L E G I S L a T I V E a L E

ABOUT THE CHARITABLE IRA INITIATIVE® The LEGACY IRA Act (H.R. 1337) results from years of effort by a small informal group of volunteers, the Rollover Rangers. They played a part in the original enactment of the Direct

IRA Charitable Gift (enacted as part of the Pension Protection Act of 2006 and made permanent by the PATH Act of 2015). The group, still all volunteers, and with additional volunteers, is now the Charitable IRA Initiative. ®

Editor: Conrad Teitell, A.B., LL.B., LL.M., 98.6 Sydney Prerau, Editor 1962-1967 Charitable IRA Initiative—John Pierce, President (Senior Gift Planning Director, Concordia College); Michael July 2018 Editor: Conrad Teitell, A.B., LL.B., LL.M., 98.6 Sydney Prerau, Editor 1962-1967 Kenyon, Vice President (President and CEO, National Association of Charitable Gift Planners, formerly July 2018 Partnership for Philanthropic Planning); Marc Littlecott, Secretary (Director of Gift Planning, South Dakota State — 56th year— L E G I S L A T I V E A L E R T — 56th year— L E G I S L A T I V E A L E R T University Foundation); Sister Georgette Lehmuth, Treasurer (CEO, National Catholic Development Conference); • TCJA—Part Two is on front burner Lon Dufek (Sr. Director, Office of Gift Planning, Providence Foundation—Oregon); Lindsay L. Lapole, board Seek to have The • TCJA—Part Two is on front burner Seek to have The • Put the Legacy IRA in the pot member of the American Council on Gift Annuities; Frank D. Minton (Frank D. Minton Consulting); Joseph Satrom, Legacy IRA Act (H.R. • Put the Legacy IRA in the pot Charles Schultz (President, Crescendo Interactive, Inc.); Cathy Sheffield (Think Giving); and Jim Soft (President 1L3e3g7a)c Iyn IcRluAd Aedct (H.R. • Strike now while the opportunity is hot Emeritus, Yellowstone Boys & Girls Ranch Foundation). • Strike now while the opportunity is hot i1n3 3T7C)J IAncluded Pro Bono Counsel—Conrad Teltell. iPna TrtC TJwAo...... 1 The House Ways and Means Committee and the White House trumpet Part Two...... 1 aT hefollow- Houseup billWays to tandhe T Meanax Cutss Com andmitt Jobsee Aandct. (Puthe b.W Lhite. 11 House5-97). trumpet The Case for the a follow-up bill to the Tax Cuts and Jobs Act. (Pub. L. 115-97). The Case for the Members of the Senate Finance Committee Legacy IRA Act— The bill to be introduced this month would make TCJA’s 12/31/25 Legacy IRA Act— Republican Democrat the “One-Pager”. . . . 2 sunseThe billt provto beisions introduced perma thisnent month and wincluould emak cheanges TCJA ’sin 12/curre31/25nt Orrin Hatch (UT), Chairman Ron Wyden, (OR) Ranking Member the “One-Pager”. . . . 2 retiresunsementt prov lawisions prov isionsperma.nent and include changes in current Chuck Grassley (IA) Debbie Stabenow (MI) The Case for the retirement law provisions. Mike Crapo (ID) Maria Cantwell (WA) LThege aCcays IeR Afo Ar tcht—e Pat Roberts (KS) Bill Nelson (FL) Legacy IRA Act— The Legacy IRA Act (H.R. 1337)—allowing tax-free transfers from IRAs the “Multi-Pager”. . . 3 The Legacy IRA Act (H.R. 1337)—allowing tax-free transfers from IRAs Mike Enzi (WY) Bob Menendez (NJ) the “Multi-Pager”. . . 3 to fund life-income charitable gifts—would fit perfectly into new retirement John Cornyn (TX) Tom Carper (DE) to fund life-income charitable gifts—would fit perfectly into new retirement John Thune (SD) Ben Cardin (MD) Statement of laws. Statement of laws. Richard Burr (NC) Sherrod Brown (OH) Charitable IRA Johnny Isakson (GA) Michael Bennet (CO) ICnhitaiarittiavbe le IRA Suggested immediate action: Suggested immediate action: Rob Portman (OH) Bob Casey (PA) SInuitpiaptoivreti ng The • Ask the chairman and members of the House Ways and Means Pat Toomey (PA) Mark Warner (VA) SLeugpapcoyr tIiRnAg TAhcet • AskCom themitt ee—achairmndan the and W mehitem Housebers of—to the includeHouse theWays Legacy and MeanIRA ins Dean Heller (NV) Claire McCaskill (MO) Legacy IRA Act (H.R. 1337)...... 