November 27, 1997 | Read Time: 2 minutes
New legislation introduced in Congress would provide an incentive to donors who want to give funds to charity from their individual retirement accounts.
Under federal law, Americans may withdraw funds without penalty from I.R.A.’s when they reach age 591/2. But people are subject to income tax on the amount taken out, even if they give the funds directly to charity.
The legislation, H.R. 2821, would allow taxpayers to roll over I.R.A. assets directly to charity without having to count the funds as income and pay taxes on them.
The bill would also give a better deal to people who want to put I.R.A. assets directly into a charitable remainder trust or another planned gift. A charitable remainder trust enables a donor to designate a gift to charity, take a tax deduction, and collect regular interest payments. Upon the death of the beneficiary of the trust — the donor, for example, or a spouse — the remainder of the trust goes to charity.
The legislation would allow people who set up a charitable remainder trust with rolled-over I.R.A. funds to avoid income tax on the amount at the time of the gift. Donors would pay income tax in the future only on the regular payments that they received.
Many fund raisers say that the bill, if enacted into law, would bring new gifts to charities because current statutes discourage Americans from making contributions from I.R.A. assets. The measure — introduced by Rep. Barbara B. Kennelly, a Connecticut Democrat, and Philip M. Crane, an Illinois Republican, who both sit on the House Ways and Means Committee — has been endorsed by 14 other House members of both parties.
