Kappa Alpha Order

Charitable IRA Roll-Over Renewed

BREAKING NEWS! The charitable IRA rollover expected to be renewed for 2014 only.

Act quickly to complete your gift before the Dec. 31, 2014, deadline.

Congress passed legislation renewing the charitable IRA rollover on the evening of Dec. 16, 2014 — for tax year 2014 only. The president was expected to sign the bill soon. Act quickly if you are considering a gift taking advantage of this popular option. Consult your tax or financial advisor to be able to complete your gift before Dec. 31, 2014.
 
Feel free also to call the Kappa Alpha Order Educational Foundation (KAOEF) 540-463-1865 or email Chief Development Officer, Ben W. Satcher, Jr., to learn how the charitable IRA rollover provision can help you support your area of choice at Kappa Alpha Order.
 
FREQUENTLY ASKED QUESTIONS:
Below answers assume the president signs legislation renewing the charitable IRA rollover for 2014
 
What is a charitable IRA rollover?
The charitable IRA rollover, or qualified charitable distribution (QCD), is a special provision allowing certain donors to exclude from taxable income — and count toward their required minimum distribution — certain transfers of Individual Retirement Account (IRA) assets that are made directly to public charities, including the Kappa Alpha Order Educational Foundation.
 
Many KAOEF donors age 70 1/2 or older have used this popular option to support the areas of their choice with tax-wise gifts ranging from $100 to $100,000.
 
The provision was first enacted for tax years 2006 and 2007, and has been extended periodically.
Since 2006, many KAOEF donors age 70 1/2 or older have used this popular option to support the area of their choice with tax-wise gifts ranging from $100 to $100,000.
 
How does this help me?
A charitable IRA rollover makes it easier to use IRA assets, during lifetime, to make charitable gifts.
 
Why will lifetime IRA gifts be easier?
Under current law, withdrawals from traditional IRAs and certain Roth IRAs are taxed as income, even if they are immediately directed to a charity. The donor receives a tax deduction for his or her donation, but various other federal, and sometimes state, tax rules can prevent the deduction from fully offsetting this taxable income. As a result, many donors have chosen not to use IRA assets for lifetime gifts. The charitable IRA rollover eliminates this problem for a limited time.
 
What gifts would qualify for a 2014 charitable IRA rollover?
A gift that qualifies, technically termed a “qualified charitable distribution,” would be:

  • Made by a donor age 70 1/2 or older
  • Transferred from a traditional or Roth IRA directly to a permissible public charity, such as the Kappa Alpha Order Educational Foundation.
  • Completed in calendar year 2014 for the 2014 tax year
  • Is there a limit on the amount that can be given?
  • Yes, there is a limit. An individual taxpayer’s total charitable IRA rollover gifts cannot exceed $100,000 per tax year.

 
What about the required minimum distribution?
If you have not already taken your required minimum distribution in a given year, a qualifying rollover gift can count toward satisfying this requirement.
 
Is an income tax deduction also available?
No. The gift would be excluded from income, so providing a deduction in addition to that exclusion would create an inappropriate double tax benefit.
 
Why are Roth IRAs included? Aren’t withdrawals from a Roth IRA tax-free?
Withdrawals from a Roth IRA may be tax-free only if the account has been open for longer than five years or if certain other conditions apply. Otherwise, withdrawals are taxed as if they came from a traditional IRA. Therefore, certain Roth IRAs could benefit from a charitable IRA rollover.
 
Can other retirement plans, such as 401(k) and 403(b) accounts, be used?
No. However, it may be possible to make a tax-free transfer from such other accounts to an IRA, from which a charitable rollover can then be made.
 
Can a gift be made to any charity?
No. Excluded are:

  • Donor advised funds
  • Supporting organizations
  • Private foundations

 
Who can benefit from using the charitable IRA rollover to make a gift?

  • Persons with significant assets in an IRA
  • Persons making gifts that are large, relative to their income. (Because a charitable rollover is not included in taxable income, it does not count against the usual percentage limitations on using charitable deductions.)
  • Persons having so few deductions that they choose not to itemize

Can a rollover gift be used to fund a charitable remainder trust or charitable gift annuity?
No. The donor can receive no benefits in return for the gift. This includes life income plan payments.
 
Can a rollover gift be used to maintain my status in the Crimson and Gold Society?
Yes.  As long as your charitable IRA rollover gift is unrestricted, it can count towards your Crimson and Gold membership for the 2014-2015 Fiscal Year.
 
Are there any benefits that a donor can receive?
The only permissible benefits from a charitable IRA rollover gift are those that would not reduce the tax deduction for which the donor would have otherwise qualified. At KAOEF, a charitable IRA rollover gift is allowed to count toward naming opportunities and toward recognition society memberships such as the Crimson and Gold Society and the Knight Commander’s Society.
 
What if a withdrawal does not meet the requirements of a charitable IRA rollover?
It simply will be included in taxable income as other IRA withdrawals currently are.
 
Is the charitable IRA rollover right for everyone?
While this is a great option, other types of gifts may provide donors with more tax benefits.  Such as gifts of appreciated securities, or basic cash gifts. As with any gift planning question, donors should consult their tax professionals for specific advice.
 
Can I still make a gift with an IRA beneficiary designation?
Absolutely! Whether or not you choose to make a charitable IRA rollover gift, you can still designate the KAOEF as a beneficiary to receive IRA assets after your lifetime. The lifetime charitable IRA rollover is simply another option for donors who would like to see their philanthropy at work now.
 
If I made a charitable IRA rollover gift in other tax years, can I do this again for the 2014 tax year?
Yes. Even if you and your spouse both made the maximum $100,000 charitable IRA rollover gift to a qualifying charity during one or more previous years, you can still take advantage of this legislation again for the 2014 tax year.
 
What about 2015 and beyond?
As of this writing, no legislation had been approved to extend this special tax advantage beyond a Dec. 31, 2014, expiration date.
 
More questions?
Contact the Kappa Alpha Order Educational Foundation office by phone at 540-463-1865 or one of your staff members by email:

Ben Satcher, Jr., Chief Development Officer

Andrew Carr, Director of Development

Stuart Whetsell, Director of Development

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