3 theCom legislationmittee—a beinnd theg draf Wtedhite. WHouseays an—tod M includeeans Com themi Legacyttee me mbIRAers in Tim Scott (SC) Sheldon Whitehouse (RI) (H.R. 1337)...... 3 the legislation being drafted. Ways and Means Committee members Bill Cassidy (LA) are listed on page 24. Seek to have The are listed on page 24. Members of the House Ways and Means Committee LSegeakc tyo IhRaAv eA cTthe Republican Democrat Legacy IRA Act • Enlist additional House cosponsors of the Legacy IRA Act. Kevin Brady (TX), Chairman Richard Neal (MA) Ranking Member added to the • Enlist additional House cosponsors of the Legacy IRA Act. Cadhdaeridty t oA ctht.e ...... 23 Sam Johnson (TX) Sander Levin (MI) Charity Act...... 23 • Seek to have a companion bill to the Legacy IRA Act introduced in Devin Nunes (CA) John Lewis (GA) • Seek to have a companion bill to the Legacy IRA Act introduced in Dave Reichert (WA) Lloyd Doggett (TX) About the the Senate by members of the Senate Finance Committee. Senate About the Finanthe Senceate Com bymitt meeemb meersmb of theers Senare atelisted Finan on pceage Com 24mitt. ee. Senate Peter Roskam (IL) Mike Thompson (CA) Charitable IRA Finance Committee members are listed on page 24. Vern Buchanan (FL) John Larson (CT) ICnhitaiarittiavbe.le. .IR. .A. . . . . 24 Adrian Smith (NE) Earl Blumenauer (OR) Initiative...... 24 • Ask Senate Finance Committee members John Thune (R-SD) and Lynn Jenkins (KS) Ron Kind (WI) • Ask Senate Finance Committee members John Thune (R-SD) and Members of Ron Wyden (D-OR) to include the Legacy IRA Act in their Charity Erik Paulsen (MN) Bill Pascrell (NJ) Mtheem Hboeursse o fWays Ron Wyden (D-OR) to include the Legacy IRA Act in their Charity Kenny Marchant (TX) Joseph Crowley (NY) Act (S. 1343). See page 23. tahned H Moeuasnes Wanadys Act (S. 1343). See page 23. Diane Black (TN) Danny Davis (IL) and Means and Tom Reed (NY) Linda Sanchez (CA) Senate Finance Senate Finance In this issue: Page 2 tells the story briefly—the “one-pager.” Pages 3-22 Mike Kelly (PA) Brian Higgins (NY) Committees...... 24 Ingiv thise the iss detueails—the: Page 2 “multi-patells the storyger.” brief(Pagely—the 3 has “one a T-pager.”able of CoPagesntents 3-22 of Jim Renacci (OH) Terri Sewell (AL) Committees...... 24 givthee “mu thelti-pager”). details—the “multi-pager.” (Page 3 has a Table of Contents of Kristi Noem (SD) Suzan DelBene (WA) Photo the “multi-pager”). George Holding (NC) Judy Chu (CA) Photo Jason Smith (MO) Be free to reproduce and disseminate this issue. Also, it is Tom Rice (SC) Be free to reproduce and disseminate this issue. Also, it is David Schweikert (AZ) downloadable at: www.taxwisegiving.com/legacyiralegislativealert. downloadable at: www.taxwisegiving.com/legacyiralegislativealert. Jackie Walorski (IN) Carlos Curbelo (FL) “The most difficult thing “The most difficult thing © Conrad Teitell 2018. Volume LVI, No. 11. Published monthly by Taxwise Giving, 13 Mike Bishop (MI) is the decision to act, is the decision to act, A©r cCaodniara Rd oTaedi,t eOll ld2 0G1r8e.e Vnowliucmh,e C LTV 0I,6 N87o0. .1 A1n. nPuuabll issuhbesdc rmipotinotnh l$y1 b9y5 T. Paxhwonisee: (G8i0v0in)g 2,4 133- Darin LaHood (IL) the rest is merely Arcadia Road, Old Greenwich, CT 06870. Annual subscription $195. Phone: (800) 243- the rest is merely 9122 or (203) 637-4553; fax: (203) 637-4572; email:[email protected]. Brad Wenstrup (OH) tenacity.” 9122 or (203) 637-4553; fax: (203) 637-4572; email:[email protected]. —teAnmaceitliya.” Earhart 24 —Amelia Earhart INCREASED CHARITABLE GIVING THROUGH THE LEGACY IRA ACT INCLUDE THE LEGACY IRA ACT IN THE CHARITY ACT (S. 1343) (H.R.1337) Ask Senator Thune (R-SD) and Ranking Senate Finance Committee member Senator Ron Wyden (D-OR) to include The Legacy IRA Act (H.R. 1337) in The Charity Act (S. Current law: Generous Americans age 70½ or older are allowed tax-free transfers from their 1343). IRAs to make direct gifts to charitable organizations. A plethora of bills are introduced in every session of congress, but few are enacted. The Legacy IRA Act would expand current