The Pension Protection Act of 2006, which was enacted in August, makes it possible for the first time, for donors to make tax efficient charitable gifts from IRAs and Roth IRAs during their lifetimes. In the past, donors who made gifts to Stuart from their retirement accounts withdrew funds and included those amounts in their gross income. Now for a limited period of time, owners of IRAs who are already required to take distributions from their retirement accounts can transfer up to $100,000 to a qualified tax-exempt public charity, such as the School. This contribution does not create a charitable deduction, but it does allow the donor to exclude the IRA distribution from gross income.

There are some restrictions on this “charitable rollover”.

• The donor must be 70 and ½.
• The contribution must be made from the IRA trustee directly to the charity.
• Contributions can only be made to public charities, and not to private foundations, supporting organizations or donor advised funds.
• This IRA charitable rollover provision expires December 31, 2007.
• Gifts from retirement accounts other than IRAs—such as 401k, 403b and SEP accounts—are not eligible. Donors may be able to make qualified transfers of money from other accounts to their IRA, and then make a charitable gift from their IRA. Please check with your tax adviser.
• The exclusion of qualified IRA gifts from reportable income applies to donors who do not itemize deductions on their Federal tax returns as well as to donors who do itemize deductions.

Who is most likely to benefit?

• Those who wish to give more than the deductibility ceiling (50% of AGI).
• Those who are subject to the income threshold after which itemized deductions are phased-out.
• Those whose major assets reside in their IRAs and who wish to make a charitable gift during their lifetime.
• Those who intend to leave the balance of their IRA to charity at death.

If you are already required to take distributions from your IRA, have a small IRA you no longer need or wish to reduce your minimum required distributions and thus reduce your taxable income, a charitable rollover from your IRA may be a convenient way to make a substantial gift to Stuart. The direct gift within the $100,000 limit counts towards your minimum IRA distribution requirement for that year. Certain states, including New Jersey do not exclude gift amounts drawn from an IRA for state income tax purposes.