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Legislative Updates & Tax Alerts

The Pension Protection Act of 2006:
Charitable Giving Provisions

 
On August 17, 2006, President Bush signed the Pension Protection Act of 2006 into law. The Act is primarily focused on retirement plans, but it also includes several provisions related to charitable giving. The following is a summary of those charitable giving provisions which are likely to be of greatest interest to our donors:
“Charitable IRA rollovers”
The new law permits individuals aged 70 1/2 and older to make direct transfers of IRA assets to qualified public charities without the transfer being treated as an income distribution. This provision originally expired at the end of 2007 but was renewed through the end of 2009 as part of the Emergency Economic Stabilization Act of 2008 and is relatively narrow in scope:
  • -Donors must be already required to take annual IRA distributions (those over age 70 1/2).
  • -Annual distributions eligible for charitable IRA rollover may not exceed $100,000.
  • -While most public charities are eligible to receive distributions from an IRA, this new rule does not apply to donor-advised funds, supporting organizations or private foundations.
Documentation requirements for cash donations
Previously, donors were required to have a receipt from the charity for donations of $250 or more to charity. The new provision extends this requirement to donations of any dollar amount.
This new rule does not require any change in the handling of contributions to your Charitable Gift Account. All contributions to the Fund receive a mailed contribution confirmation, which serves as documentation for tax purposes.
Penalties for Abuses
The Act also includes a number of provisions which penalize those who engage in abusive practices. Most notably, donors who derive personal economic benefit from a grant issued by a donor-advised fund will be subject to a penalty of 125% of the amount of the benefit and the donor-advised fund’s management will be subject to a 10% penalty if it knowingly approved the grant request.
Schwab Charitable Fund has a firm commitment to ethical practices, and we have procedures in place which prevent abusive transactions of this nature.
We at Schwab Charitable are pleased to see greater attention given to charitable giving at the legislative level--especially since these new provisions aim to both encourage charitable giving, which contributes greatly to our society, and to discourage those abuses which undermine trust in charitable giving.
Complete information on the Pension Protection Act of 2006 is available at www.house.gov/jct/x-38-06 [PDF] (pages 263-351 pertain to the charitable reform).

To help you stay informed about changing governmental regulations that may affect your charitable giving, we provide the following list of sites which have up-to-the-minute news and analysis of related legislation:

Chronicle of Philanthropy
Features articles about the nonprofit world. You can search their article archives by topic. Also available on the site are a list of forthcoming conferences and workshops, and job opportunities in the nonprofit world.
Philanthropy News Network
Although often used by those who work in the nonprofit sector, this electronic publication has many articles of interest to donors. The site offers up-to-date news on; charity programs, fundraising, volunteers, foundations, corporate giving, nonprofit jobs, an index of nonprofits, and philanthropy links.