Senate Introduces IRA Charitable Rollover Bill

Senate Introduces IRA Charitable Rollover Bill

News story posted in Legislative on 24 May 1999| comments
audience: National Publication | last updated: 18 May 2011
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Summary

In a press release, U.S. Senator Kay Bailey Hutchison, R-Texas, introduced legislation which will allow donors to roll over assets from an IRA to a charity without incurring tax liability. The legislation is co-sponsored by several other Senators and has been endorsed by over 200 charitable organizations.

PGDC Summary:

U.S. Senators Kay Bailey Hutchison, (R-Texas) and Richard Durbin (D-Illinois) have co-sponsored S. 1086, which will allow donors to roll assets from an IRA over to charity without incurring tax liability.

Under current law, taxpayers desiring to make lifetime transfers of IRA assets to charity must first withdraw them, recognize the distribution for income tax purposes, contribute the funds to charity, and then claim an income tax charitable deduction to mitigate their income tax liability.

The Bill would permit individuals age 59-1/2 or older to make direct transfers from their IRA to charity free from the recognition of income.

In addition to outright transfers to charitable organizations, non-recognition treatment would also be available for transfers to retained income plans such as charitable remainder trusts, pooled income funds, and charitable gift annuities. In order to qualify, the income recipients or annuitants must be limited to the individual for whose benefit the IRA is maintained, the spouse of such individual, or any qualified charity.

No income tax charitable deduction would be available for any qualifying transfers.

Other co-sponsors include Senators Jesse Helms (R-North Carolina) and Dianne Feinstein (D-California). In addition, over 200 charitable organizations support the legislation.

The Senate legislation mirrors H.R. 1311, the "IRA Charitable Rollover Incentive Act of 1999," reported in News Alerts on April 1, 1999.

FULL TEXT:

STATEMENTS ON INTRODUCED BILLS

AND JOINT RESOLUTIONS

S. 1086. A bill to amend the Internal Revenue Code of 1986 to waive the income inclusion on a distribution from an individual retirement account to the extent that the distribution is contributed for charitable purposes; to the Committee on Finance.

IRA ROLLOVER TO CHARITY ACT



Mrs. HUTCHISON. Mr. President, today, I am pleased to introduce, along with Senator Durbin, the IRA Rollover to Charity Act of 1999. This legislation has the support of numerous charitable organizations across the United States. The effect of this bill would be to unlock billions of dollars in savings Americans hold and make them available to charity.

Mr. President, the legislation will allow individuals to roll assets from an Individual Retirement Account (IRA) into a charity or a deferred charitable gift plan without incurring any income tax consequences. Thus, the donation would be made to charity without ever withdrawing it as income and paying tax on it.

Americans hold well over $1 trillion in assets in IRAs. Nearly half of America's families have IRAs. Recent studies show that assets of qualified retirement plans comprise a substantial part of the net worth of many persons. Many individuals would like to give a portion of these assets to charity.

Under current law, if an IRA is transferred into a charitable remainder trust, donors are required to recognize all such income. Therefore, absent the changes called for in the legislation, the donor will have taxable income in the year the gift is funded. The IRA Rollover to Charity Act lifts the disincentives contained in our complicated and burdensome tax code and will unleash a critical source of funding for our nation's charities. This is a common sense way to remove obstacles to private charitable giving.

Under the legislation, upon reaching age 59 1/2, an individual could move assets penalty-free from an IRA directly to charity or into a qualifying deferred charitable gift plan -- e.g. charitable reminder trusts, pooled income funds and gift annuities. In the latter case the donor would be able to receive an income stream from the retirement plan assets, which would be taxed according to normal rules. Upon the death of the individual, the remainder would be transferred to charity.

Mr. President, I hope the Senate will join in this effort to provide a valuable new source of philanthropy for our nation's charities. This legislation has the support of numerous universities and charitable groups, including the Charitable Accord, an umbrella organization representing more than 1,000 organizations and associations.

Mr. President, I have just returned from the Balkans. I have seen first hand the wonderful work that is being done by charitable groups in dealing with the massive refugee crisis that has occurred there. As terrible as this crisis has been, it would be worse if not for the great work that is being done by charitable groups. Our bill will help direct additional resources to those charities and thousands of others. I urge my colleagues to co-sponsor this legislation.

106th CONGRESS

1st Session

S. 1086




IN THE SENATE OF THE UNITED STATES
May 20, 1999

Mrs. Hutchison (for herself, Mr. Durbin, Mr. Helms, and Mrs. Feinstein) introduced the following bill; which was read twice and referred to the Committee on Finance


A BILL

To amend the Internal Revenue Code of 1986 to waive the income inclusion on a distribution from an individual retirement account to the extent that the distribution is contributed for charitable purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT ACCOUNTS FOR CHARITABLE PURPOSES.

(a) In General.--Subsection (d) of section 408 of the Internal Revenue Code of 1986 (relating to individual retirement accounts) is amended by adding at the end the following new paragraph:

``(8) Distributions for charitable purposes.--
``(A) In general.--No amount shall be includible in gross income by reason of a qualified charitable distribution from an individual retirement account to an organization described in section 170(c).
``(B) Special rules relating to charitable remainder trusts, pooled income funds, and charitable gift annuities.--
``(i) In general.--No amount shall be includible in gross income by reason of a qualified charitable distribution from an individual retirement account--
``(I) to a charitable remainder annuity trust or a charitable remainder unitrust (as such terms are defined in section 664(d)),
``(II) to a pooled income fund (as defined in section 642(c)(5)), or
``(III) for the issuance of a charitable gift annuity (as defined in section 501(m)(5)).
The preceding sentence shall apply only if no person holds an income interest in the amounts in the trust, fund, or annuity attributable to such distribution other than one or more of the following: the individual for whose benefit such account is maintained, the spouse of such individual, or any organization described in section 170(c).
``(ii) Determination of inclusion of amounts distributed.--In determining the amount includible in the gross income of any person by reason of a payment or distribution from a trust referred to in clause (i)(I) or a charitable gift annuity (as so defined), the portion of any qualified charitable distribution to such trust or for such annuity which would (but for this subparagraph) have been includible in gross income--
``(I) shall be treated as income described in section 664(b)(1), and
``(II) shall not be treated as an investment in the contract.
``(iii) No inclusion for distribution to pooled income fund.--No amount shall be includible in the gross income of a pooled income fund (as so defined) by reason of a qualified charitable distribution to such fund.
``(C) Qualified charitable distribution.--For purposes of this paragraph, the term `qualified charitable distribution' means any distribution from an individual retirement account--
``(i) which is made on or after the date that the individual for whose benefit the account is maintained has attained age 59\1/2\, and
``(ii) which is made directly from the account to--
``(I) an organization described in section 170(c), or
``(II) a trust, fund, or annuity referred to in subparagraph (B).
``(D) Denial of deduction.--The amount allowable as a deduction under section 170 to the taxpayer for the taxable year shall be reduced (but not below zero) by the sum of the amounts of the qualified charitable distributions during such year which would be includible in the gross income of the taxpayer for such year but for this paragraph.''
(b) Effective Date.--The amendment made by subsection (a) shall apply to taxable years beginning after the date of the enactment of this Act.

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