The American Taxpayer Relief Act of 2012 enacted on January 2, 2013 creates a unique opportunity for charitable giving. Individuals with IRAs who have attained age 70½ may make a tax-free rollover to charity of up to $200,000, but only if they act during January 2013.
The new law brings back the ability of an individual who has attained age 70½ to make a tax-free IRA distribution (commonly referred to as a “rollover”) to charity of up to $100,000 during 2013. Further, if the IRA owner acts during January 2013, he or she can rollover an additional $100,000 and have it treated as if it was rolled over in 2012 (a year in which the IRA charitable rollover had temporarily expired until the enactment of the new law). Even more interesting, an individual who took a personal IRA distribution during December 2012 may be able to treat up to $100,000 of the distribution as a tax-free 2012 distribution to charity – to the extent the individual transfers up to $100,000 in cash to charity during January 2013. Therefore, IRA owners looking to “double up” on IRA charitable rollovers – and contribute up to $200,000 of IRA assets tax free to one or more charities – can do so if they act before the end of January 2013.
IRA rollovers to charity are subject to several limitations. The donee organization cannot be a “supporting organization” or a “donor-advised fund,” and as a general rule, a private foundation is eligible for an IRA rollover only if it is an operating foundation. The IRA owner cannot receive any consideration for the distribution, and he or she must obtain written substantiation from the donee organization that it received the distribution and provided no goods or services in consideration for it.