IRA contributions

Jesse Calagna · May 2016

is there is a way (or even a reason why) our org should be noting gifts as an IRA contribution?

JoAnn Strommen · May 2016

IRA contributions, I don't know why you would. Is the money going into an IRA?

IRA distributions or IRA rollovers to your org, yes, would be recorded as gifts. Completely different things.

Not an IRA/IRS/tax expert so this is just my opinion...

Jesse Calagna · May 2016

It's a check from a constituent that states 2016 IRA Charitable Donation. I was asked by my colleague if we should note this in RE, but i don't know why we would

James Andrews · May 2016

Jesse Calagna:

It's a check from a constituent that states 2016 IRA Charitable Donation. I was asked by my colleague if we should note this in RE, but i don't know why we would

You would note it because the donor can't take a charitable deduction for the donation. You'll want to include some language in your acknowledgment about it, since per IRS 590-B, charitable distributions require the same acknowledgment as a regular contribution (as defined in IRS 526).

JoAnn Strommen · May 2016

Possibly the constituent meant "IRS" so they would be reminded for their records that it's a charitable deduction.

The constituent isn't a bank, financial advisor or business that could be sending a check at someone's direction for an IRA disbursement, is it?

Jesse Calagna · May 2016

The check is from the constituent's company. I don't know much about finance so i'm lost

JoAnn Strommen · May 2016

Is the company one that handles IRA's for people?

If it were me and I didn't know, I'd probably just call donor and just tell them you want to be clear about it.

James Andrews · May 2016

Jesse, here's what's going on: when they hit 70 1/2 years old, people have to start taking distributions from their IRAs. They get taxed on them like income, because you put them in the IRA pre-tax.

But the IRS has said that rather than taking a distribution from your IRA as income, a person can have their IRA manager do a charitable distribution and donate the money directly to a qualified charity (colloquially known as a rollover by some people, known as a QCD by the IRS).

Since they're donating it, it never qualifies as income for them, so they don't get taxed on it -- but since they put it in the IRA pre-tax also, they don't get a charitable deduction from it.

But they need the same kind of acknowledgment you would send them if they had made a tax deductible gift.

Look here for more info.

JoAnn Strommen · May 2016

Just to clarify the end of James' post.

"But they need the same kind of acknowledgment you would send them if they had made a tax deductible gift."

It should be an acknowledgement / thank you but should not have any text relating to it being a tax deductible gift. For us, we have 2 different letters in RE.

This is all applicable if the donation is directly from the IRA manager.

Michael Sherman 2 · May 2016

For all IRA Rollovers, since the first one, we have been including the following required paragraph in the acknowledgement letter:

This letter is also to acknowledge that this gift was received as an IRA rollover directly from the plan trustee/administrator and understand that it is your intention for the contribution to qualify as a charitable distribution from your IRA under section 408(d)(8) of the Internal Revenue Code. Further, Naples Botanical Garden is qualified under section 501(c)(3) of the Internal Revenue Code and your gift will not be transferred to either a donor advised fund or a supporting organization as described in section 509(a)(3). No goods or services of any value were or will be transferred to you in connection with this gift.

Jesse Calagna · May 2016

Is there any reason to note that in RE or is all we have to do differently is send them a non tax thank you letter?

Michael Sherman 2 · May 2016

I note it on the reference line. I guess you could also note it as a Gift subtype. You may be asked if you have received any IRA rollovers by an auditor and how they are handled. I have been asked this at a prior org.

Debra Holcomb · May 2016

Donors who give this way are excellent candidates for your planned giving program. While you may not be required to record the IRA details for your receipt, it is helpful to store that info for your fundraising program.

Michael Langley · August 2016

Jesse Calagna:

is there is a way (or even a reason why) our org should be noting gifts as an IRA contribution?

My understanding is that there are some special rules for both the charity and the donor when it comes to IRA distributions. I'm no expert either but we do record in the reference that it is an IRA Distribution. For these gifts we include the following p.s. at the bottom of the donor's acknowledgement.

P.S. This letter certifies that we received your gift directly from your plan administrator and that it is your intention for this to be a qualified charitable distribution under section 408(d)(8) of the Internal Revenue Code. We warrant to you that the Foundation is qualified under section 170(b)(1)(A) of the Internal Revenue Code, that your gift was not transferred to a donor advised fund or a supporting organization as described in section 509(a)(3), and that you have received no goods or services in exchange for your fully tax-deductible contribution. Please keep this letter with a copy of your tax return.

Michael Langley · August 2016

Jesse Calagna:

is there is a way (or even a reason why) our org should be noting gifts as an IRA contribution?

Here's an explaination:

Internal Revenue Code Section 408(d)(8)

Individual retirement accounts

d) Tax treatment of distributions

  (8) Distributions for charitable purposes.

   (A)In general. So much of the aggregate amount of qualified charitable distributions with respect to a taxpayer made during any taxable year which does not exceed $ 100,000 shall not be includible in gross income of such taxpayer for such taxable year.

   (B) Qualified charitable distribution. For purposes of this paragraph, the term "qualified charitable distribution" means any distribution from an individual retirement plan (other than a plan described in subsection (k) or (p))—

     1. which is made directly by the trustee to an organization described in section 170(b)(1)(A) (other than any organization described in section 509(a)(3) or any fund or account described in section 4966(d)(2), and

     2. which is made on or after the date that the individual for whose benefit the plan is maintained has attained age 70 1/2. A distribution shall be treated as a qualified charitable distribution only to the extent that the distribution would be includible in gross income without regard to subparagraph (A).

   (C) Contributions must be otherwise deductible. For purposes of this paragraph, a distribution to an organization described in subparagraph (B)(i) shall be treated as a qualified charitable distribution only if a deduction for the entire distribution would be allowable under section 170 (determined without regard to subsection (b) thereof and this paragraph).

   (D)Application of section 72. Notwithstanding section 72, in determining the extent to which a distribution is a qualified charitable distribution, the entire amount of the distribution shall be treated as includible in gross income without regard to subparagraph (A) to the extent that such amount does not exceed the aggregate amount which would have been so includible if all amounts in all individual retirement plans of the individual were distributed during such taxable year and all such plans were treated as 1 contract for purposes of determining under section 72 the aggregate amount which would have been so includible. Proper adjustments shall be made in applying section 72 to other distributions in such taxable year and subsequent taxable years.

   (E) Denial of deduction. Qualified charitable distributions which are not includible in gross income pursuant to subparagraph (A) shall not be taken into account in determining the deduction under section 170.

   (F) Termination. This paragraph shall not apply to distributions made in taxable years beginning after December 31, 2009.

Faith Murray · August 2016

Yes, I would recommend that these be recorded - we do it in the gift reference. For example, you don't want them being pulled over as just any old gift when pulling Tax substantiation letters at the end of the year. Thank-you letters should include some sort of special statement, though we usually keep ours brief by inserting "Thank you for your gift of $--- as a Qualified Charitable Distribution from your IRA, through [Name of IRA Company]" into the regular text of the acknowledgment letter. Also, as Debra indicated, these people are excellent Planned Giving prospects, so even if you had no donor age in your records, when one of these gifts is received, you automatically know this is a senior citizen with extra spending money and a stong affiliation to your org. In RE, we track so many different minutiae of a person's life, and this is one of those super-useful bit of data, I don't see why one wouldn't want to track it!

IRA contributions

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