CHARITABLE GIVING WITHOUT TEARS
'I deem it the duty of every man to devote a certain portion of his income for charitable purposes, and ... his further duty to see it so applied as to do the most good of which it is capable.' -- Thomas Jefferson, 1806
Thomas Jefferson never imagined in his wildest dreams that the federal government which he helped to found would exact tribute from Americans' philanthropic efforts. But that is the case in our country today.
Right now, Americans who wish to donate assets held in an IRA to a charity of their choice have to pay federal taxes on those assets first. Under current law, Uncle Sam takes as much as 39 percent of such gifts out in taxes. So I have sponsored legislation, the Charitable IRA Rollover Act, to allow these generous-hearted individuals to roll over assets from an IRA to a charity without incurring a tax liability. Gifts to charity shouldn't be taxable events. This measure is written to encourage America's best charitable instincts, and to strengthen our charitable organizations as well as our colleges, universities and other educational institutions.
Here's how it would work: Many people have done such a good job of saving for their retirement that, when the day comes, they find they do not need any or part of the assets they hold in IRAs for living expenses. They would like to donate those funds to a charity or educational institution whose work they support.
Under current law, they must remove the funds from their IRA, pay any federal taxes owed and make their diminished contribution to charity.
My bill would change that burdensome and costly process by allowing a person who has reached age 59 ½ to move assets from an IRA directly to a charity or into a qualifying deferred charitable gift plan without having to pay federal tax on the transfer funds.
This could provide a valuable new stream of philanthropy for our nation's charities. Recent studies show that retirement plan assets comprise a substantial part of the net worth of many individuals. So these IRA assets represent the main source of funds from which they can make charitable gifts.
The additional giving encouraged by my Charitable IRA Rollover Act would support increased public services through the nonprofit sector. I believe voluntary charity changes hearts and lives much more effectively than government programs -- the hearts and lives of those who voluntarily help as well as those in need of a hand.
Americans are among the most generous people in the world -- 70 percent of all U.S. households contribute to charity -- but we have the potential to give even more. To those who argue we can't afford to forego this particular stream of tax revenue, I would counter with Thomas Jefferson's words once more: "I would rather be exposed to the inconveniences attending too much liberty than to those attending too small a degree of it."
I first introduced the Charitable IRA Rollover Act in 1998. Unfortunately, it was part of the tax relief bill that President Clinton vetoed in 1999. With a President who has expressed support for tax relief and for encouraging private charities to step in where government cannot, I'm hopeful the time is right to make the Charitable IRA Rollover Act the law of the land.
February 6, 2001