law and demonstrate Congress’s support of American charities by allowing middle-class taxpayers to more fully participate in The Charity Act, sponsored by Senator John Thune (R-SD) has a better chance of philanthropy. The bill allows taxpayers 65 or older to make transfers from their IRAs to fund enactment than many other bills. Mr. Thune is the chairman of the Republican Policy life-income plans (charitable remainder trusts and charitable gift annuities) and enables them Committee, is the third ranking Republican in the Senate and is a member of the Senate to retain retirement income, with a gift of the assets to the designated charity on death. Finance Committee. This bipartisan bill is cosponsored by Ranking SFC member Ron Wyden (D-OR) and Senators Robert P. Casey, Jr. (D-PA); Pat Roberts (R-KS); Jerry Moran This low-cost legislation ($106 million over 10 years) encourages generosity and helps (R-KS); Joe Donnelly (D-IN); Gary C. Peters (D-MI); Amy Klobuchar (D-MN); Rob Portman (R- offset the loss of the charitable deduction for those who will no longer itemize resulting OH); Debbie Stabenow (D-MI); and John Boozman (R-AR). from the increased standard deduction. And it is an opportunity for older Americans (both itemizers and nonitemizers) to increase their philanthropy and maintain financial security Summary of Charity Act (S. 1343): through life-income gifts. Retirement income from life-income plans is fully taxed. • Sense of the Senate. Encouraging charitable giving should be a goal of tax reform. Congress should ensure that the value and scope of the deduction for charitable This legislation was introduced by Representative Kevin Cramer (R-ND) and is cosponsored contributions isn’t diminished during a comprehensive rewrite of the tax code. by Ways and Means Committee members Earl Blumenauer (D-OR), Peter Roskam (R-IL), David Schweikert (R-AZ), David Young (R-IA), Mike Kelly (R-PA), David Reichert (R-WA), • Donor Advised Funds IRA Rollover Eligibility and Transparency: Current law allows Randy Hultgren (R-IL), Kristi Noem (R-SD), and Erik Paulsen (R-MN). an Individual Retirement Arrangement ("IRA") owner who is age 70-1/2 or older generally to exclude from gross income up to $100,000 per year in distributions made directly from These charitable organizations support the Legacy IRA Act: the IRA to certain public charities. The proposal would make donor advised funds (DAFs) eligible for the donations. Sponsors of DAFs would be required to disclose whether they • Alliance for Strong Families and • Goodwill USA have an official policy on "inactive" or "dormant" funds, and if so, describe the policy or Communities • Jewish Federations of North America include a copy of it with the return. • American Cancer Society Cancer • League of American Orchestras Action Network • March of Dimes • American Council on Gift Annuities • Mental Health America Sponsors of DAFs would also be required to disclose average payouts over the most • American Heart Association `• National Association of Charitable Gift recent three-year period. • Americans for the Arts and Americans Planners for the Arts Action Fund • National Catholic Development • American Red Cross Suggestion. Thank Senator Thune and the cosponsors (especially Senator Wyden) for Conference • Association of Art Museum Directors introducing the Charity Act and ask that the provision on Donor Advised Funds be expanded • National Multiple Sclerosis Society • Boy Scouts of America to authorize transfers from IRAs to fund life-income charitable gifts as provided in The • Boys and Girls Clubs of America • OPERA America Legacy IRA Act (H.R. 1337) introduced by a number of the members of the House Ways & • Catholic Charities USA • Salvation Army Means Committee. • Dance/USA • United W ay W orldwide • Girls Inc. • Volunteers of America • Girl Scouts of the U SA • YMCA of the USA • Foundation Excise Taxes would be simplified. • YW CA USA • Non-Profits would be required to File Form 990 Electronically.

