Federal Nonprofit Reform
Charitable Giving
IRA Rollover

Handouts

Reprint of Ready Reference Page shared with permission by Don Kramer, Esq., Editor of Nonprofit Issues. See our bookstore for discounted order form for this legal newsletter.

PANO's presentation on the Pension Protect Act -Charitable Incentives and Reforms presented on October 31, 2006.

Handout from our Legislative Roundtable with key US Senate Staffer Melanie Looney on August 23, 2006. 

What Estate Planners Need to Know about the Pension Protection Act.
This document and its contents are the sole property of Christopher R Hoyt, Professor of law at the University of Missouri, Kansas City School of Law. Neither the document nor its contents may be used for commercial purposes. Use of this document or excerpts from it, must be accompanied by appropriate citation.  For more information, visit http://www.law.umkc.edu/faculty/hoyt.htm.

PANO News

11/15/07 US Reps. Rangel & McCrery introduce Technical Corrections Act of 2007. US Reps. Rangel & McCrery introduce the Technical Corrections Act of 2007 (HR4159) to fix unintended results from provisions in the Pension Protection Act of 2006, the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), and other tax laws dating back to 1998. Companion legislation (S.2374) was also introduced in the Senate. For the by the Joint Committee on Taxation summary of HR4159, go to http://www.house.gov/jct/x-109-07.pdf. 

10/29/07 House Ways & Means Approves Tax Reduction and Reform Act Extending Charitable Provisions from Pension Protection Act of 2006. US House Ways and Means Committee reports out of Committee the Tax Reduction and Reform Act of 2007. H.R.3970 is designed to correct or extend certain provisions from the Pension Protection Act of 2006 that are set to expire on December 31, 2007. Charitable provisions include the following:

Extension of the deduction of State and local general sales taxes. The bill extends for one year the election to take an itemized deduction for State and local general sales taxes in lieu of the itemized deduction permitted for State and local income taxes. This proposal is estimated to cost $3.58 billion over 10 years.

Extension of special tax treatment of certain payments to controlling exempt organizations  The bill would extend for one year the current law special rules for interest, rents, royalties and annuities received by a tax exempt entity from a controlled entity. This proposal is estimated to cost $23 million over 10 years.

Modification of unrelated business income tax rules for certain investment partnerships. The bill would allow pension plans, universities and other tax-exempt entities to directly invest in hedge funds and other investment funds without incurring unrelated business income tax (“UBIT”). This would eliminate the current-law incentive for pension plans, universities and other tax exempt entities to invest in hedge funds and other investment funds through offshore “blocker” corporations formed in tax haven jurisdictions and would improve the investment returns for pension plans, universities and other tax exempt entities that invest in these investment funds. This proposal is estimated to cost $1.34 billion over 10 years.

Extension of provision encouraging contributions of capital gain real property made for conservation purposes. The bill would extend for one year the current-law increased contribution limits and carryforward period for amounts in excess of these limits for contributions of appreciated real property (including partial interests in real property) for conservation purposes. This proposal is estimated to cost $52 million over 10 years.

Extension of enhanced charitable deduction for contributions of food inventory. The bill would extend for one year the current-law provision allowing businesses to claim an enhanced deduction for the contribution of food inventory. This proposal is estimated to cost $72 million over 10 years.

Enhanced charitable deduction for contributions of book inventories to public schools. The bill would extend for one year the current-law provision allowing C corporations to claim an enhanced deduction for contributions of book inventory to public schools (kindergarten through grade 12). This proposal is estimated to cost $31 million over 10 years.

Extension of enhanced deduction for corporate contributions of computer equipment for educational purposes. The bill would extend for one year a provision that encourages businesses to contribute computer equipment and software to elementary, secondary, and post-secondary schools by allowing an enhanced deduction for such contributions. This proposal is estimated to cost $218 million over 10 years.

Extension of tax-free distributions from individual retirement plans for charitable purposes The bill would extend for one year the current-law provision that permits tax free charitable contributions from an Individual Retirement Account (IRA) of up to $100,000 per taxpayer, per taxable year. This proposal is estimated to cost $452 million over 10 years.

Extension of special rule for S corporations making charitable contributions of property. The bill would extend for one year the current-law provision allowing S corporation shareholders to take into account their pro rata share of charitable deductions even if such deductions would exceed such shareholder’s adjusted basis in the S corporation. The bill would also make a technical correction clarifying the application of this provision. This proposal is estimated to cost $54 million over 10 years.

