What is the Pension Protection Act in a “nutshell?”
The new law provides an exclusion from gross income for otherwise taxable IRA distributions of up to $100,000 per year from traditional IRAs and Roth IRAs for “qualified charitable distributions” made during 2006 and 2007 by plan owners who have attained at least age 70½ on the date of distribution to charity.

Does the new law apply to all IRA transfers?
The new rules apply only to outright lifetime transfers from IRA owners. The rules and benefits applicable to testamentary transfers remain unchanged.

Which Plans Are Eligible?
As stated above, the exclusion applies to traditional IRAs and Roth IRAs only. Other forms of retirement plans such as 401(k), 403(b) annuities, defined benefit and contribution plans, profit-sharing plans, Keoghs and employer-sponsored SEPs and SIMPLE plans are NOT eligible.

What are the Effective Dates?
The new rules are effective for transfers made during 2006 and 2007. We presume the standard delivery rules will apply. Therefore, distribution must be delivered or postmarked to the charity no later than December 31 of the year for exclusion.

Who Can Exclude IRA Distributions?
The exclusion applies to individuals who have reached age 70½ by the date of the contribution. It is important to distinguish this rule from the rule that requires plan participants to begin receiving minimum required distributions in the same year they reach 70½ (if they have already begun receiving distributions) and no later than April 1 of the year following the year in which they attain age 70½ (if they have not). Therefore, donors, their advisors, and helpful charities will want to check the calendar to make sure this important test is satisfied.

Is There a Limitation on the Amount?
The amount that can be excluded from a plan owner’s income is limited to $100,000 per taxpayer per year. Therefore, a married couple could donate up to $200,000 provided each spouse owns at least one IRA and can each make a qualified charitable distribution of $100,000 from his/her plans. Amounts exceeding this amount are treated under the old rules.

Can qualified charitable distributions be applied in satisfaction of a plan owner's minimum required distribution requirements for the year? Yes. If, for example, a participant is required to withdraw 5% from their IRA for the year, they can direct the entire amount to charity in satisfaction of their minimum required distribution.

What about income tax withholdings from amounts distributed to charity? The Treasury will prescribe rules under which IRA owners are deemed to elect out of withholdings on amounts distributed to charity.

What kind of charities may receive a gift? The gift must be designated to a qualified exempt public charity and may not have any limitations that would disqualify a charitable deduction. The recipient may not be a private foundation, supporting organization or donor-advised fund. Advisors should be careful if donors plan to make gifts to foundations for universities or medical centers, since some are supporting organizations. Many university and medical center foundations will file for exempt status as Sec. 509(a)(1) charities to permit them to receive IRA gifts.

How can I give an IRA rollover gift to a ministry of The Christian and Missionary Alliance?
Tax-free IRA charitable gifts may be designated for C&MA local churches, C&MA district ministries (church planting projects, camps and conferences, etc.), the Great Commission Fund, C&MA colleges and seminary, and other qualified charitable entities. Although IRA rollover gifts may not be given directly to The Orchard Foundation, its representatives are prepared to help individuals who desire to give a gift to C&MA-related charities.

Helpful Articles on the Web
“The Pension Protection Act of 2006: A Guide to Charitable IRA Rollovers”
“IRA Charitable Rollover Passes!”


The Orchard Foundation and its representatives do not render professional tax or legal advice. We recommend that you consult a tax advisor about your specific situation.