Just to refresh everyone's memory, in August 2006, then President Bush signed the Pension Protection Act of 2006 (PPA 2006), which gave individuals at least 70 1/2 years old the opportunity to make a charitable gift of up to $100,000 a year in 2006 and 2007 from their IRAs, as long as it went directly to a charity. The money could not come from any other qualified retirement plans such as a pension or 403(b), 401(k), etc. and it was limited regarding donative intent. However, as long as it never touched the donors' hands, it enabled people with large enough IRAs to make a donation without negative tax consequences: there was no charitable deduction, but there was also no taxation on the distributed funds, which could also be applied towards the required minimum distribution.

Among the restrictions was the gift could not go towards a split interest entity such as charitable remainder trust or charitable gift annuity.

This law was allowed to expire at the end of 2007. It was not reinstated as PPA 2008 until much later in that year (retroactive, believe it or not - I wonder how that was supposed to work?!?) with the proviso it will expire at the end of 2009. By the time it was passed, many IRAs were down 30%-40%. Other types of retirement plans had also suffered. Why would anyone make a gift from a much depleted IRA when it's a resource for the security of their retirement income?

The good news is at least there is more thought behind the potential new legislation:

On April 22, 2009, Sens. Byron Dorgan (D-ND) and Olympia Snowe (R-ME) introduced the Public Good IRA Rollover Act (S. 864). This legislation would make the IRA Charitable Rollover permanent, remove the $100,000 annual limit on donations, provide IRA owners with a planned giving option starting at age 59 1/2, and allow for distributions to supporting organizations, donor-advised funds, and private foundations. S. 864 has 11 original cosponsors, including four Democratic members and one Republican member of the Senate Finance Committee. Companion legislation (H.R. 1250) was introduced in the House last month. (Excerpt from the Planned Giving Design Center)

First, people as young as 59 1/2 can take advantage of it, greatly increasing the potential number of donors using this method. Second, it eliminates the $100,000 annual ceiling (who thought that one up anyway?) increasing the potential gift sizes. Third, we don't have to worry it will expire then have to wait half the year hoping for its renewal - it will be a permanent law.

And: the present versions of the Public Good IRA Rollover Act of 2009 allow for contributions to split interest gifts. I'm guessing lots of charitably inclined people aged 59 1/2 and older will decide to move some funds from their IRAs--which can be very vulnerable to market fluctuations--and place them into charitable gift annuities, which offer guaranteed attractive rates that are good for life.

Question One: I'm assuming that married people will want to have joint annuities with spouses so the income doesn't stop when one dies. But charitable gift annuities have to be funded all at once. So how will separate IRAs coordinate the transfer? Also, what happens with divorce situations? It's easy to change beneficiaries on an IRA now, but joint charitable gift annuities are totally another story.

Question Two: How will the securities markets react to a potentially large sell-off when they're already so weak?

Question Three: How will rates and reserve requirements change for nonprofits who are guaranteeing the returns?

Question Four: Will more funds go to charitable remainder trusts so that future generations can receive the income too?

Of course, this is not the first time this legislation has been "discussed" in Congress and there have been numerous failed attempts in the past. We'll just have to wait and see if it's passed and what will ultimately survive in the new law.

As you can see, there's a lot to think about.

Author's Bio: 

Lorri M. Greif, CFRE, president of Breakthrough Philanthropy, Inc., has more than two decades of experience in the nonprofit community focused on creating and implementing successful planned giving and major gifts campaigns for local and national nonprofits. She has the experience of a seasoned nonprofit fundraiser coupled with the knowledge of a professional consultant.

Her many years of strategic thinking, fundraising know-how, and donor cultivation and stewardship, are now a key resource addressing the needs of Breakthrough Philanthropy's clients, mostly mid-sized to larger nonprofits.

Lorri has a unique skill for building or re-working fundraising campaigns from "the ground up." As the first Chief Development Professional for HIAS, Inc., a 120+ year immigration rescue agency, she created a major gift and planned giving program while accelerating their annual campaign. She changed the organization's fundraising culture by providing extensive training to other professionals and board members about the importance of individual giving versus dependence on government funding. She also created national marketing strategies, defined gift acceptance guidelines for the agency, oversaw adherence to IRS and government regulations, and more.

Lorri was also the National Director of Planned Giving for Women's American ORT (now ORT America, Inc.), a 100+ year-old nonprofit organization, which provides funding for vocational training and re-training worldwide. In addition to directing the program, she created and implemented a national marketing campaign for planned giving that helped to bring participation in the planned giving society to more than 1,000 members. She also helped to create the organization's Diamond Ladder campaign, which brings in millions of dollars in new and increased major gifts.

Additionally, Lorri helped to create or reinvigorate planned giving campaigns for such organizations as the Police Athletic League, Inc. (PAL), Friends of the IDF, YIVO Institute for Jewish Research, the Crohn's and Colitis Foundation, and the National Council on Alcoholism and Drug Dependence (NCADD), to name just a few.

Lorri proudly serves on the board of Women in Development (WID). She is also a member of the Planned Giving Group of Greater New York (PGGGNY), the National Council on Planned Giving (NCPG), the American Council on Gift Annuities (ACGA), and more! Contact Lorri at info@breakthroughphilanthropy.com.