tax extender

IRA Giving – Anyone?

The tax extender-go-round is slowly churning again but the results this time are not guaranteed – particularly regarding the IRA rollover.

To get you up-to-speed quickly, the IRA giving provision has been stuck since its enactment in 2006 in the annual or bi-annual tax extender legislation.  The extender package refers to a series of tax deals (mostly for corporate breaks to encourage investment or float something “good”) that expire annually or bi-annually and must be re-upped after they expire.

Of course, why all of the suspense?  Why not just permanently pass these tax deals?  Easy answer – their costs to the U.S. Treasury are too high!

In any case, I am getting more “Tax Extender” notifications these days from my google alerts, which seems to tell me that the ball is rolling and we may have an answer for 2014 IRA giving for 70.5-year-olds and up.

But, unlike other years, here is what I am hearing.

  • Maybe Congress will just pass what they think are the most needed (actually 6 were mentioned – NONE being the IRA giving provision – click to see article!)  This is on the negative side for IRA giving.  It is bad enough that the AMT fix (formerly part of the extender-go-round) was actually permanent last time – which took a lot of pressure off Congress to get this done. Now, Congress wants to pass only the “top” 6?  Not good for the other 50+ tax deals.
  • Or, in early April, we had the Senate Finance co-chair declaring this would the last renewal for the extenders!  Read this article and get a sense that some extenders may not make the cut and be gone forever. By the way, April 3 was the last time the IRA rollover was even mentioned on my google search.

I tend to believe that the nonprofit world doesn’t have the leverage or drive to get the IRA rollover over the top and into permanent law.  If you read into the various extenders up for grabs, you will see several that look like boondoggles to me – but have an aggressive lobbying effort pushing them over the top (regardless of whether they make sense for the country).  In fact, some are nonsensical – no logical reason except that the industry (which profits from the extender) that wants them is making sure they happen.  Not so with the IRA rollover.

Am I predicting an end to IRA giving this year?  Not yet. But, the way things look right now, sooner or later the IRA rollover will be gone for good.  I hope I’m wrong but unless the nonprofit world steps up with a serious lobbying effort, its chances look slimmer and slimmer every day.

Year End Tax Planning – Here We Go….

Year end holiday shopping is already happening – what about year end tax planning?  And, what are the opportunities (and pitfalls) for fundraisers?

Click here for a link to a recent Forbes piece.  In short, they are recommending selling capital gains property while the 15% bracket still exists.  Not a great message for charitable giving which usually says “avoid capital gains by giving your appreciated property.”  So, we might see advisors not steering clients toward charitable gifts to avoid capital gains but rather cashing in on gains at current low tax rates.

The bonus will be in 2013 when capital gains will almost certainly jump back to 20% (and 23.8% for higher earners from the Obamacare tax on investment income).  Capital gains avoidance will hopefully be more relevant for major gifts and planned giving in 2013 and beyond.

I love this one from the Washington Post:  EARN MORE, PAY MORE (click here to see it) – just reminding investors who have been enjoying paying only 15% on dividends – they may see their taxes on those same dividends almost triple!  Max rate on that same dividend will be 43.4%!  Hey, trade in that dividend stock for a CGA!  Run the numbers and it is impressive what a CGA offers when dividends are so highly taxed.

Actually, the article mentions that companies may speed up dividends to be distributed before year end (and let their shareholders get one last taste of 15% taxes). Maybe your donors will have some windfalls to play with (i.e. give to your charity)?

Lastly, a client just asked where we are standing on the IRA rollover (included in the tax extenders).  Click here on the latest on this issue.  In short, no tax extender until fiscal cliff talks are finished.  Who thinks the fiscal cliff is getting resolved before the end of the year?   This means that fundraisers have to wait a few more weeks before giving up hope (or not) on year-end IRA gifts.