Charities on the hunt for donations have zeroed in on the senior citizen set this year, sending one message: Donate now, before it’s too late.
“Too late” — in this case — means Jan. 1. That’s the current closing date of a narrow window that allowed people older than 70 and one-half to donate up to $100,000 tax-free from their IRAs to some types of charities. The IRA Charitable Rollover, part of the Pension Protection Act of August 2006, has spurred many local charities to get the word out about the opportunity.
In some cases, it’s paid off big.
Doreen Fundiller-Zweig, executive director of the Jewish Community Foundation, estimates that $300,000–$400,000 in donations has come in because of the tax break, and she said many other charities in the region have gotten a strong response from older philanthropists.
“It’s crazy not to take advantage of it,” Fundiller-Zweig said.
The National Committee for Planned Giving has recorded a veritable windfall from the law. Spokeswoman Nicole Cunningham said that nationally, the law has brought in $104 million in donations over 5,918 separate transactions as of late September.
“We really believe that that’s only a fraction of the transactions,” she said. Those numbers come out of voluntary reports from whichever charities opted to respond to the committee’s request for information, so it’s likely that many charities aren’t recording nearly all the money they’ve gotten as a result of this law.
Although both houses of the U.S. Congress are strongly considering extending the tax break past its original deadline, many charities aren’t counting on any extensions, preferring to talk up the tax break to potential donors.
With the fast-approaching deadline, Fundiller-Zweig said she’s been encouraging donors not to procrastinate, as completing all the paperwork can be tough during the holiday rush.
“I wouldn’t wait until Dec. 31 to get this done,” she said. If a would-be donor’s IRA custodian is unreachable as the clock winds down, for example, he or she will be out of luck.
Tom Scanlon, a CPA and financial adviser with Manchester-based Borgida & Co., has brought up the tax-free window to clients who meet the age requirement and are “charitably inclined.” The reception, he said, is usually good.
Taxes tend to eat up a good amount of IRA funds anyway, Scanlon said: Investors have to pay mortgages on their accounts, so taking tax-free money out is appealing to many people.
One client of Scanlon’s seized upon the idea because his IRA required him to take out $25,000 a year, regardless of whether he wanted to or not. By using the rollover, the client could make a large donation with the money.
Fundiller-Zweig said people with those types of accounts and a decent asset base have been receptive to the idea. Others may have planned to make donations in their wills, but are spurred to action earlier when they hear they can avoid taxes.
“It’s an easy gift to make,” she said.
Tax Break Extension
Some charities, seeing the relatively small time frame of the tax-free law, didn’t think it worthwhile to launch any marketing effort to spur potential donors to action. But an extension of the law might bring more of them into the fray.
And an extension is in the works. The House of Representatives approved a bill with a one-year extension of the rollover on Nov. 12, and the Senate is currently discussing the issue.
Cunningham, of the National Committee for Planned Giving, said her organization is pressing for the tax law to apply to a wider set of donors, such as lowering the age limit from 70 and one-half to 59 and one-half years old. Regardless of any expansions, the law has supporters of both Democratic and Republican persuasion, she said — the biggest potential snag is that proposed extensions are folded into larger fiscal bills that are much more prone to rejection.