For the 10/29/07 House Ways & Means Committee summary of H.R.3970 go to http://waysandmeans.house.gov/media/pdf/110/Summary%20for%20Distribution.pdf.

10/2/07 US House W&M Committee Requests Public Comments on Pension Protection Act Changes; Deadline Nov 1, 2007. US House Ways and Means Committee requests public comments on H.R. 3361, a bill to make certain technical correction to the "Pension Protection Act of 2006" (PPA). The PPA Technical Corrections bill was introduced on August 3, 2007. Some of the technical corrections, such as the corrections to “combined plan limits” and “nonspousal rollovers,” have a pressing urgency.

The Pension Protection Act of 2006 (PPA) (P.L.109-280) was signed into law on August 17, 2006. The PPA made significant changes to many areas of pension law including (1) funding rules for single-employer and multi-employer defined pension plans; (2) pension plan disclosure to plan participants; (3) investment advice, prohibited transactions, and fiduciary rules; (4) benefit accrual standards; (5) deduction limits for single-employer and multi-employer defined pension plans; (6) permanency of certain pension provisions, including increased contribution limits for defined contribution plans (such as 401(k); (7) improved portability and distribution of pension benefits, including non-spousal rollovers; and (8) automatic enrollment for 401(k) plans.

Public comments are due on November 1, 2007. Comments will help guide the committee recommend changes to the bill before it’s potential passage before the end of this year.

Advisory 
PPA on the IRS website

7/23/07 Subcommittee Hearing Tuesday July 24 on Charities and IRA Rollover Incentive. US House Ways & Means Oversight Subcommittee will hold an overview hearing on July 24 on charities and the IRA rollover charitable giving incentive enacted in the Pension Protection Act. Hearing begins in Washington DC at 10am. The IRA rollover charitable giving incentive will expire at the end of this year. Two bills to extend the provision and expand its scope currently sit in committee because Congress remains unclear as to the provision’s effectiveness.

If your organization has received a charitable contribution in 2006 or 2007 from a donor’s IRA account, (using the IRA Rollover Provision) then PANO and the Subcommittee want to hear from you before the Committee’s July 31 deadline. Please send a brief email with your contact information to david@pano.org.  Include a list of the number of IRA Rollover gifts that your charity received, the amounts of those gifts, and whether the gifts were from new donors. To submit a statement for the record go to http://waysandmeans.house.gov/submissions.aspx.  Please copy PANO with your submission.

The current IRA Rollover provision, though limited, has already generated millions of dollars in new charitable donations. Your examples can help make the case to Congress that the IRA Rollover is an important charitable giving incentive that should be extended and expanded. For the Hearing announcement go to http://waysandmeans.house.gov/hearings.asp?formmode=view&id=6224.

7/9/07 W&M Committee to Hold July 24 Hearing on Charities & the IRA Rollover; Public Comments due July 31. US House Ways & Means Oversight Subcommittee Chairman John Lewis (D-GA) announced that the Subcommittee will hold an overview hearing on July 24 that will focus on charities and the IRA rollover charitable giving provision enacted in the Pension Protection Act of 2006. The Subcommittee wants to hear from charities that have received contributions from IRA retirement accounts.

The hearing will review the overall state of this sector, including activities and measures for ensuring public accountability and good governance. In the hearing announcement, Chairman Lewis stated: “The volunteers and organizations that make up the charitable community work day after day providing services to our communities that are critical to all Americans and essential to the well-being of our Country. The Congress and the public must continue to support this community. I look forward to beginning a dialogue about the important role charities play in American life. The Subcommittee will continue its review of tax-exempt issues throughout the 110th Congress, including charities’ efforts to assist diverse communities and other specific areas of concern.” Comments are due by July 31. For more information go to http://waysandmeans.house.gov/hearings.asp?formmode=view&id=6224. 

7/3/07 House Oversight Subcommittee Seeks Charities’ Comments on Reform and Incentives from Pension Protection Act. House Ways and Means Oversight Subcommittee Chairman John Lewis (D-GA) has requested charities to submit written comments for the record on the provisions relating to tax-exempt organizations contained in the Pension Protection Act of 2006. The Subcommittee is particularly interested in how these new rules affect, or will affect, charitable efforts and the difficulties that have arisen in implementing these provisions, especially with respect to the provisions scheduled to expire on December 31, 2007. The deadline to submit written comments is Tuesday, July 31, 2007. For more information on how to submit comments, see the press release from the Oversight Subcommittee. http://waysandmeans.house.gov/hearings.asp?formmode=view&id=6116. 