Members of the House: we ask you to cosponsor The Legacy IRA Act (H.R. 1337). Contact Alex McIntyre in Rep. Kevin Cramer’s office: ([email protected]).

Senators: we ask you to introduce companion legislation to H.R. 1337 in the Senate.

See pages 3-22 for a detailed explanation of the Legacy IRA Act.

2 23 STATEMENT OF CHARITABLE IRA INITIATIVE* SUPPORTING THE LEGACY IRA ACT (H.R. 1337)

Prepared by Conrad Teitell, pro bono counsel**

The Legacy IRA Act (H.R. 1337) enables middle-class individuals to support American charities by making transfers from their IRAs to fund charitable life-income plans. They would receive retirement income for life and provide for a significant charitable gift at death.

House Ways & Means Committee Chairman Kevin Brady (R-TX) cosponsored an earlier bill (see page 6) enabling taxpayers to make direct and life-income gifts from their IRAs.

And Senate Finance Committee Chairman Orrin Hatch cosponsored a similar bill (see page 7).

TABLE OF CONTENTS Request that the Legacy IRA Act (H.R. 1337) be included in upcoming tax legislation. . . 4 Pending legislation ...... 4 Current law...... 4 Legacy IRA Act—the details...... 4 Explanation of types of life-income charitable gifts that could be rolled over from an individual's IRA to fund a life-income gift that would pay taxable income to the donor...... 5 Legislation whose time has come: Listing of widely cosponsored bipartisan bills introduced since the beginning of the century...... 5 Dear Colleague letter by Rep. Kevin Cramer (R-ND) and Earl Blumenauer (D-OR) inviting cosponsors for The Legacy IRA Act...... 8 The Salvation Army's letter supporting The Legacy IRA Act...... 9 National Catholic Development Conference's letter supporting The Legacy IRA Act.. . . . 10 Partnership for Philanthropic Planning (now National Association of Charitable Gift Planners) letter supporting The Legacy IRA Act...... 11 The Legacy IRA Act (H.R. 1337)—the bill's text...... 12 $106 million Score of The Legacy IRA Act by the Joint Committee on Taxation...... 20 Include The Legacy IRA Act in the Charity Act (S. 1343)...... 23 About the Charitable IRA Initiative...... 24 List of Ways and Means and Senate Finance Committees...... 24

*Contact information: A 501(c)(4) all-volunteer organization, 815 Medary Avenue, Brookings, SD 57006. (See page 24 for listing of volunteers.)

**Contact information; Cummings & Lockwood, Six Landmark Square, Stamford, CT 06901. Phone: (203) 351-4164; Fax: (203) 708-3840; email: cteitell@ cl-law.com.

3 We ask that the language of The Legacy IRA Act (H.R. 1337) be included in upcoming tax legislation. The Legacy IRA Act would authorize tax-free IRA rollovers for gifts that benefit charities and provide taxable retirement Income—charitable life-income plans—for the donors. At the donor's death, the assets in the plan are owned outright by the qualified charity. Charitable deductions aren't allowable for amounts transferred to the life-income plans (charitable remainder trusts and charitable gift annuities). The Joint Committee on Taxation has scored this bill at only $106 million. See pages 20-22.

Pending legislation. This bipartisan legislation was introduced by Representative Kevin Cramer (R-ND) and is cosponsored by Ways and Means Committee members Earl Blumenauer (D-OR); Peter Roskam (R-IL); David Schweikert (R-AZ); David Young (R-IA); Mike Kelly (R-PA); David Reichert (R-WA); Randy Hultgren (R-IL); Kristi Noem (R-SD); and Erik Paulsen (R-MN).

An identical bill in the 114th Congress (H.R. 5171) was introduced on May 6, 2016. Ways and Means Committee cosponsors: Peter Roskam (R-IL); Earl Blumenauer (D-OR); Patrick Tiberi (R-OH); Eric Paulsen (R-MN); Mike Kelly (R-PA); KrIsti Noem (R-SD): Adrian Smith (R-NE); and Devin Nunes (R-CA). Rep. Kevin Cramer (R-ND), a long-time advocate of the legislation, was also a cosponsor.

Current law: Individuals age 70½ or older can make direct (outright) gifts from an IRA of up to $100,000 per year to public charities (other than donor advised funds and supporting organizations) and to private operating and passthrough (conduit) foundations without having to report the IRA distributions as taxable Income on their federal income tax returns. A charitable deduction isn't allowable.

First enacted in 2006, this law was made permanent by the PATH Act of 2015. Direct IRA rollovers have helped American charities feed the hungry; and provide education, medical services, housing assistance, and myriad other services that Americans need.

THE LEGACY IRA ACT: THE DETAILS: Qualified charities under The Legacy IRA Act. The same donees authorized for direct outright IRA transfers to charities (above).

Annual ceiling on transfers from a donor's IRA for a life-income plan under The Legacy IRA Act: $400,000, for individuals 65 or older. For individuals 70 and 1/2 or older, the combined ceiling for direct and life-income transfers from their IRAs is $400,000, with a $100,000 cap for direct transfers.

