requiring that donated clothing and household items be in at least “good, used” condition
  • modifying recordkeeping requirements for certain charitable contributions
  • allowing the Internal Revenue Service to share information with state charity officials

It is rumored that Congress will take up a technical corrections bill in the fall that will make alterations to provisions in the pension reform legislation.

“We are thrilled that Congress passed the IRA rollover provision,” said Paulette V. Maehara, CFRE, CAE, president and CEO of AFP. “This is an important charitable giving incentive that will do much to help our nation’s charities. It is our hope that we will be able to work with Congress to ensure that this provision is extended beyond 2007.”

Maehara also noted that AFP intends to work with Congress if it takes up a technical corrections bill to reexamine the charitable reforms to ensure that they do not overly burden charities with regulations.

A more detailed summary of both the incentives and reforms can be found in the Attachments section below.

For the complete text of the bill, go to the Library of Congress THOMAS website and search for “H.R. 4.”

Attachments

H.R. 4: Charitable Provisions — PDF Format, 91086KB

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