Charitable rollovers help make lasting changes

Just before recessing for the holidays this past December, the U.S. House and Senate passed, and President Barack Obama signed into law, the Protecting Americans from Tax Hikes Act of 2015 or PATH Act.

This action renewed more than 50 tax provisions, making some permanent while others were extended for multiple years.

We in the area of philanthropy hope the passage of the PATH Act will benefit our donors — and our communities — by allowing them the opportunity to engage in more consistent and thoughtful tax planning opportunities rather than waiting until the end of each December to learn whether the provisions would be renewed – for the year about to be just completed.

The Community Foundation of Jackson County, along with our donors and other community partners, should be most excited that the PATH Act permanently extended the provision for people age 70½ and older to be allowed to make tax-free distributions from individual retirement accounts to a qualified charitable organization. That would include charitable donations to new or existing funds administered by the foundation.

The donations continue to be capped at a maximum of $100,000 per taxpayer ($200,000 for a couple) each year. Doug Hasler, a CPA with Blue & Co., reported this month that such IRA charitable rollover distributions are excluded from the taxpayer’s gross income, with no separate deduction for the charitable contribution.

Here’s how the IRA charitable rollover can help you make a lasting change for good in our community:

You must be an IRA owner who is at least age 70½.

You must notify your IRA custodian of your desire to make a direct transfer of the distribution from your account to a charity such as the foundation.

And you can count the gift toward your required minimum distribution and pay no tax on the gift.

As with any gift to charity, including those to the foundation, you’re encouraged to run your plans past your financial adviser or attorney to ensure you’re getting the most out of your gift in terms of taxes and your financial situation.

IRA charitable rollover gifts, unfortunately still cannot be made to donor advised funds — that’s a change that we and our partners in philanthropy will continue to work on in coming sessions. You can continue to make rollover gifts to support your favorite charities, your favorite causes or to the whole community with gifts to funds administered through the foundation, including unrestricted funds, designated funds and agency funds.

Traditional individual retirement accounts are subject to the same required minimum distribution rules that apply to qualified employer-provided retirement plans, Hasler said in his report to those of us involved in philanthropy.

Gifts to qualified charities could be planned to meet withdrawal requirements, among other planning opportunities, he added, a process that should be smoother for everyone involved now that the deduction has been made permanent.

A conversation with your money manager can help you navigate your IRA charitable rollover distributions. A conversation with us here at the foundation can help you figure out how you can best satisfy your giving desires and how best you can become an important partner in our community’s efforts to help the agencies and programs that assist those among us who are in need.

Dan Davis is president and CEO of the Community Foundation of Jackson County. For information about donating to the foundation, call 812-523-4483 or send an email to [email protected] The foundation is a nonprofit public charity established in 1992 to serve donors, award grants, and provide leadership to improve Jackson County forever.