No loss to the government on Required Minimum Distributions under The Legacy IRA Act. The types of life-income plans assure that the annual taxable payments will generally be equal to (or greater than) what individuals must have received under the required minimum distribution rules had they kept the funds in their IRAs instead of rolling them over for charitable life-income plans.

Minimal revenue cost to the government of The Legacy IRA Act. Under the authorized life-income plans, the IRA owners will be taxed on income received at ordinary income tax rates. Because the payouts are 5 percent or more, there generally will be more income paid from the charitable life-income plans than under the normal minimum required distribution rules. The only authorized income beneficiaries of the life-income plans are the individual IRA

4 owner, his or her spouse or both of them. At death, the assets in the plan go directly to the named qualified charity or charities and not to family members.

Why wouldn't IRA owners just give outright to charity (direct gifts) from their IRAs as provided under the now permanent law? Many IRA owners want to make charitable gifts, but also need retirement income. The life-income IRA rollover is a way for donors of average resources to combine charitable gifts with retirement income. Many charities have donors "standing by" to make life-income charitable gifts from their IRAs.

The Legacy IRA is a Middle-Class Charitable IRA Rollover. It allows average Americans (who meet the minimum age requirement) not just wealthy taxpayers to benefit charities.

Four-year trial for Life-Income Charitable IRAs. The provision wouldn't be permanent but be for a four-year trial period. That provides adequate time to determine the provision's efficacy.

Cost. The bill's cost is only $106 million over 10 years. This is a small fraction of the money that charities will receive as a result of enactment.

EXPLANATION OF TYPES OF LIFE-INCOME CHARITABLE GIFTS THAT COULD BE ROLLED OVER FROM AN INDIVIDUAL'S IRA TO FUND A LIFE-INCOME GIFT THAT WOULD PAY TAXABLE INCOME TO THE DONOR Charitable Remainder Unitrust (CRUT). Pays the income beneficiary an amount for life (at least annually) determined by multiplying a fixed percentage (set at the outset) of the net fair market value of the trust assets, revalued each year. On death of the life beneficiary the charity gets the remainder. The fixed percentage cannot be less than 5 percent and the remainder interest must be at least 10 percent of the initial net fair market value of all property placed in the trust.

Charitable Remainder Annuity Trust (CRAT). Pays the income beneficiary for life a fixed dollar amount (at least annually) specified in the trust instrument. On the death of the life beneficiary the charity gets the remainder. The fixed dollar amount must be at least 5 percent of the initial net fair market value of the transferred assets and the remainder interest must be at least 10 percent of the initial net fair market value of all property placed in the trust.

Charitable Gift Annuity (CGA). A donor transfers assets to a qualified charitable organization in return for its promise to pay the donor fixed payments (at least annually) for life. The value of the assets paid by the donor to the charity exceeds the actuarial value of the payments made by the charity to the annuitant. The transferred assets become a part of the charity's general assets and the annuity payments are backed by all the charity's assets—not just the transferred property. The charitable gift portion must be more than 10 percent.

LEGISLATION WHOSE TIME HAS COME The expansion of the now-permanent direct Charitable IRA to include charitable life- income IRAs is not a new idea. Bipartisan bills providing for both direct IRA charitable gifts and life-income IRAs have been introduced from the beginning of this century. Senate Finance Committee Chairman Hatch in the past cosponsored legislation that would have allowed both direct and life-income transfers from IRAs. Care Act of 2002 (S. 1924). And Ways and Means Committee Chairman Brady cosponsored The Charitable Rollover Incentive

5 Act of 2001 (H.R. 774). Both those bills had a broader class of qualified charities than those designated qualified charities under the permanent direct charitable IRA law. And those bills had no ceilings whatsoever on the amounts that could be transferred from IRAs. (See below for both bills.)

Ways and Means Committee Chairman Kevin Brady (R-TX) in a March 16, 2016, meeting with members of the Charitable IRA Initiative said that he favored the Legacy (life-Income) IRA legislation.

Earlier bills: • Neighbor-to-Neighbor Act of 2001 (H.R. 824). Introduced by House Ways & Means Committee member Rep. Jennifer Dunn (R-WA). Would have allowed direct and life-Income charitable rollovers from IRAs. Cosponsors; Brian Baird (D-WA); Ander Crenshaw (R-FL); Nathan Deal (R-GA); John J. Duncan, Jr. (R-TN); Philip English (R-PA); James C. Greenwood (R-PA); Melissa Hart (R-PA); C.L. Otter (R-ID); Bill Pascrell, Jr. (D-NJ); John Peterson (R-PA); Bob Schaeffer (R-CO); Michael K. Simpson (R-ID); Mark Souder (R-IN); Charles H. Taylor (R-NC); J.C. Watts, Jr. (R-OK); and Ed Whitfield (R-KY).

