Notice 2007-7 and charitable IRA rollovers

The IRS has released initial guidance for tax-free distributions from IRAs to qualified charities. Notice 2007-7 covers a lot of the ground that was disturbed by the Pension Protection Act of 2006. You can get a copy of the Notice here. The material on charities and IRAs is at the end.

Perhaps the most important clarification for taxpayers is that if they are 70 1/2 they can tap their IRAs to satisfy pre-existing charitable pledges. Such a transfer will not be considered a prohibited transaction. A husband and wife may each contribute $100,000 in both 2006 and 2007 (a total transfer of $400,000 for the couple), but only if each has an IRA. The husband may not, for example, transfer $200,000 from his own IRA on the couple's behalf.

We expect to see lots of marketing in this area all year long. For example, I have in my hand the letter that Sam Heitzman received from his alma mater, Ohio State University. They wanted to "remind" him "about this new philanthopic opportunity." Early reports suggest that the education sector may prove the biggest beneficiary of this tax benefit.