Pension Protection Act

On Aug. 17, 2006 Congress passed the Pension Protection Act, which contains provisions for certain charitable gifts from IRAs. The change represents a new opportunity for donors to make outright gifts.

Provisions that affect gifts from individual retirement accounts under the following conditions:

* Plan owners must be at least 70 ½ years of age at the time of the distribution (minimum required distribution age).

* The new rules only apply to outright lifetime charitable transfers from IRA owners made directly by the IRA administrator to the benefiting non-profit organization (bequest rules and benefits remain unchanged).

* The new law allows for an exclusion from gross income of up to $100,000 per year for otherwise taxable distributions. There is no income tax deduction involved, only the exclusion from gross income.

* Only owners of traditional IRAs and Roth IRAs are eligible.  However, owners of other types of qualified plans may roll assets into an IRA to allow them to make gifts if such a rollover is otherwise permitted.

*  The law only applies to gifts made during tax years 2006 and 2007 (the law expires Dec. 31, 2007).

* The distribution must be made to a qualified charity, and cannot be made to a private foundation, donor advised fund or supporting organization.

* The transfers must be outright in nature and cannot be used to fund a charitable gift annuity or charitable remainder trust or trust addition.

* Distributions made under this law will satisfy the donor’s minimum required distribution (MRD) for that tax year – often this is an issue for IRA owners over 70 ½ - they may not need the additional income and do not wish to pay tax on it.  This will allow charitable gifts to be made to fulfill that requirement without adding to their tax liability.

For more information, contact:

Office of Development
University of Minnesota Duluth
1049 University Drive, 315 Darland
Duluth, MN 55812

218-726-7989 or 1-866-726-7110
Fax: 218-726-6186
dev@d.umn.edu