Area Charities Advocate IRA Rollovers

October 22, 2007
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GRAND RAPIDS — With the sun about to set on a federal law allowing Individual Retirement Account transfers to charities, many nonprofits are making last-minute pitches to donors.

The provision, part of the Pension Protection Act of 2006, permits people at age 70½ to roll over a traditional or Roth IRA of $100,000 or less to certain nonprofit organizations and avoid counting the distribution as taxable income. However, the donor gives up the federal tax deduction for donations.

Currently, the provision is set to expire at the end of 2007. According to the National Committee on Planned Giving, one bill has been introduced to make the IRA Charitable Rollover provision a permanent law. However, the NCPG, along with 103 members of the U.S. House and Senate, is backing legislation that would broaden the rollover as well as extend it.

An NCPG survey has shown nearly 6,000 distributions worth about $104 million have been made nationwide under the temporary provision.

Kurt Arvidson, a chartered financial analyst and partner at Norris, Perne & French, said a few clients who are not relying on their IRAs to finance retirement have taken advantage of the provision.

“I’ve really only had multimillionaire clients do it,” Arvidson said. “Your normal retiree is going to want to spend that money for the most part. The nice part is that it is not included in the donor’s taxable income.

“It really, truly does benefit the charities as another way to give and to get money out of a person’s retirement account.”

“Frankly, we’ve been delighted,” said Ron Rozema, development department manager at Pine Rest Christian Mental Health Services. “We’ve gotten some gifts. It’s turned out to be a nice giving opportunity for people who have put some money aside who can now make a gift.”

He said Pine Rest, with an annual fundraising goal of $1.3 million, is promoting the provision in a recent mailing. He said donors should check with their financial advisors to determine whether the charitable rollover is a good option.

Grand Rapids Community Foundation has received about 10 IRA rollover gifts, said Marilyn Zack, vice president for development. The amounts ranged from $5,000 to $10,000, she said.

“They were used for a variety of things, from the establishment of a scholarship fund to a designated fund for a local nonprofit to just general support for the community,” Zack said. “Donors can use those kinds of gifts for anything but a donor-advised fund here at the Community Foundation.”

Donor-advised funds currently are prohibited from receiving IRA rollovers, as are private foundations, supporting organizations and deferred gift plans. According to NCPG, the Public Good IRA Rollover Act now before Congress would allow distributions to all types of charitable organizations, would allow rollovers to be made starting at age 59½, and would drop the $100,000 cap. A 25-member Congressional Philanthropy Caucus, including Congressman Fred Upton, R-St. Joseph, is expected to meet before the end of the year, and the IRA rollover law is expected to be a topic of discussion, according to the Council of Michigan Foundations.

But for this year, nonprofits are trying to get the word out about the provision before Dec. 31. 

“So many assets right now are tied up in IRA plans, and a lot of those plans are kind of over-funded,” Zack said. “And it’s an asset that can be taxed very heavily at death. So why not get them out and get them to work, especially during somebody’s lifetime?”

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