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Pension
Protection
Act of 2006

On August 17, 2006, President Bush signed the Pension Protection Act of 2006, which includes a charitable reform package and a charitable giving incentives package.

The charitable giving incentives package is designed to encourage charitable donations and includes the following key elements:

• Individuals age 70 ½ by the date of contribution and older may transfer up to $100,000 per year in 2006 and 2007 directly from an IRA to a qualified charity, i.e. the donor must direct the IRA manager to transfer funds directly to the donee which must be a tax-exempt organization. A couple may be able to transfer as much as $400,000 to charity in 2006 and 2007 if they both have IRAs.
• Qualified charitable distributions may be made only from traditional IRAs and Roth IRAs.
• Qualified charitable distributions may not be made from other forms of retirement plans such as 401(k), 403(b) annuities, defined benefit and contribution plans, profit sharing plans, Keoghs and employer sponsored SEPs and SIMPLE plan.
• Contributions to non-operating private foundations, donor-advised funds and supporting organizations do not qualify. (Supporting organizations are organizations that provide support to another section 501(c)(3) organization that is not a private foundation).
• Contributions to a planned gift, such as a charitable gift annuity or a charitable remainder trust do not qualify.
• Distributions are excluded from donor’s gross income and will count against donor’s minimum distribution requirement.
• As in previous versions of IRA rollover legislation, there is no federal income tax deduction available for these distributions in addition to their exclusion from income.

Donors to whom the new IRA rollover likely will appeal include those already giving at their 50% deduction limit; those whose income level causes the phase-out of their exemptions; those who do not itemize their deductions; and those for whom additional income will cause more of their Social Security income to be taxed.

For Michigan residents, eligible Michigan donors will save taxes at their highest marginal state income tax rate (6%), for every charitable gift they make from their IRAs instead of from their checking accounts.

For further information on the IRA Charitable Rollover, please call Kim-Lan Trinh, Associate Director of Development, Planned Giving and Major Gifts at (313) 237-3408, or email her at ktrinh@motopera.org.