Special Tax Bill Includes Extended Help for Charities
Provision Permits Tax-free Charitable Transfers from IRAs
Huntsville, Alabama – On December 18, Congress passed the PATH Act, which renews and makes permanent the IRA charitable rollover provision of 2006, making it easier for Americans to give to causes they care about. This provision has the power to help local charities strengthen their communities by allowing individuals to roll over up to $100,000 annually from an Individual Retirement Account (IRA) to charity without being federally taxed.
Millions of Americans continue to save pre-tax dollars in their IRAs. The law allows taxpayers 70½ and older to share their wealth by giving retirement savings directly to charity and bypassing income tax.
This law is important to local charities operating as agents of philanthropy in order to continue to build community and improve social service programs that benefit people every day.
“It is a win-win for people who would rather give to charity than pay taxes and for the nonprofit organizations they choose to support,” said Stuart Obermann, CEO/President of the Community Foundation of Huntsville/Madison County (“Community Foundation”).
Thanks to decades of deliberate saving, some of today’s retirees have more money in their IRAs than they need for daily living expenses and long-term care. Charitable individuals and couples have expressed an interest in giving the funds to charity, but income tax must be paid on all withdrawals, which reduces the value of the gift. Others are concerned about designating their children as IRA beneficiaries, because that may draw unintended tax consequences. Chris Russell, Chair of the Community Foundation’s Fund Development Committee, shares: “The new IRA Charitable Rollover law provides a simple and tax-efficient way for seniors to support their favorite charities while avoiding income tax on their IRA Required Minimum Distributions.”
“For larger estates, a good portion of IRA wealth goes to estate taxes and income taxes of beneficiaries,” Obermann said. “Experts estimate heirs may receive less than 50% of IRA assets that pass through estates.” A provision in the PATH Act extends a special gifting option of transferring IRA assets directly to charity. By going directly to a qualified public charity such as the Community Foundation, the money is not included in the IRA owner’s income and – most importantly – is not taxed, preserving the full amount for charitable purposes.
Annually, holders of traditional IRAs who are at least 70½ years old can make direct charitable transfers up to $100,000. Individuals may exclude the amount distributed directly to an eligible charity from their gross income. The Community Foundation can help donors execute the transfers and choose from several charitable fund options for their gift. Donor Advised Funds do not qualify for tax-free IRA transfers.
“This really is a powerful opportunity,” said Obermann. “For anyone interested in establishing a permanent legacy in this community, this is a chance of a lifetime to make the gift of a lifetime.”
Through philanthropic services, strategic grantmaking and community leadership, the Community Foundation helps people support the causes they care about, now and for generations to come.
Gift of a Lifetime: Shopping for Charity
Having more retirement money than you need is a great problem to have, and one that’s now easier to solve. But generous IRA donors still face multiple options for their gifts: Support the entire community? Underwrite a special cause? Shore up a favorite charity? Here are three options for your consideration:
Community Catalyst Fund — Meeting ever-changing community needs.
IRA transfers to the Community Catalyst Fund address a broad range of current and future needs. The Community Foundation evaluates all aspects of community well-being —arts and culture, community development, education, environment, health and human services —through its annual Vital Signs project and will award strategic grants to move the needle on these key community indicators. Obermann noted, “For people who care deeply about this community and its people, this fund is an excellent way to help today and shape tomorrow.”
Field of Interest Funds —Connecting personal values to high-impact opportunities.
IRA transfers to Field of Interest Funds allow donors to target gifts to causes important to them: arts, education, neighborhood revitalization, youth, the environment, and more. The Community Foundation can create a grant-making program to awards grants to community organizations and programs addressing the donor’s specific interest area. “For those who are particularly passionate about a single cause, Field of Interest Funds provide strategic, lasting support —even as needs change over time,” said Obermann.
Designated Fund—Helping local organizations sustain and grow.
IRA transfers to Designated Funds allow donors to support the good work of a specific nonprofit organization — a senior center, a church, a museum, or any qualifying nonprofit charitable organization. Obermann said, “For people who want to help secure the future of their favorite charities, our endowed Designated Funds give nonprofits a steady stream of income, plus planned giving and investment management services.”
About the Community Foundation of Huntsville/Madison County
Our Mission: The Community Foundation of Huntsville/Madison County serves as the trustee of our community’s future, fostering philanthropy and mobilizing partners, while striving for an exceptional quality of life both today and tomorrow.
The Community Foundation was founded in Huntsville in 2009. In the size years since inception, the Community Foundation has raised or managed over $16.1M in charitable donations and has distributed over $5M to nonprofit agencies, churches, and schools in our community and elsewhere. The foundation also provides educational, networking and capacity building services for the nonprofit organizations that benefit from our donors’ grants.
For more information about the Community Foundation, contact Stuart Obermann at 256.535.2065 or firstname.lastname@example.org or visit www.communityfoundationhsv.org.