Chris Kelly
By Chris Kelly
Exec. VP/General Counsel, Tennessee Baptist Foundation
It’s not always popular to speak of the, uh, let’s say “seniority” of some of our Baptist brothers and sisters. However, for the purpose of this article, it may be a good thing as you have an opportunity to contribute to Kingdom work that others do not enjoy.
If you have reached the young age of 70 and a half years and you have an IRA (Individual Retirement Account), you know that the Internal Revenue Service requires that you take out a certain amount each year known as the Required Minimum Distribution, or RMD, for short. The taxpayer is then taxed on the amount taken from the IRA in the calendar year. For several years, with some limitations, the IRS has allowed a taxpayer to have the RMD distributed directly to a qualified charity.
This direct distribution, known as a Qualified Charitable Distribution (QCD), satisfies the person’s annual RMD requirement. A great tax benefit of this plan is that the money distributed directly to the charity does not count as personal income for the taxpayer. Thus, the individual gets the tax benefit and the charity gets the benefit of the donation. Win-win for everyone!
However, the current problem we have is that even though legislation is pending in Congress to make this effective in 2015, as this is being written, it has yet to become the law. The QCD has historically only been approved on a very narrow basis from year-to-year, and many times not until the very 11th hour in late, late December. So, is this article nothing but worthless historical information and a waste of newsprint? I think not.
There is still a planning opportunity while we wait to see if Congress acts. If you are required to take the RMD and you have charitable inclinations (such as to your church, local association, or other Baptist cause), you should still consider structuring a gift from your IRA so that if Congress does extend the QCD for 2015, you will already be in compliance with the law and can enjoy the full tax benefits of this transaction without the year-end rush to get it done. Simply contact your financial advisor to follow the previous QCD rules and make your distribution directly to the charity. Then, you can rest easy that you have covered your bases for the year and you can enjoy the better things of life rather than monitoring tax legislation (unless, of course, you enjoy doing that).
But what happens if Congress does not renew the QCD for 2015? Your IRA custodian will simply issue you a 1099-R for the distribution, and the charity will issue you a receipt for your personal income tax filing. If you itemize your taxes, you may get some benefit for the charitable contribution, just depending on your individual tax situation.
So, talk to your advisor and get the ball rolling. And if you have any questions about this technique, please feel free to contact the Foundation at 1-800-552-4644.
We are happy to help with this opportunity to support the work of the Kingdom!
