NEW TAX LAW TO BENEFIT NONPROFITS AND IRA HOLDERS

PENSION PROTECTION ACT OF 2006

It’s like stealing from the IRS – legally. On August 17, 2006 President Bush signed into law the Pension Protection Act of 2006, which permits those over age 70½ to make current gifts from their IRA accounts providing tax benefits to the donors during 2006 and 2007. This law permits IRA rollovers to charities without declaring any additional income or paying any additional tax. These qualifying gifts can be any amount up to $100,000 each year. If you are considering IRA withdrawals or face mandatory withdrawals, you need to know about the provisions of this act.

These types of donations are limited to public charities only. What this means to us is that such donations must be made to the CAF or the American Airpower Heritage Museum. They cannot be made to our American Airpower Heritage Foundation. Only regular and Roth IRA accounts qualify for this type of rollover donation. However, donors with other types of qualified retirement plans may be able to roll them into an IRA and then use this law to make the desired gift. Contact your financial advisor to see if your plan is eligible to be rolled into an IRA.

Although there is no charitable income tax deduction for these IRA rollovers, such donations are not included in a donor’s taxable income, which simplifies the donor’s tax return and saves some taxes. An added plus of this type donation made by December 31, 2006 is that it will qualify for all or part of an IRA owner’s required minimum distribution in 2006. Also, this type donation is not included in the 50% of adjusted gross income deduction limitation on cash donations.

There are situations where one must take a required IRA distribution that increases income to a level where 85% of Social Security income is taxable. By using this type of donation, if it otherwise makes sense, income may be lowered such that only 50% of Social Security income is taxable.

If your IRA has grown to the extent that it’s producing more income than you need, you would like to give more than the charitable deduction limitation permits or the provisions of this law provide a tax deduction benefit, please contact your IRA custodian for personal advise or to make an IRA rollover donation to benefit the CAF of the museum.
Discover how your donation can have a dramatic impact on the future and mission of the Commemorative Air Force here.

FYI
Where charitable income tax deductions are noted, gifts are deductible up to the maximum amount allowed by applicable laws.

All information contained in this publication is presented solely for educational and illustrative purposes. Individuals and families should consult their personal professional advisors for specific tax implications, and prior to making estate planning decisions.