Charitable Contributions and Recent Tax Law Changes

The passage of the Pension Protection Act (PPA) earlier this year brought about a number of changes in how charitable donations can be made and will be treated under the law. These changes may affect how you wish to perform your charitable activities.

Charitable IRA Rollovers

For tax years 2006 and 2007 only (so far), an IRA owner aged 70 1/2 may make a direct transfer of IRA funds, up to $100,000, to an eligible charity. The amount transferred effectively bypasses the tax return as it is not taxed as income, but neither is a deduction taken for the contribution. The amount transferred counts towards your Minimum Required Distribution. There are several advantages to this:
  • Taxpayers need not itemize their deductions to take full advantage of the tax break.
  • The tax benefits of the transfer are not limited by the percentage of Adjusted Gross Income (AGI) limits normally associated with charitable contributions. (Normally, contributions to public charities are limited to 50% of AGI).
  • The monies do not increase your AGI (as would be the case if they were received as income and then taken as a deduction). This means they will not contribute towards the phase-out of the itemized deduction and, conversely, will lower the threshold for miscellaneous and medical deductions.

Needless to say there are rules to follow:

  • Funds must be contributed directly by the IRA trustee to the charity
  • Employer plans (401(k), 403(b), SIMPLE IRAs, SEPs) are not eligible though, of course, once rolled over to a traditional IRA, the funds become subject to IRA rules.
  • Donor Advised Funds and Supporting Organizations are not eligible recipients


Guidelines for Cash Donations Changing

Beginning with tax year 2007 (earlier if your tax year started before January 1), the IRS will no longer just take your word for it (even if you're keeping notes or a diary) that you dropped a couple of bucks into the collection plate or Salvation Army kettle. The new rules state that donations of cash or by check, electronic funds transfer, credit card or payroll deduction must be backed up by a "bank record or a written communication from the charity showing the name of the charity, the date, and amount of the contribution." A bank record includes:

  • A canceled check
  • A bank or credit union statement provided the statement shows the name of the charity, date, and amount as required above
  • A credit card statement showing the name of the charity and the posting date
  • Payroll deductions require the pay stubs, W-2, or another employer-provided document along with a pledge card showing the name of the charity.

Guidelines for Non-Cash Donations Already Changed

For clothing and household items donated after August 17, 2006 to be deductible, they must be in "good used condition or better". The exception to this is that any single item valued at $500 or more may be deducted, regardless of condition, provided a qualified appraisal is included with the tax return.

For more information and details, see recent IRS news release IR-2006-192. Note: IRS Publication 526, Charitable Contributions, has not yet been updated.

Frequently Asked Questions about Portability of Health Coverage and HIPAA

Frequently Asked Questions about Portability of Health Coverage and HIPAA:

One of the biggest fears faced by people losing (or even changing) their jobs is the fear of being exposed to a financially devastating health claim. This FAQ, from the U.S. Department of Labor, explains the major points of HIPAA, the Health Insurance Portability and Accountability Act of 1996, the law outlining the rules employers and health plans must follow in providing you coverage under a new plan. The highlights:

1) If you have had continuous health coverage for 12 (or in some cases 18) months prior to joining a new health plan, that plan may not exclude pre-existing conditions

2) If you have had a break of 63 days (or longer if mandated by state law) in health coverage, the new plan may only excluded conditions for which you have received advice, diagnosis, care, or treatment in the 6 months preceding your first day of coverage under the new plan (or if there is a waiting period, the first day of the waiting period).

3) Conditions for which you have received treatment in the past but not in the last 6 months (e.g. allergies) are NOT pre-existing conditions.

4) Neither pregnancy nor genetic information without diagnosis or treatment may be deemed a pre-existing condition.

HIPAA was designed to take some of the fear out of losing your health coverage. Check out this site to get the full details.

Book Review: Rome, Inc. by Stanley Bing

Entertaining, though not the place I would go to learn about either Roman history or business. Bing's premise, drawn from his subtitle, is that Rome was the 'first multinational corporation', just like the ones we see today only a little more honest about their use of power.

A little disclaimer here: Bing could have told me the Roman Empire was populated by ginger-bread men and ruled by the Blue Meanies and I'd have had no basis to disbelieve him. My knowledge of the Roman Empire consists mostly of Shakespeare's historical plays (not the easiest place for your average late-20th century educated Midwestern boy to get 'just the facts ma'am' either), movies, and a computer game called Caesar III. Add to that a little bit of the prequel in the form of the Iliad and the Aeneid, and there's my reference point (and probably lots of people's as well).

Following the city/empire from its mythical founding to its transformation into the Holy Roman Empire, Bing leaves the reader with the twin comforts of: 1) Things haven't changed all that much and 2) Where they have it's for the better (your CEO isn't plucking out your eyeballs no matter how insane he may seem to you). Much of the story centers around the founding twins (Romulus and Remus), Marius, Julius Caesar, and Augustus Caesar, though juicy tidbits about other rulers are tossed in for good measure with comparison to modern moguls.

My biggest complaint is that there is no bibliography or suggested reading - something the topic invites, especially for those of us not already steeped in the classics. To remedy that, in part, let me make my humble suggestions.

The Aeneid - Virgil
History - Livy
Twelve Caesars - Suetonius
Lives - Plutarch
Decline and Fall of the Roman Empire - Gibbon
The Civil Wars - Julius Caesar