Special Report: Where Does the Charitable IRA Rollover Stand?

As we head toward the end of the calendar year, I’ve been increasingly asked about the status of the Charitable IRA Rollover. This is the tax law provision that allowed taxpayers who were 70½ or older to transfer as much as $100,000 a year directly from their IRAs to qualified charities without tax penalties. The mechanism, which expired December 2011, gave older Americans, with an over-funded retirement, an additional pool of funds from which to contribute.

Many nonprofit organizations found the IRA Rollover unlocked new and increased giving. Development professionals also found that talking about the IRA Rollover was an easy way to engage prospects in a discussion about planned giving.

Unfortunately, the U.S. Congress allowed the IRA Rollover provision to lapse. And, it looks like the provision, if it is reinstated, won’t be reinstated until after the November election. Fortunately, there is support for the provision on Capitol Hill. The Senate Finance Committee did vote to include the IRA Rollover, through 2013, in the so-called Tax Extenders legislation.

The Wall Street Journal recently published a brief update regarding the status of the provision: “Will Rule on IRA Donations Return?”

While professional organizations such as the Association of Fundraising Professionals have been at the forefront of the fight for the IRA Rollover, members of Congress need to hear from a diverse group of individuals and organizations.

If you support the IRA Rollover provision, contact your Representative and Senators to let them know they should support it, too.

That’s what Michael Rosen says… What do you say?

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12 Responses to “Special Report: Where Does the Charitable IRA Rollover Stand?”

  1. So if I understand correctly, people are not currently allowed to make IRA charitable rollovers, but the government is considering reinstating the ability to do so? This is something that seems silly to keep out of American’s hands. I understand the government wants our tax/penalty dollars, but come on, giving to charity is something people (usually) do from the heart for an extremely good and/or life-saving cause. I wish the government would help make that easy for people to do. Oops, I just used “easy” and “government” in the same sentence… silly me!

    • Brian, thank you for sharing your thoughts and for pointing out that not reinstating the IRA Rollover would be just plain “silly.” Unfortunately, Congress has been guilty of very silly behavior for quite a long time. That’s why it’s so important for citizens to stand-up and demand some common sense on Capitol Hill. As a former Board Chair of the AFP Political Action Committee, and member of the AFP US Government Relations Committee, I played an active leadership role in advocating for passage of the original IRA Rollover. So, I know from personal experience that members of Congress are swayed by a fairly small amount of citizen action. A dozen calls and/or letters to a member’s office on an issue like this is often enough to make a real impression. We are not powerless unless we choose to be.

  2. What more politicians need to understand is that when individuals give major gifts to charities, it means that the government does not need to give as much support in grants or other methods. What people need to understand is that the government has spent so much money that it doesn’t have, it must increase revenue through taxes and penalties to lower the extreme deficit it has created over the last decade.

    Realistically, I see this getting more support from the GOP than I do from DNC, as the wealthy who would benefit the most seem to be more of the Republican party.

    • Richard, thank you for sharing your thoughts. There are some folks out there who suggest that politicians want more Americans dependent on the government because the recipients of government goodies will be more likely to vote for the politicans that give them the goodies. With that orientation, there is little place for an independent, robust nonprofit sector. These same folks also believe that the government has been co-opting some nonprofit organizations in much the same way. Before any of my readers send me an angry protest comment, let me just point out that one of the folks I was referencing was Alexis de Tocqueville, the author of Democracy in America (1835-40). He wrote, “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.”

  3. Herewith, my angry protest comment:

    Michael, I do not think AdT ever suggested that 47% of the population is composed of freeloading victims, nor that human beings could be motivated by deprivation of food, shelter, and housing, or else written off. And Richard, the provision has passed under Congresses controlled by both parties. Furthermore, it seems to me that the wealthy can take a taxable distribution and an offsetting deduction with nearly the same outcome (and many other satisfactory charitable tactics available also), but those who do not itemize benefit significantly from this provision.

