A provision in the Pension Protection Act (PPA) of 2006, which allows individuals over the age of 701?,,2 to make a one-time donation of up to $100,000 from an IRA tax-free to a charitable institution of their choice, is not picking up as much steam as some would have expected, and experts do not see much hope of it being extended beyond its current expiration date, Dec. 31 of this year.
Most observers consider the measure itself a positive development, both for the charities (donor advised funds and private foundations are excluded) as well as retirees that have the means to give away $100,000 from an IRA without feeling a pinch. However, the option is limited to only these individuals, says Robert Sharpe, president of the Sharpe Group, a leading provider of philanthropic services to the nonprofit community that is based in Memphis.
“The provision is only for people who have IRAs, so it is aimed at a fairly limited market, since most people have their money in 401(k)s or 403(b)s,” Sharpe says. “There are people who have rolled over into IRAs, but we are talking about a pretty small universe here.”
The charitable IRA rollover allows a donor to give a gift directly to a charity, rather than withdrawing cash and reporting it as taxable income, or giving it to a donor-advised fund or trust. Charities have been angling for this kind of charitable transfer option for years, and it is the first of its kind allowing people to give charitable gifts directly from their IRAs while they are alive.
Yet Frank Simon, founder and president of Findlay, Ohio-based P.R.O.F.I.T. Financial LLC, also believes that the provision’s appeal is limited, not just because it is aimed at a fairly small set of retirees, but also because it has not resonated with either that subset of retirees or charitable groups at large.
“Only two of our firm’s clients have asked about the provision,” Simon reports. “We asked several of the charitable organizations we work with about the experiences they have had, and they also found little interest.”
The low response rate, according to Simon, is a clear indication that awareness of the provision must be increased among retirees, their advisors, and the charitable institutions that wish to avail themselves of lump sum donations; many of those charities do not have properly formulated communication strategies with which to reach out to funding sources and potential donors.