Pension Protection Act of 2006 Includes IRA Charitable Rollover Provision

On August 17, 2006, the Pension Protection Act of 2006 was established, encouraging financial support of charitable organizations throughout the United States. This new legislation contains a provision that allows an exclusion from gross income for certain distributions of up to $100,000 to Purdue University in 2006 and 2007 by individuals age 70 ½ or older from their traditional individual retirement accounts (IRAs) or Roth IRAs, which would otherwise be counted as income. It should be noted, however, that there is no charitable contribution deduction for the distribution.

This means you can make a lifetime gift using funds from your IRA without experiencing any undesirable tax effects. Previously, you would have had to report any amount taken from your IRA as taxable income. You then would have received a charitable deduction for the gift, but only up to 50 percent of your adjusted gross income.

            IRA Charitable Rollover Provision Eligibility

You can now make a gift from your traditional or Roth IRA without such tax complications if … 

• You are age 70½ or older by the date of the distribution
• Your gift each year is $100,000 or less (and counts toward the minimum required distribution)
• You make the gift on or before December 31 of each year
• You transfer funds directly from a traditional IRA or Roth IRA
• You transfer the gift outright to Purdue University or Purdue Research Foundation

Only the taxable portion of any IRA or Roth IRA distribution qualifies for the exclusion. It is important to note that any quid pro quo benefit you receive in return for the distribution disqualifies the entire distribution from the gross-income exclusion.

For More Information

Please contact Gordon Chavers at (800)-677-8780 or gchavers@purdue.edu with any questions you may have about the new law.

This information is not intended as legal, accounting, tax,
investment or other professional advice.