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‘2014’ Because the past is not all that matters

Watch this page for timely updates about tax and financial information related to your successful philanthropy.

Three things to know:

  • IRA Charitable Rollover is back in the Wings – When will it hit the Stage?
  • Tax Bills in both House and Senate – Highlights
  • Gift Annuity Rates Stay the Same: Era of Low Interest Rates Continues.

ONE: A Return Engagement for IRA Rollover?

The U.S. Senate Finance Committee has approved another “extender” (periodic legislation authorizing short-term extensions of controversial financial or tax measures).  Included in the Expiring Provisions Improvement Reform and Efficiency Act (EXPIRE) among other things (see below) is an extension of the IRA Charitable Rollover provision.  Effective retroactive to January 1, 2014 and through 2014 and 2015, this provision, as in prior years, allows IRA owners age 70½ or older to exclude from taxable income up to $100,000 per year in distributions direct from the IRA to certain public charities including VHS.

The fate of the IRA rollover, and EXPIRE Act in general, is in doubt as no Senate vote is yet scheduled, and the current draft House of Representatives tax bill from the Ways and Means Committee does not include the IRA Rollover.

TWO: Tax Bills May Never Come Due in either house of Congress

Senator Wyden has reportedly made it clear that the EXPIRE Act is the last “extenders” legislation he will introduce as chairman, favoring instead comprehensive, permanent tax reform.  House Ways and Means Chair Dave Camp has already unveiled a comprehensive tax reform of his own.  Camp’s bill reduces today’s seven brackets (10%, 20%, 25%, 30%, 35%, 39.6%, plus the 3.8% tax on the investment income on the highest earners) into three (10%, 25% and 35%, with the top 35% rate reserved only for incomes of $450,000 or more.

Camp’s bill would make up to 95% of taxpayers into non-itemizers by increasing the standard deduction from $12,200 to $22,000 for married joint filers.  Other notable changes include:  allowing an individual’s charitable tax deduction only on gifts exceeding 2% of Adjusted Gross Income (AGI); requiring donor advised funds to distribute all contributions within five years of receipt, or subject the sponsoring organization (e.g., a community foundation) to a 20% excise tax on undistributed funds, and lowering the excise tax paid by private foundations on net investment income to 1% from 2%.

As noted in ONE above, the current Ways and Means draft does not include the IRA Rollover.  Opposition from both parties to features of Camp’s wide-ranging bill makes its progress uncertain.

THREE: More of the Same, at Least for a While

After conducting its annual review of gift annuity rates, The American Council of Gift Annuities, has left in place for another year the rates in effect since the beginning of 2012.   These are among the lowest rates for the past 20 years or so, with rates ranging from 4.7% for one 65-year-old, to 6.8% for an 80-year-old, and a high of 9.0% for someone at least 90 years old.

Market interest rates remain more broadly at or near historic lows.  The prime rate still hugs a low 3.25% while the benchmark 30-year Treasury bond, at 3.29%, is almost unchanged from one year ago.  Since hitting a recent high of 3.00% around January 1, 2014, the 10-year Treasury has fallen to around 2.44%. 

With numbers like these, it’s worth remembering that a deferred gift annuity will return substantially higher rates than the immediately-paying variety.  Please contact Pam Seay for more information or specific rates, at pseay@vahistorical.org