    • John, thank you for commenting. Before I respond to your comment, I also want to thank you for keeping the conversation civil and for making an “angry protest comment” that really wasn’t all that angry. The first part of your comment appears to reference the media mischaracterization of Mitt Romney’s inelegant statements about his political campaign, not his policies. Regardless of where one stands politically, there is no denying that he was quite correct when he suggested that those who pay no federal income tax and who receive government benefits are far more likely to vote for Barack Obama than Romney. To win, Romney needs to secure his core base of support and bring some of those who are still undecided to his camp. For some, this political calculus might be uncomfortable. But, to me, it seems like a logical campaign strategy.

      Regarding your point about the potential tax benefits related to the IRA Rollover, you’re absolutely correct. The tax implications for wealthy Americans is essentially awash. It is those who do not itemize that can really benefit the most from the provision. Unfortunately, those folks will be somewhat less able to afford to make a gift from their IRAs.

      It seems we are all in agreement that the IRA Rollover is a good thing. Where we might disagree is in our predicition about what Congress will do and why it will do it.

  4. Thanks Michael for writing on a sensitive, controversial topic. Friends, I am sorry to say, you can probably kiss this one goodbye. With annual federal deficits at $1+ Trillion projected by the administration for the next decade, the Federal Government will need as much revenue as it possibly can get. Also, I think you can say goodbye to the charitable tax deduction as well, either in trade for a flatter, simpler tax code (as proposed by the Right) or the ideological belief that the rich should not avoid taxes for any reason (the Left), and the money is better directed by government.

    • Steve, thank you for sharing your thoughts. Your point is a good one. There is indeed a growing appetite in Washington, DC for limiting or eliminating incentives for charitable giving. While the motivations leading to this might be varied, the reality is that there is increasing support for this policy shift. Unfortunately, such a policy shift will do little to solve our nation’s deficit problem. Congress could eliminate all tax deductions and tax the wealthy at a rate of 100 percent, and we would still have a problem. Putting it simply, we do not have a tax problem in this country; we have a spending a problem. Maybe, the problem is both.

      There are those who advocate for returning to the tax rates we had under President Bill Clinton. I could actually get behind such a plan if Congress also returned to the Federal spending levels (as a percentage of GDP) we had under Clinton. That would allow spending to continue to grow, just not at the insane pace it has been growing.

      Both Democrats and Republicans are guilty of over spending. This brings me back to what Tocqueville wrote. He suggested that a republic could only survive for about 200 years. At that point, government would have figured out that it could buy the public’s vote with the public’s money. His predicition is remarkable although the republic seems to be lasting a bit longer than he expected. Also, while he predicted that government would use our money to buy our support, he never predicted that government would use our money, our children’s money, and our grandchildren’s money.

      I want to also thank you for reminding folks that our anticipated annual budget deficits are expected to exceed $1 trillion for the next decade. I’d like to share some additional numbers to underscore just how serious the revenue/spending problem is:

      As I write this, our current debt figures are (I also provide the corresponding number for 2000, the last year of the Clinton Administration):

      The US National Debt is at $16,043,783,000,000, and climbing. ($5,693,815,000,000)

      The US National Debt equals $51,208 per citizen. ($20,136)

      The US National Debt equals $140,276 per tax payer. ($54,434)

      The US National Debt is over 104 percent of GDP. (59 percent)

      As a percentage of GDP, federal, state, and local government tax revenue equals 32.5 percent. (37.6 percent)

      As a percentage of GDP, federal, state, and local government spending equals 41.6 percent. (36 percent)

      You can get more figures for the US and other countries by visiting: http://usdebtclock.org.

      So, why have I spent so much time looking at our tax and debt situation? I’ve done this because I want folks to think more deeply about the issues. It’s critically important to the nonprofit sector. While we can discuss the merits of the IRA Rollover, the reality is that GDP growth will have a far greater impact on philanthropy. In the US, philanthropy has consistently correlated to GDP at the rate of about two percent. If the economy is well managed, we will have strong GDP growth which, in turn, will likely ressult in strong philanthropic growth. Slow GDP, as we have already seen, will likely result in slow philanthropic growth.

      If we want a stronger nation, if we want to grow philanthropy, we better demand that all of our elected officially do their jobs and, in the process, allow for stronger economic growth.

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