New Law Encourages Donations from Individual Retirement Accounts
Congress passed legislation in August 2006 that encourages prospective donors to make contributions from their Individual Retirement Accounts (IRAs). Specifically, a provision of the Pension Protection Act of 2006 (H.R.4) allows persons of age 70 ½ and older to make tax-free contributions of up to $100,000 per year to qualified charitable causes.
IRA withdrawals are subject to federal income tax during lifetime withdrawals and when conveyed in an estate. However, qualified withdrawals for charitable purposes will pass free of income tax. The donor will not receive a charitable deduction for this form of gifting. The new law allows this special “IRA” incentive for the years of 2006 and 2007.
Though the new law prohibits charitable donations from IRAs to two prominent fund-types at many community foundations—Donor-Advised Funds and Supporting Organizations, it is nonetheless an excellent way to make gifts to other types of funds at the North Carolina Community Foundation.
Scholarship funds and funds designated for specified non-profits can be created or added-to through this new means of gifting, and donations to the nearly sixty “county” funds in the widespread North Carolina Community Foundation network is a ready path to take advantage of this law. County funds are overseen by local boards and the North Carolina Community Foundation staff. Through a fair and thoughtful process, grants are made from county funds for charitable purposes within the county.
In addition to income tax and possible estate tax savings, gifting from an IRA is a good consideration for those that do not itemize deductions on their annual tax returns.
Please contact your financial advisor about your situation. To learn more about charitable giving through the North Carolina Community Foundation, please contact us.