6/13/07 House Oversight Subcommittee Requests Comments on Tax-Exempt Provisions from the Pension Protection Act. House Ways and Means Oversight Subcommittee Chairman John Lewis (D-GA) has requested written comments for the record, regarding the tax exempt organization provisions contained in the Pension Protection Act of 2006. The PPA of 2006 included a laundry list of charitable reforms and incentives such as the IRA rollover provision. Many of these incentives will expire at the end of this year. The Subcommittee wants to hear from charities and foundations about the real impact of these recently-enacted provisions, and specifically about the successes or difficulties charities have had in implementing the provisions. Comments must be received before Tuesday, July 31. For more information or to submit comments go to http://waysandmeans.house.gov/hearings.asp?formmode=view&id=6116. 

3/14/07 US House and Senate Introduce Bill for IRA Charitable Rollover Provision. With the support of over 700 charitable organizations endorsing Independent Sector’s sign-on letter, the Public Good IRA Rollover Act of 2007 was introduced in the Senate (S. 819) by Senators Byron Dorgan (D-ND) and Olympia Snowe (R-ME), and in the House (H.R. 1419) by Representatives Earl Pomeroy (D-ND) and Wally Herger (R-CA). These two bills will extend and expand the current IRA rollover charitable giving incentive, that will expires at the end of 2007.

IRA Charitable Rollover provision that became law last August will expire at the end of this year. The IRA Rollover Provision provides a tax incentive for Americans over age 70 to give a charitable donation from their Individual Retirement Account (IRA) without incurring penalties or paying income tax on that money. From August to December of 2006, charities reported over $50 million in charitable donations directly from IRAs. But the IRA rollover tax incentive is temporary. Unless extended by law, this charitable giving incentive will end as of December, before its full benefit has been realized.

PANO and Independent Sector thank you for your support. For more information go to http://www.independentsector.org/programs/gr/IRArollover.html. 

To sign-on to Independent Sector’s letter: http://www.independentsector.org/programs/gr/IRA_rollover_signon.pdf.

3/5/07 Sign-on in support of the Public Good IRA Rollover Act of 2007 Deadline is Wednesday, March 7, 2007 at 5:00 pm

The IRA Charitable Rollover provision that became law last August is enabling older Americans to use retirement savings to support their favorite charitable causes without suffering adverse tax consequences. During the first four months of the provision, charities reported that they received over $50 million from IRAs to support their work of improving lives and strengthening society.

But the incentive will expire at the end of the year unless the charitable nonprofit community takes action now.

Independent Sector and the National Committee on Planned Giving have been working with members of Congress to extend the IRA rollover provision. Senators Byron Dorgan (D-ND) and Olympia Snowe (R-ME) and Representatives Earl Pomeroy (D-ND) and Wally Herger (R-CA) have agreed to sponsor the "Public Good IRA Rollover Act of 2007".

This bill would extend the current IRA Charitable Rollover provision by making it permanent, and would propose the following changes:

• Remove the current $100,000 annual limit on donations.
• Expand eligibility to allow all charitable organizations to benefit including private foundations.
• Lower the age of eligibility to 59 ½.

The “Public Good IRA Rollover Act” is expected to be introduced in the US Senate on Thursday, with a bill to be introduced in the US House soon thereafter. For a Draft copy of the Senate version of the “Public Good IRA Rollover Act”, go to http://www.independentsector.org/programs/gr/Draft_IRA_Rollover_bill.pdf. 

More information about the proposed bill and the current IRA Rollover provision is posted at http://www.independentsector.org/programs/gr/IRArollover. 

A sign-on letter by Independent Sector and the National Committee on Planned Giving will be sent to Congress on Thursday in support of the “Public Good IRA Rollover Act of 2007.” To add your organization’s name to the sign-on letter before the bill is introduced in the Senate, complete the form online at http://www.independentsector.org/programs/gr/IRAsignon.asp before 5:00pm on Wednesday, March 7.

The IRA rollover provides an important incentive for charitable giving. By signing-on to this letter, your organization’s name will be added to the list of charities that support extending and expanding the IRA Rollover provision through the “Public Good IRA Rollover Act of 2007”.

The deadline to sign-on is Wednesday, March 7 at 5:00pm.

2/28/07 IRA Rollover Provision. By the end of this year, the IRA Charitable Rollover provision that became law last August will expire. The IRA Rollover Provision provides a tax incentive for Americans over age 70 to give a charitable donation from their Individual Retirement Account (IRA). Under this law, the donor can give untaxed money directly to the charity, without paying penalties or income tax on that money. From August to December of 2006, Charities reported over $50 million in charitable donations directly from IRAs. But the IRA rollover tax incentive is temporary. Unless extended by law, this charitable giving incentive will end as of December 2007, before its full benefit has been realized.

