Important Tax Law Change for Charitable Giving

On August 17, 2006 President Bush signed the Pension Protection Act of 2006.

Section 1201 of the new pension act signed on August 17, 2006 provides for tax-free distributions from Individual Retirement Accounts (IRAS) for qualified charitable distributions (QCDs). The act allows for an exclusion from gross income for otherwise taxable distributions from a traditional or a Roth IRA for qualified charitable distributions. The exclusion is limited to $100,000 per taxpayer per taxable year. A QCD is any distribution:

1. from an IRA directly by the IRA trustee to an organization described in section 170(b)(1)(A) of the Internal Revenue Code. Examples of organizations described in this section are churches, educational institutions, and hospitals or medical research facilities.

2. made on or after the date the IRA owner attains age 70-1/2, and if made by directly by the taxpayer, the entire of which (ignoring the percentage limitations) would be deductible under present law.

QCDs are taken into account for purposes of the minimum distribution rules applicable to traditional IRA's. Distributions that are excluded from gross income by reason of the provision are not taken into account in determining the deduction for charitable contributions under section 170.

The provision applies to distributions made in taxable years beginning in 2006 and 2007.