One good turn may deserve another - as Congress considers extending IRA direct gifts
BY JOHN _W. SHEPPARD Retired Estate Planning Attorney and Trustee, Southwest Florida Community Foundation

In August 2006, Congress passed a law which permits for 2006 and 2007 direct charitable gifts from one's IRA, which is a tax benefit to the IRA owner, but limited the eligibility to IRA owners older than 70-1/2 and gifts not exceeding $100,000 in each of only the years 2006 and 2007.

Surprise! Surprise! Alert! The new Congress will consider what will be called a "Stand Alone" IRA bill to be called "The Public Good IRA Rollover Act of 2007." The bill has been introduced and supported by a number of Republican and Democratic Senators and members of Congress.

The essence of the new law (if passed) would be to revise the present law to permit the following:

• All (IRS recognized) charities would be eligible recipients,

• Life income, deferred charitable gifts (Charitable Gift Annuities and some other deferred charitable gift plans) from IRA's could start at 59-1/2;

• Outright and direct gifts to charities from an owner's IRA, who is 70-1/2 would not end in 2007 but would be made permanent, and the current limitation of $100,000 would be removed - and be made unlimited.

Why the sudden change in thinking to loosen up charitable gifts? Two reasons!

First, by permitting those at 59-1/2 to make current income and deferred charitable gifts, the IRS would still be receiving income tax on the income, as it is drawn down by the IRA owner. Second is the overwhelming response to the 2006 Act. Records show that before the end of the year, several billion dollars were released from IRA's directly to charity in the last four months of 2006, and the giving has been continued in 2007.

The proposed 2007 law then gives an added bonus to permit "IRA Life Income Rollovers." In other words, a person more than 59-1/2 would be permitted to "rollover" funds from his/her IRA to a life income plan such as a Charitable Gift Annuity, which could provide income to the donor and/or the donor's spouse only - not to third parties.

Now does this mean that those who have charitable goals, through the Foundation or other charities, should stand up and cheer? Not quite yet! Right now you do have the remainder of 2007 to direct up to $100,000 to a charity - if you are more than 70-1/2. Period! That's it! But there does seem to be a rising sentiment to make the permission permanent and more comprehensive.

The primary reason working against this new broadening of IRA direct gifting is that Congress generally follows a "money out, money in" tax benefit rule. In other words, if there is to be a tax revenue loss when a new law is adopted, Congress looks to find another source of revenue to replace it. Whoever heard of Congress and the federal government cutting back a spending program?

This then is an alert - stay tuned, and if you feel so inclined, write our Congress members and Senators to support the proposed law. They are SB 819 and HR 1419. (Interestingly enough, just within the last few days, more Congress members have joined in co-sponsoring the bill so that there are now 81 co-sponsors in the House and 22 in the Senate.

REMEMBER: You can still make direct gifts up to $100,000 to a charity from your IRA for the remainder of 2007 (if you are more than 70-1/2). Understand that this is a very precise procedure, so don't wait until December to decide, and be sure your IRA Trustee understands what is to be done.

For more information on the current or proposed laws, contact your attorney or tax advisor, or the Southwest Florida Community Foundation office at 274-5900.