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Business and Policy Areas
Business and Policy Areas
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IRS Publishes Guidance on IRA Rollovers

January 23, 2007

IRS Notice 2007-7, published January 10, includes guidance on the recently enacted provision allowing Individual Retirement Account (IRA) owners to directly transfer tax-free up to $100,000 per year to an eligible charity. The provision, which covers "qualified charitable distributions" from IRAs owned by individuals 70 1/2 and older, is currently only in effect for tax years 2006 and 2007. 

In addition to addressing IRA rollovers to charities, the notice sets forth guidance in question-and-answer format with respect to several provisions of the Pension Protection Act of 2006 (PPA), including lump sum distributions, hardship distributions, rollovers to nonspouse beneficiaries, and vesting of nonelective contributions.

The PPA adds section 408(d)(8) to the Code, which at this time, is only applicable for tax years 2006 and 2007.  Generally, if a distribution from an IRA owned by an individual who has attained age 701/2 is made directly by the trustee to certain charitable organizations, the distribution is excluded from gross income.  A distribution eligible for this treatment is called a "qualified charitable distribution".

Key points include:

  • The maximum total amount of a distribution that may be excluded from income in a year is $100,000;
  • Qualified charitable distributions may be made to organizations described in section 170(b)(1)(A), other than supporting organizations described in section 509(a)(3) or donor advised funds described in section 4966(d)(2);
  • The exclusion from income is applicable to a distribution made at any time during 2006 -- provided it meets the requirements of section 408(d)(8) -- even if the qualified charitable distribution was made prior to August 17, 2006 (date of enactment).

Unless extended by Congress, the provision will expire at the end of tax year 2007.

NACUBO Contact: Mary M. Bachinger, director, tax policy, mary.bachinger@nacubo.org