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Congress Wrestles with Tax Bills that Include IRA Rollover

(Sept. 29, 2008) The U.S. House and Senate have each passed H.R. 6049, a bill that includes the IRA Rollover and several other limited charitable giving incentives. This is promising activity, but the fate of this provision and others is still unclear.

The Senate version of the tax bill contains a two-year extension of the IRA Rollover, whereas the House version initially called for a one-year extension. Adding to the complexity, the House last week passed H.R. 7202 that contains a two-year extension. It is worth nothing that each version of the rollover provision found in these bills is retroactive to Dec. 31, 2007.

The House and Senate do not agree on how they will pay for the tax package—something that may put the legislation (and the IRA Rollover) in limbo.

In addition to the IRA Rollover, the following tax incentives were included in the Senate-passed bill for charitable giving. Most are limited in scope and apply only to gifts for Midwestern disaster relief for victims of storms, tornados and floods in that region:

  • Temporary Suspension of Limitations on Charitable Contributions. The amount allowed as a charitable deduction in any taxable year may not exceed ten percent of the corporation’s taxable income or fifty percent of an individual’s adjusted gross income. The proposal temporarily waives these limits regarding charitable cash contributions dedicated to Midwestern disaster relief efforts. The proposal is effective for contributions paid during the period beginning on the earliest applicable disaster date for all states and ending on Dec. 31, 2008.
  • Increase in Standard Mileage Rate for Charitable Use of Vehicles. As eWire has reported, the mileage rate individuals may use to compute a tax deduction for personal vehicle expenses associated with charitable work is statutory and has not been increased since 1997. The rate is currently 14 cents per mile. However, for a taxpayer assisting in relief efforts related to the Midwestern disaster, the proposal sets the charitable mileage rate at seventy percent of the current standard business mileage rate (50.5 cents per mile), beginning on the applicable disaster date and ending on Dec. 31, 2008.
  • Exclusion from Income of Mileage Reimbursements for Charitable Volunteers. In general, reimbursements received for operating expenses of a personal vehicle used in connection with charitable work in excess of the statutory charitable mileage rate are taxable income to the recipient. However, reimbursements for charitable mileage attributable to the Midwestern disaster up to the amount of the standard business mileage rate will not be considered taxable income through Dec. 31, 2008.

House Passes Charity Enhancement Act of 2008

In addition to these provisions, Rep. John Lewis (D-GA), Chairman of the Ways and Means Subcommittee on Oversight and Investigations, introduced a completely separate bill to make corrections to the Pension Protection Act of 2006. The House passed the bill, known as the Charity Enhancement Act of 2008 (H.R. 7083) this past Saturday. This legislation will now go to the Senate for consideration.

The Charity Enhancement Act:

  • promotes scholarships by revising rules so the granting of scholarships is not viewed as a taxable event
  • makes charitable institutions more transparent and public by facilitating the electronic filing of tax returns filed by charities and foundations
  • supports the philanthropy of Native American tribal governments
  • provides relief to longstanding foundations and charities established by estates
  • supports volunteer boards by allowing charities to reimburse some of the reasonable and necessary expenses they incur in providing services to their organizations

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