The IRA Charitable Rollover: What Next?

The IRA charitable rollover came into being with the Pension Protection Act of 2006.  It expired at the end of 2007, but was extended in the fall of 2008 retroactively from the first day of 2008 through the end of 2009.  It expired again at the end of 2009, then was extended again in December 2010, retroactively from the first day of 2010 through the end of 2011.  Now it has expired again. What’s next?

If history is any indication, the IRA charitable rollover will: 

• be reenacted into law in late 2012

• take effect retroactively to January 1, 2012 and remain in effect through December 31, 2012

• be limited to outright gifts totaling up to $100,000 per year made by donors at least age 70-1/2 to public charities (excluding supporting organizations and donor advised funds that can make distributions to more than one charity) with no benefit accorded by the charity in return

• allow such gifts to count toward a donor’s required minimum distribution

Yet who says history will repeat itself?  In its quest to decrease the federal deficit in part by curtailing “tax expenditures,” Congress might conclude that the nation can no longer afford the revenue lost by allowing some donors to exclude otherwise taxable IRA distributions from income.

On the other hand, Congress could plow some new ground. Given that the IRA charitable rollover provision was among the “extenders” contending for inclusion in the payroll tax cut legislation enacted just before Christmas 2011, the provision could successfully be swept into a new bill prolonging the tax cut beyond February 29, 2012. Moreover, there continues to be an effort to have the rollover concept apply to life income arrangements as well as outright gifts (and to have donors as young as age 59-1/2 be eligible to make charitable gifts from their IRAs).

My bet is that Congress will do what it has done in the past and extend the IRA charitable rollover in its present form at some point during 2012, retroactive to the beginning of 2012.

For the time being, however, one thing is certain: the most recent incarnation of the IRA charitable rollover expired as of January 1, 2012. This means charities that have not done so already will need to update their print and Web content accordingly.

Once again, we’re in wait-and-see mode.