• Charitable Rollover Incentive Act of 2001. (H.R. 774). Introduced by Ways & Means Committee member Philip Crane (R-IL). Would have allowed tax-free rollovers from IRAs for direct and life-income charitable gifts. (Mr. Crane introduced similar legislation in the 1990's.) Co-sponsors: Kevin Brady (R-TX); Wally Herger (R-CA); Richard Neal (D-MA); Ronald Paul (R-TX); John Peterson (R-PA); Mike Rogers (R-MI); Mark Souder (R-IN); Bart Stupak (R-OK); Thomas Tancredo (R-C0); and Wesley Watkins (R-OK).

• The Savings Opportunity and Charitable Giving Act of 2001 (S. 592) introduced by Senator Rick Santorum (R-PA) and Senator Joseph Lieberman (I-CT). Would have allowed tax-free IRA rollovers for outright and life-income charitable gifts.

• Public Good IRA Rollover Act of 2001 (S. 1376) introduced by Senator Byron L. Dorgan (D-ND) and Olympia Snowe (R-ME). Would have allow tax-free IRA rollovers for outright and life-income charitable gifts.

• President George W. Bush in the wake of September 11, 2001. Donations to charities not involved in disaster relief had declined, in a letter to Senate Majority leader Tom Daschle (D-SD) and Senate Minority leader Trent Lott (R-MS), the President urged Congress to enact an "Armies of Compassion" law that would help struggling charities by providing additional tax incentives including tax-free IRA rollovers at age 69 or older for both outright and life-income charitable gifts.

• Care Act of 2002 (S. 1924) introduced by Senators Joseph Lieberman (I-CT) and Rick Santorum (R-PA). Would allow individuals 67 and over to make tax-free distributions from IRAs for outright and life-income charitable gifts. Cosponsored by: Senator Orrin Hatch (R-UT); Senators Sam Brownback (R-KS); Jean Carnahan (D-MO); Evan Bayh (D-IN); Thad Cochran (R-MS); Bill Nelson (D-FL); Richard Lugar (R-IN); and Hillary Clinton (D-NY).

6 • Care Act of 2003 passed by the Senate 96-6. Would allow tax-free direct transfers from IRAs at age 70 1/2 or over and life-income transfers at age 59 1/2 or older, broader qualified charities than current law for direct IRA transfers and no annual ceilings.

• The Charitable Giving Act of 2003 passed the House 408-13. Would have allowed tax-free transfers from IRAs for direct and life-income charitable gifts.

Both the House and Senate bills were passed by overwhelming majorities. The bills provided a number of tax Incentives for charitable gifts, including the charitable IRA rollover for direct and life-income gifts. But a few senators wouldn't consent to sending the Senate bill over to the House unless some unrelated provisions were added to the Senate bill. And those provisions weren't popular with the House majority. Result: The House's approval of the charitable IRA (408-13) and the Senate's approval (95-5) did not go to conference.

• Charitable IRA legislation in 2004 (H.R. 4488). Would allow tax-free direct and life- income rollovers identical to the bill that passed the Senate (above). Cosponsored by Rep. Jim Ramstad (R-MN) and Rep. Earl Pomeroy (D-ND).

• The Public Good IRA Rollover Act of 2007—(S. 819) and (H.R. 1419). Would make all charities eligible recipients; be available for life-Income gifts at age 59 1/2 or over and outright gifts at age 70 1/2 or over; and had no dollar cap for outright and life-Income rollovers. Introduced by Senator Byron Dorgan (D-ND). Cosponsors: Norm Coleman (R-MN); Dianne Feinstein (D-CA); Chuck Hagel (R-NE); John Kerry (D-MA); Carl Levin (D-MI); Joseph Lieberman (I-CT); Blanche Lincoln (D-AR); Charles Schumer (D-NY); Gordon Smith (R-OR); and Olympia Snow (R-ME). Introduced in the House by Earl Pomeroy (D-ND). Cosponsors: Nell Abercrombie (D-HI); Melissa Bean (D-IL); Shelley Berkley (D-NV) , Earl Blumenauer (D-OR); Jo Bonner (R-AL); John Boozman (R-AR); Dan Burton (R-IN); Dave Camp (R-MI); Eric Cantor (R-VA); Shelley Moore Capito (R-WV); Lois Capps (D-CA); Joseph Crowley (D-NY); Rahm Emanuel (D-IL); Philip English (R-PA); Wally Herger (R-CA); David Hobson (R-OH); Michael Honda (S-CA); Stephanie Tubbs Jones (D-OH); Marcy Kaptur (D-OH); Dale Kildee (D-MI); Ron Kind (D-WI); Ron Lewis (R-KY); Betty McCollum (D-MN); Thaddeus McCotter (R-MI); Cathy McMorris Rodgers (R-WA); Jeff Miller (R-FL); James Moran (D-VA); Marilyn Musgrave (R-CO); Sue Wilkins Myrick (R-NC); Bill Pascrell, Jr. (D-NJ); Joseph Pitts (R-PA); David Price (D-NC); Jim Ramstad (R-MN); Adam Schiff (D-CA); Jean Schmidt (R-OH); Allyson Schwart (D-PA); Bart Stupak (D-MI); Ellen Tauscher (D-CA); Lee Terry (R-NE); Mark Udall (D-C); Fred Upton (R-MI); Timothy Walberg (R-MI); and Jerry Weller (R-IL).

