Supporting Caltech: IRA Provision Benefits Both Supporters and Charities

Enacted in August, the Pension Protection Act of 2006 (PPA 2006) includes a long-awaited provision for IRA charitable rollovers. The legislation enables individuals age 70½ or older to make gifts directly from their IRAs to charitable organizations.

Prior to PPA 2006, such gifts required donors to first take possession of the IRA distribution as income and then make a separate contribution. Furthermore, due to various limits on tax deductions, many contributors could not completely offset the tax cost of the withdrawal with a corresponding deduction, even when the entire withdrawal went to charity.

Important points about the new legislation include the following:

• IRA transfers may not exceed $100,000 per taxpayer per year
• No charitable income tax deduction is allowed for these gifts
• Gifts must be made on or before December 31, 2007
• Gifts must be outright to public charities*

Several Institute benefactors are already employing the new legislation in their giving, seeing a win-win situation for Caltech and themselves. "In 2005, I could only deduct $30,000 of a $51,000 gift," explains Bob Herzog (BS '56). "This year, I was able to give 100 percent of the funds directly from my conventional IRA to Caltech. It relieved me from the tax consequences of receiving the income directly. I will also make use of this provision in 2007."

More information on IRA charitable rollovers is available from the Office of Gift Planning. Call 626-395-8461 or e-mail giftplanning@dar.caltech.edu.

*The legislation does not apply to gifts to a charitable remainder trust, gift annuity, donor-advised fund, or supporting organization.