For more information go to For more information go to http://www.independentsector.org/programs/gr/IRArollover.html. 

To sign-on to Independent Sector’s letter, go to: http://www.independentsector.org/programs/gr/IRA_rollover_signon.pdf. 

1/12/07 IRS Issues Guidance on IRA Charitable Rollover.  On January 10, 2007, the IRS released new guidance on the IRA Charitable Rollover provisions enacted last year in the Pension Protection Act.  IRS Notice 2007-7 provides frequently asked questions and answers, and clarifies a number of issues related to IRA distributions.  With respect to charitable donations from IRA funds, the guidance clarifies that checks may be delivered to a charity by the IRA holder, as long as they are made payable to an eligible charity.  Additionally, the $100,000 distribution limit applies separately to spouses, as long as each holds an IRA and is at least age 70½.  This permits contributions of up to $200,000 by married couples.  The guidance also answers questions about IRAs that are maintained under an employment arrangement or on behalf of a beneficiary, the timing of distributions, and minimum distribution requirements. For a copy of the January 10, 2007 Treasury Department press release go to. http://www.treasury.gov/press/releases/hp222.htm. A copy of the IRS guidance (Notice 2007-7) is posted at http://www.treasury.gov/press/releases/reports/notice20077.end.pdf.

3/06 Urge Congress to Approve IRA Rollover Provision. Contact your members of Congress now in support of the IRA Charitable Rollover Provision. This potential new charitable giving incentive is being considered as part of a broad tax relief package.   

The advantages of the IRA Charitable Rollover Provision include: Allowing a donor who has reached the age of 59 1/2 to transfer IRA funds directly to a charity without incurring income tax on the transfer; encourages a significant amount of new contributions from generous Americans who would no longer have to pay tax on a charitable contribution from their IRA funds; and helps charitable organizations by providing critical new resources to support the many programs and services that enrich and strengthen communities every day. The IRA Rollover provision enjoys wide bipartisan support.

House and Senate conferees are considering including this provision in a broad tax reconciliation bill, H.R. 4297. The IRA Charitable Rollover Provision is included in the Senate bill, but not in the House version.  This incentive to charitable giving has long been supported by orchestras, the nonprofit community, and leaders on the Hill. 

We urge you to contact your member of Congress and express your support for the Charitable Rollover Provision.  If you have not yet weighed in on this issue, now is the time to do so! For a copy of S. 2020, go to http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=109_cong_bills&docid=f:h4297eas.txt.pdf.  For more details go to http://www.independentsector.org/programs/gr/S2020summary.html.

12/05 U.S. Senate Approves Nonprofit Reforms in Reconciliation Bill.   On November 18, the U.S. Senate passed the Tax Relief Act of 2005, which included the long-awaited charitable reform legislation as well as charitable giving incentives. The charitable reform provisions include:

Increase fines and penalties for self-dealing and certain other violations by private foundations and excess benefit transactions by public charities. Establish a definition of donor-advised funds that gives the Secretary of the Treasury broad authority to delineate appropriate exceptions; impose aggregate payout requirements for donor-advised funds that would include reasonable and necessary expenditures by the sponsoring organization to administer the fund; and impose minimum payout requirements on individual funds that hold over 10% of their assets in property or other illiquid assets, which could be satisfied by transferring full control of partial interest in those illiquid assets to the sponsoring organization. Sponsoring organizations would be required to report annually the total number of and aggregate assets and contributions made by donor-advised funds they hold. To claim a tax deduction for funds or assets given to a donor-advised fund, donors would be required to have written substantiation that those assets are under the exclusive legal control of the sponsoring organization. Prohibit donors from taking a tax deduction for contributions to a donor-advised fund held by a Type III supporting organization. Prohibit both donor-advised funds and supporting organizations from making payments and distributions to donors and related parties (other than public charities), although fair and reasonable compensation may be provided to investment advisors. Supporting Organizations: Require minimum aggregate distributions by all supporting organizations of 85% of investment income or 3% of the fair market value of assets (other than assets used or held for the use of the supported organization), rising to 5% of assets in the third taxable year after enactment, and impose new rules on Type III supporting organizations that limit the number of organizations that may be supported and that require documentation of the approval of arrangements by the supported organizations. Reasonable and necessary administrative expenses would count towards qualifying distributions of a supporting organization. Require organizations not otherwise required to file an annual information return (based on gross receipts) must notify the IRS each year. Failure to file notice or return with IRS could result in loss of exempt status. [Amendment 2670 Section 324] Permit the IRS to disclose to state officials information pertaining to proposed actions involving a nonprofit. [Amendment 2670 Section 325] Expansion of the base of tax on private foundation net investment income. [Amendment 2670 Section 322] Valuation of Non-cash Charitable Donations: Values for donations of clothing and household items will be fixed by a new IRS standard price list. This guide will be written and published by the Internal Revenue Service with some input from the donee organizations. Other anti-abuse provisions include modifications to the deduction for donations of facade easements. Charities accepting such easements must be accredited by the National Trust for Historic Preservation. Strengthen the rules for appraisals required to claim tax deductions for contributions of property, impose new rules on tax-deductible gifts of façade easements and taxidermy, and add new rules to ensure that contributions of partial interest in gifts of property are used for charitable purposes. The charitable giving incentives included in the TAX Relief Act were previously part of Senator Rick Santorum's CARE Act, were only temporary, to expire on January 1, 2008. The charitable giving incentives include:

