Schumer Introduces Bill to Expand Charitable IRA Rollovers

Schumer Introduces Bill to Expand Charitable IRA Rollovers

News story posted in Legislative on 5 December 2013| comments
audience: National Publication | last updated: 5 December 2013
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Summary

Senate Finance Committee member Charles E. Schumer, D-NY has introduced S. 1772, the Public Good IRA Rollover Act of 2013, which if passed would expand and extend without expiration the definition of tax-free IRA distributions made for charitable purposes for taxable years beginning after December 31, 2013. The current IRA rollover law, which allows outright transfers of up to $100,000 to qualified charities from IRA holders age 70 1/2 or older is scheduled to expire at the end of this year.

In addition to outright gifts to charity as provided under current law, the proposed bill would allow transfers from IRA holders who have reached age 59 1/2 to split-interest entities such as charitable remainder trusts, pooled income funds, and charitable gift annuities. No income tax charitable deduction would be allowed for any direct or split-interest rollovers and distributions from split-interest entities would be considered ordinary income to beneficiaries/annuitants. The bill has been forwarded to the Senate Finance Committee.

Full Text:
 
113TH CONGRESS
1ST SESSION

S. 1772

To amend the Internal Revenue Code of 1986 to expand tax-free
distributions from individual retirement accounts for charitable
purposes.

IN THE SENATE OF THE UNITED STATES

NOVEMBER 21, 2013

Mr. SCHUMER (for himself, Mrs. GILLIBRAND, Mr. PRYOR, Mr. LEVIN, Mr.
JOHNSON of South Dakota, and Ms. COLLINS) 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 expand tax-free distributions from individual retirement accounts for charitable purposes.

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

SECTION 1. SHORT TITLE.

This Act may be cited as the "Public Good IRA Rollover Act of 2013".

SEC. 2. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT ACCOUNTS FOR CHARITABLE PURPOSES.

(a) IN GENERAL. -- Paragraph (8) of section 408(d) of the Internal Revenue Code of 1986 (relating to tax treatment of distributions) is amended to read as follows:

"(8) DISTRIBUTIONS FOR CHARITABLE PURPOSES. --

"(A) IN GENERAL. -- No amount shall be includible in gross income by reason of a qualified charitable distribution.

"(B) 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 directly by the trustee --

"(I) to an organization described in section 170(c), or

"(II) to a split-interest entity, and

"(ii) which is made on or after the date that the individual for whose benefit the account is maintained has attained --

"(I) in the case of any distribution described in clause (i)(I), age 70 1/2, and

"(II) in the case of any distribution described in clause (i)(II), age 59 1/2.

A distribution shall be treated as a qualified charitable distribution only to the extent that the distribution would be includible in gross income without regard to subparagraph (A) and, in the case of a distribution to a split-interest entity, only if no person holds an income interest in the amounts in the split-interest entity 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).

"(C) CONTRIBUTIONS MUST BE OTHERWISE DEDUCTIBLE. -- For purposes of this paragraph --

"(i) DIRECT CONTRIBUTIONS. -- A distribution to an organization described in section 170(c) shall be treated as a qualified charitable distribution only if a deduction for the entire distribution would be allowable under section 170 (determined without regard to subsection (b) thereof and this paragraph).

"(ii) SPLIT-INTEREST GIFTS. -- A distribution to a split-interest entity shall be treated as a qualified charitable distribution only if a deduction for the entire value of the interest in the distribution for the use of an organization described in section 170(c) would be allowable under section 170 (determined without regard to subsection (b) thereof and this paragraph).

"(D) APPLICATION OF SECTION 72. -- Notwithstanding section 72, in determining the extent to which a distribution is a qualified charitable distribution, the entire amount of the distribution shall be treated as includible in gross income without regard to subparagraph (A) to the extent that such amount does not exceed the aggregate amount which would have been so includible if all amounts in all individual retirement plans of the individual were distributed during the taxable year and all such plans were treated as 1 contract for purposes of determining under section 72 the aggregate amount which would have been so includible. Proper adjustments shall be made in applying section 72 to other distributions in such taxable year and subsequent taxable years.

"(E) SPECIAL RULES FOR SPLIT-INTEREST ENTITIES. --

"(i) CHARITABLE REMAINDER TRUSTS. -- Notwithstanding section 664(b), distributions made from a trust described in subparagraph (G)(i) shall be treated as ordinary income in the hands of the beneficiary to whom is paid the annuity described in section 664(d)(1)(A) or the payment described in section 664(d)(2)(A).

"(ii) POOLED INCOME FUNDS. -- No amount shall be includible in the gross income of a pooled income fund (as defined in subparagraph (G)(ii)) by reason of a qualified charitable distribution to such fund, and all distributions from the fund which are attributable to qualified charitable distributions shall be treated as ordinary income to the beneficiary.

"(iii) CHARITABLE GIFT ANNUITIES. -- Qualified charitable distributions made for a charitable gift annuity shall not be treated as an investment in the contract.

"(F) DENIAL OF DEDUCTION. -- Qualified charitable distributions shall not be taken into account in determining the deduction under section 170.

"(G) SPLIT-INTEREST ENTITY DEFINED. -- For purposes of this paragraph, the term 'split-interest entity' means --

"(i) a charitable remainder annuity trust or a charitable remainder unitrust (as such terms are defined in section 664(d)) which must be funded exclusively by qualified charitable distributions,

"(ii) a pooled income fund (as defined in section 642(c)(5)), but only if the fund accounts separately for amounts attributable to qualified charitable distributions, and

"(iii) a charitable gift annuity (as defined in section 501(m)(5)).".

(b) EFFECTIVE DATE. -- The amendment made by this section shall apply to distributions made in taxable years beginning after December 31, 2013.

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