• The Public Good IRA Rollover Act of 2013. Would allow tax-free rollovers to all charities with no ceilings at age 59 1/2 or over for life-income gifts and age 70 1/2 or older for direct transfers. Introduced by Charles Schumer (D-NY). Cosponsors: Senators Kirsten Gillibrand (D-NY); Mark L. Pryor (D-AR); Carl Levin (D-MI); Tim Johnson (D-SD); and Susan M. Collins (R-ME). Identical bills were Introduced by Senator Schumer in two earlier Congresses.

• Care Act of 2003 passed by the Senate 96-6. Would allow tax-free direct transfers from IRAs at age 70 1/2 or over and life-income transfers at age 59 1/2 or older, broader qualified charities than current law for direct IRA transfers and no annual ceilings.

• The Charitable Giving Act of 2003 passed the House 408-13. Would have allowed tax-free transfers from IRAs for direct and life-income charitable gifts.

7 Act of 2001 (H.R. 774). Both those bills had a broader class of qualified charities than those designated qualified charities under the permanent direct charitable IRA law. And those bills had no ceilings whatsoever on the amounts that could be transferred from IRAs. (See below for both bills.)

Ways and Means Committee Chairman Kevin Brady (R-TX) in a March 16, 2016, meeting with members of the Charitable IRA Initiative said that he favored the Legacy (life-Income) IRA legislation.

6 owner, his or her spouse or both of them. At death, the assets in the plan go directly to the named qualified charity or charities and not to family members.

The Legacy IRA is a Middle-Class Charitable IRA Rollover. It allows average Americans (who meet the minimum age requirement) not just wealthy taxpayers to benefit charities.

Four-year trial for Life-Income Charitable IRAs. The provision wouldn't be permanent but be for a four-year trial period. That provides adequate time to determine the provision's efficacy.

Cost. The bill's cost is only $106 million over 10 years. This is a small fraction of the money that charities will receive as a result of enactment.

5 We ask that the language of The Legacy IRA Act (H.R. 1337) be included in upcoming tax legislation. The Legacy IRA Act would authorize tax-free IRA rollovers for gifts that benefit charities and provide taxable retirement Income—charitable life-income plans—for the donors. At the donor's death, the assets in the plan are owned outright by the qualified charity. Charitable deductions aren't allowable for amounts transferred to the life-income plans (charitable remainder trusts and charitable gift annuities). The Joint Committee on Taxation has scored this bill at only $106 million. See pages 20-22.

THE LEGACY IRA ACT: THE DETAILS: Qualified charities under The Legacy IRA Act. The same donees authorized for direct outright IRA transfers to charities (above).

4 STATEMENT OF CHARITABLE IRA INITIATIVE* SUPPORTING THE LEGACY IRA ACT (H.R. 1337)

Prepared by Conrad Teitell, pro bono counsel**

House Ways & Means Committee Chairman Kevin Brady (R-TX) cosponsored an earlier bill (see page 6) enabling taxpayers to make direct and life-income gifts from their IRAs.

And Senate Finance Committee Chairman Orrin Hatch cosponsored a similar bill (see page 7).

*Contact information: A 501(c)(4) all-volunteer organization, 815 Medary Avenue, Brookings, SD 57006. (See page 24 for listing of volunteers.)

**Contact information; Cummings & Lockwood, Six Landmark Square, Stamford, CT 06901. Phone: (203) 351-4164; Fax: (203) 708-3840; email: cteitell@ cl-law.com.

