Bill Would Provide Permanent Fix for IRA Charitable Rollover

Legislation Will Encourage More Giving, Greater Impact

ARLINGTON, VA – A new bill introduced in the U.S. Senate would permanently extend the Individual Retirement Account (IRA) charitable rollover and expand it to allow increased charitable giving, most notably through donor-advised funds. It is a particularly attractive vehicle for many donors because it allows them to create a fund through an organization, like a community foundation, and recommend how those funds should be used.

The Public Good IRA Rollover Act of 2011 (S. 557), introduced by Sens. Charles Schumer (D-N.Y.), Olympia Snowe (R-Maine), Richard Burr (R-N.C.), and John Kerry (D-Mass.) would also allow for such giving through supporting organizations and private foundations. Additionally, the proposed legislation lifts the $100,000 charitable gift limit and allows for certain giving—like to a charitable remainder trust—as early as age 59 ½.

The current law, set to expire at the end of 2011, capped IRA rollovers at $100,000 and was limited to taxpayers aged 70 ½ or older.

“This legislation recognizes the value of donor-advised funds and other charitable giving vehicles as vital to strengthening philanthropy’s impact in our communities,” said Steve Gunderson, president and CEO of the Council on Foundations. “The Council is committed to working with Sens. Schumer, Snowe, and other members of Congress to ensure that more Americans and their families can contribute to efforts that address our most pressing problems and advance the public good.”

In 2008—the most recent date for which the data is available—56 percent of funds for community foundation grants came from donor-advised funds and 37 percent of those donor-advised fund grant dollars went to support human services.

Prior to 2006, taxpayers wishing to transfer IRA assets to charitable causes first had to recognize the amount as income, make a transfer, and then claim a charitable contribution deduction for the amount gifted. This often resulted in tax liability, even though the donor ultimately transferred the entire IRA distribution to charity. The Pension Protection Act of 2006 (PPA) partially solved this problem by allowing individuals to transfer amounts from their IRA accounts directly to charity without first having to recognize the distribution as income.

The Schumer-Snowe legislation continues the commitment of former Sen. Byron Dorgan of North Dakota, who championed similar legislation in the 111th Congress to fix the IRA rollover and allow for the transfer of charitable gifts to donor-advised funds.

The new legislation has already gained strong bipartisan support in the Senate and has six original co-sponsors:

• Sherrod Brown (D-Ohio)
• Kristen Gillibrand (D-N.Y.)
• Tim Johnson (D-S.D.)
• Patrick Leahy (D-Vt.)
• Carl Levin (D-Mich.)
• Mark Pryor (D-Ark.)

The Council, which worked closely with Sens. Schumer and Snowe on the legislation, is also encouraging its more than 1,750 members to urge their senators to support the bill as co-sponsors. (The Council’s issue paper provides more information about the organization’s position on the issue.) The bill is one of the priority items on the Council’s 2011 legislative agenda. Additional legislative priorities for the Council include:

• Simplifying the private foundation excise tax to a single, flat rate
• Promoting and growing rural philanthropy
• Streamlining the process required for foundations to participate in Program Related Investments

Last week, the Council, along with the Forum of Regional Associations of Grantmakers, co-hosted more than 250 philanthropic leaders in Washington, D.C. for Foundations on the Hill, two days of legislative and regulatory updates and meetings with members of Congress and their staffs. Foundations educated members about their impact on their respective communities and how proposed legislative and regulatory changes could enhance their contribution to the public good. More information about the Council on Foundations’ 2011 Legislative Agenda and policy papers is available here.

The Council on Foundations (www.cof.org), formed in 1949, is a nonprofit membership association of grantmaking foundations and corporations. Members of the Council include more than 1,750 independent, operating, community, public, and company-sponsored foundations, and corporate giving programs in the United States and abroad. The Council’s mission is to provide the opportunity, leadership, and tools needed by philanthropic organizations to expand, enhance, and sustain their ability to advance the common good.