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Thursday December 18, 2014

Washington News

Washington Hotline

IRA Rollover and Tax Extenders

Following House passage of the Tax Increase Prevention Act of 2014 (H.R. 5771), the bill moved to the Senate. While the Senate was originally expected to pass the bill in the week of December 8, the Senate did not take up the bill. This bill will extend 55 tax provisions through December 31, 2014. The provisions will be retroactive to January 1, 2014.

There are four key charitable provisions in the bill.

1. IRA Charitable Rollover – Each IRA owner who is 70 1/2 or older may make a transfer of up to $100,000 per year to a qualified charity. The IRA charitable rollover is tax-free and not included in adjusted gross income.

2. Conservation Gift Limits – Gifts of property for conservation purposes benefit from increased deduction limits. The normal 30% limit for appreciated property gifts is increased to 50% and the carry-forward limit is extended from five years to 15 years.

3. Food Inventory Gifts – An enhanced deduction for contributions of "apparently wholesome" food will be available for all donors. The deduction is the lesser of twice the basis or basis plus one-half of the appreciation.

4. S Corporation Appreciated Gifts – A Subchapter S corporation may give appreciated stock or land to charity. Only the basis of the S corporation in the donated asset will be used to reduce the shareholder basis, even though the full fair market value deduction is claimed by the shareholder.

Sen. Charles Grassley (R-IA) shared the frustration of many taxpayers in a speech on the Senate floor. He noted, “Congress’ procrastination on tax extenders has been causing a lot of headaches and indigestion for many of my constituents back home.”

Grassley continued, “Retirees want to know whether they can make a charitable donation from their IRA to meet their required minimum distribution. Small business owners want to know whether the enhanced expensing rules under Section 179 will be extended so they can invest in new machinery. The renewable energy sector wants to know what investments they should make to increase production.”

Grassley noted that the House and Senate had attempted to make several of these provisions permanent, but the White House objected to the bill. He shared his “hope that in the new Congress we can make strides towards putting some certainty back in the tax code.”

Editor’s Note: With the failure to reach a compromise on permanent passage of the extenders, the only acceptable solution is a one year extension. In January, the new Congress will try again to make permanent many of the tax extenders provisions.

Permanent IRA Rollover Bill


Following the breakdown of negotiations between Congress and the White House to make permanent 10 different tax extender provisions, House Ways and Means Chairman Dave Camp (R-MI) and Senate Finance Committee Chairman Ron Wyden (D-OR) agreed to introduce a permanent extension of three of the most popular charitable provisions.

The Supporting America’s Charity Act (H.R. 5806) would permanently extend three of the charitable provisions, including the IRA charitable rollover, expanded limits for conservation gifts and enhanced deductions for food inventory gifts. Because of the short window of time, the bill required a passage by two-thirds of the House and unanimous consent to pass in the Senate.

Chairman Camp noted that “this legislation will ultimately increase charitable giving by making these policies permanent and enabling charities to better serve those in need.”

The Ranking Member of the Ways and Means Committee is Sander Levin (D-MI). He noted that he was a leading sponsor of the bill to encourage enhanced deductions for gifts of food inventory. However, Rep. Levin reflected the White House’s concern and indicated that he would oppose the bill. The White House stated that because there were no tax increases to offset the continuation of the tax deduction that “the Administration strongly opposes House passage of H.R. 5806.”

The House vote on H.R. 5806 was 275 to 149, falling just eight votes short of the two-thirds margin needed to pass the bill. Following this vote there was bipartisan disappointment expressed by Camp and Wyden. Camp stated, "I think it's unfortunate at this time of year that we can't do something to help food banks and charities, for those parts of society that government doesn't reach." Wyden echoed this disappointment noting that there was "extraordinary need" for the help that charities provide across the country and that helping charity was a "special priority" of his.

Editor’s Note: While the passage of the permanent extenders was strongly supported by a coalition of leading charitable organizations, it is difficult to pass a bill in such a short time under House and Senate rules. The good news for nonprofits is that there is a strong level of bipartisan support for making the three charitable provisions permanent. The White House is concerned that opening the door to some permanent extenders will encourage the House and Senate to vote for other permanent extenders. While the legislative process is complicated, it now seems quite possible that these three charitable provisions will be made permanent in 2015.

Published December 12, 2014

Previous Articles

House Moves Forward With Tax Extenders

IRS End-of-Year Tax Tips

Tax Extenders – One Year or Permanent?

IRA Rollover and Tax Extenders Debate

Lame-Duck Focus on Tax Extenders

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