The non-itemizer deduction: This would permit taxpayers who do not itemize deductions on their income taxes to take a deduction for their total cash contributions over $210 for single filers and over $420 for joint filers. Taxpayers who itemize deductions will be permitted to deduct the total of both cash and non-cash contributions over $210 ($420 for joint filers). New substantiation rules apply for non-cash gifts of $250 or more. The IRA Rollover provision: This would permit taxpayers over age 70 ½ to make tax-free distributions from their IRAs directly to charitable organization. The Artists Deduction: Grant enhanced tax deduction (fair market value) for gifts of literary, musical, artistic or scholarly compositions. [Amendment 2670 Section 308] Modifications to grant enhanced deductions to corporations for contributions of food and book inventory. Conservation Easements: Encouragement of contributions of capital gain real property made for conservation purposes. [Amendment 2670 Section 307] Mileage reimbursements to charitable volunteers to be excluded from gross income. Expenses not reimbursed, but incurred through use of volunteer’s own vehicle for the benefit of the charitable organization shall be deductible using business mileage rates. [Amendment 2670 Section 309, Section 139B] Increase incentives for S Corporations to make charitable contributions. [Amendment 2670 Section 402]

These charitable giving incentives were previously part of Senator Rick Santorum's CARE Act. Unfortunately, the charitable giving incentives included in the TAX Relief Act were only temporary, and will expire On January 1, 2008. The amended Tax Relief Act [S. 2020] then moved to Conference Committee with the House. For the description of the Chairman’s modification to the Tax Relief Act by the Joint Committee on Taxation, go to http://www.house.gov/jct/x-77-05.pdf.  For additional Information go to http://www.independentsector.org/programs/gr/charityreform.html.  For more information see http://www.ombwatch.org/article/articleview/3177/1/403. 

8/17/06 Breaking NEWS! Today, President Bush Signed The Pension Protection Act Of 2006.  See this fact sheet for more information. Review this handout from our Legislative Roundtable with key US Senate Staffer Melanie Looney on August 23, 2006. 

8/4/06 US SENATE PASSES PENSION REFORM BILL WITH CHARITABLE PROVISIONS. Last night, after more than a year of negotiations, US Senate passed by a vote of 93-5, the Pension Reform Bill (H.R. 4) which included a significant package of charitable reforms and incentives. HR 4 was passed by the House last week. The President is expected to sign the bill into law as soon as possible.

The charitable incentives include tax free deductions from IRAs for charitable donations, tax deductions for charitable donations of food and book inventories, and a provision to encourage contributions land for conservation purposes. Unfortunately, some charitable incentive provisions like the non-itemizer tax deduction were not included in this package.

The charitable reform provision in this bill include doubled excise taxes on charities engaging in abusive transactions, increased disclosure requirements by charities not filing 990’s, and greater accountability for Donor-Advised funds and supporting organizations.

The bill represents the most comprehensive changes in the laws governing how charities operate in the nearly 30 years. It is incumbent on the entire nonprofit community to continue to vigilant and involved in the regulatory process to follow.

For a copy of H.R. 4, and a list of the charitable reforms and incentives go to http://capwiz.com/pano/issues/bills/?bill=8945106 

More analysis is available from Independent Sector at http://www.independentsector.org/programs/gr/charityreform.html 

For a copy of the Senate Finance Committee’s press release on http://www.finance.senate.gov/press/Gpress/2005/prg080306b.pdf