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President’s Budget Includes IRA Rollover, Other Giving Provisions

(Feb. 11, 2008) President Bush’s proposed 2009 budget contains a provision to make permanent the Individual Retirement Account (IRA) Rollover provision, which expired at the end of 2007.

Under the budget released last week, the IRA Rollover would allow donors age 70½ and older to transfer up to $100,000 from a traditional or Roth IRA directly to a charitable organization and have the amount excluded from their income for tax purposes. This version of the IRA Rollover is essentially the same as the one that expired at the end of 2007 after being in effect for about 1½ years.

AFP continues to work with Congress and the Bush Administration to push for an expanded version of the rollover provision that would:

  • Allow for planned or deferred gifts
  • Eliminate the $100,000 annual cap on rollover gifts
  • Lower the age limit to permit donors age 59½ to take advantage of the rollover

More information on the IRA Rollover provision, and what AFP members can do to help lobby for the provision, can be found here.

The inclusion of the IRA Rollover provision in the president's budget is a sign of the adminstration's strong support of the issue. However, with both congressional and presidential elections this year, there will be a limited window of time for legislative activity this year. AFP will be pushing Congress to either extend or make permanent the provision before it adjourns for the elections.

Private Foundations Excise Tax

The president’s budget also includes a change in the excise tax on the net investment income of private foundations. The proposal would eliminate the current “two-tier” structure whereby a foundation typically pays a 2 percent excise tax, unless its giving in a particular year exceeds the average of its giving over the past five years. In that case, the excise tax is reduced to 1 percent.

In its place, the budget would simply enact a one percent flat tax. The administration argues that the current system reduces the incentive for foundations to give more since they might suffer adverse tax consequences in future years if their giving levels drop. The change would simplify tax planning and make additional funds available for charitable purposes.

The change would be effective for taxable years beginning after Dec. 31, 2008.

Other provisions

Other provisions included in the budget would also be made permanent include:

  • Partial deduction for contributions of capital gain real property made for conservation purposes
  • Enhanced charitable deduction for contributions of food inventory
  • Enhanced deduction for corporate contributions of computer equipment for educational purposes
  • Special rule for S corporations making charitable contributions of property

A complete copy of the president’s budget can be found here. The charitable giving provisions begin on page 28.

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