Pension Protection Act of 2006 Contains Charitable Giving Provisions
The Pension Protection Act of 2006 [H.R. 4, 109th Cong, 2nd Sess. (2006)] was passed by Congress, and the President has indicated he will sign the bill. This act includes several provisions altering the tax treatment of certain charitable gifts and corporate-owned life insurance (COLI) arrangements.
- The bill allows an income tax exclusion for up to $100,000 per year of charitable distributions from regular and Roth IRAs. This does not apply to simplified employee pension plans or simplified retirement accounts. The distributions must be made directly to “50% charities”, which include most public charities but not private foundations, donor-advised funds , supporting organizations, or charitable remainder trusts. Qualifying charitable distributions will count towards the minimum distribution requirements. This provision applies only for distributions made in tax years beginning in 2006 or 2007.
- The bill imposes a temporary reporting requirement for certain exempt organizations with respect to the acquisition of interests in certain life insurance policies. This is in response to some abusive insurance plans that have involved charities without significantly benefiting the charities.
- The bill denies the deduction for contributions of clothing or household items that are not in good condition or that have minimal monetary value.
- The legislation modifies the calculation of the tax on private foundation net investment income so that more income is taxable.
- New rules apply to charitable contributions to donor-advised funds. Gifts to donor-advised fund have new substantiation requirements. The law now outlines how the excess business holdings rules of Code Sec. 4943 apply to donor advised funds, and it imposes the excess benefit excise tax under Code Sec. 4958 on certain distributions from donor advised funds to or for the benefit of disqualified persons.
- The favorable income, estate, gift, and GST tax treatment of Code Sec. 529 plans has been made permanent.
- Excise taxes apply to certain corporate-owned life insurance (COLI) arrangements.
You can search for the text of the legislation at http://thomas.loc.gov/.