3 INCREASED CHARITABLE GIVING THROUGH THE LEGACY IRA ACT INCLUDE THE LEGACY IRA ACT IN THE CHARITY ACT (S. 1343) (H.R.1337) Ask Senator Thune (R-SD) and Ranking Senate Finance Committee member Senator Ron Wyden (D-OR) to include The Legacy IRA Act (H.R. 1337) in The Charity Act (S. Current law: Generous Americans age 70½ or older are allowed tax-free transfers from their 1343). IRAs to make direct gifts to charitable organizations. A plethora of bills are introduced in every session of congress, but few are enacted. The Legacy IRA Act would expand current law and demonstrate Congress’s support of American charities by allowing middle-class taxpayers to more fully participate in The Charity Act, sponsored by Senator John Thune (R-SD) has a better chance of philanthropy. The bill allows taxpayers 65 or older to make transfers from their IRAs to fund enactment than many other bills. Mr. Thune is the chairman of the Republican Policy life-income plans (charitable remainder trusts and charitable gift annuities) and enables them Committee, is the third ranking Republican in the Senate and is a member of the Senate to retain retirement income, with a gift of the assets to the designated charity on death. Finance Committee. This bipartisan bill is cosponsored by Ranking SFC member Ron Wyden (D-OR) and Senators Robert P. Casey, Jr. (D-PA); Pat Roberts (R-KS); Jerry Moran This low-cost legislation ($106 million over 10 years) encourages generosity and helps (R-KS); Joe Donnelly (D-IN); Gary C. Peters (D-MI); Amy Klobuchar (D-MN); Rob Portman (R- offset the loss of the charitable deduction for those who will no longer itemize resulting OH); Debbie Stabenow (D-MI); and John Boozman (R-AR). from the increased standard deduction. And it is an opportunity for older Americans (both itemizers and nonitemizers) to increase their philanthropy and maintain financial security Summary of Charity Act (S. 1343): through life-income gifts. Retirement income from life-income plans is fully taxed. • Sense of the Senate. Encouraging charitable giving should be a goal of tax reform. Congress should ensure that the value and scope of the deduction for charitable This legislation was introduced by Representative Kevin Cramer (R-ND) and is cosponsored contributions isn’t diminished during a comprehensive rewrite of the tax code. by Ways and Means Committee members Earl Blumenauer (D-OR), Peter Roskam (R-IL), David Schweikert (R-AZ), David Young (R-IA), Mike Kelly (R-PA), David Reichert (R-WA), • Donor Advised Funds IRA Rollover Eligibility and Transparency: Current law allows Randy Hultgren (R-IL), Kristi Noem (R-SD), and Erik Paulsen (R-MN). an Individual Retirement Arrangement ("IRA") owner who is age 70-1/2 or older generally to exclude from gross income up to $100,000 per year in distributions made directly from These charitable organizations support the Legacy IRA Act: the IRA to certain public charities. The proposal would make donor advised funds (DAFs) eligible for the donations. Sponsors of DAFs would be required to disclose whether they • Alliance for Strong Families and • Goodwill USA have an official policy on "inactive" or "dormant" funds, and if so, describe the policy or Communities • Jewish Federations of North America include a copy of it with the return. • American Cancer Society Cancer • League of American Orchestras Action Network • March of Dimes • American Council on Gift Annuities • Mental Health America Sponsors of DAFs would also be required to disclose average payouts over the most • American Heart Association `• National Association of Charitable Gift recent three-year period. • Americans for the Arts and Americans Planners for the Arts Action Fund • National Catholic Development • American Red Cross Suggestion. Thank Senator Thune and the cosponsors (especially Senator Wyden) for Conference • Association of Art Museum Directors introducing the Charity Act and ask that the provision on Donor Advised Funds be expanded • National Multiple Sclerosis Society • Boy Scouts of America to authorize transfers from IRAs to fund life-income charitable gifts as provided in The • Boys and Girls Clubs of America • OPERA America Legacy IRA Act (H.R. 1337) introduced by a number of the members of the House Ways & • Catholic Charities USA • Salvation Army Means Committee. • Dance/USA • United W ay W orldwide • Girls Inc. • Volunteers of America • Girl Scouts of the U SA • YMCA of the USA • Foundation Excise Taxes would be simplified. • YW CA USA • Non-Profits would be required to File Form 990 Electronically.

Members of the House: we ask you to cosponsor The Legacy IRA Act (H.R. 1337). Contact Alex McIntyre in Rep. Kevin Cramer’s office: ([email protected]).

Senators: we ask you to introduce companion legislation to H.R. 1337 in the Senate.

See pages 3-22 for a detailed explanation of the Legacy IRA Act.

2 23 ABOUT THE CHARITABLE IRA INITIATIVE The LEGACY IRA Act (H.R. 1337) results from years of effort by a small informal group of volunteers, the Rollover Rangers. They played a part in the original enactment of the Direct