[Congressional Record Volume 151, Number 43 (Wednesday, April 13, 2005)]
[Extensions of Remarks]
[Page E644]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   A BILL TO ALLOW TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT 
                    ACCOUNTS FOR CHARITABLE PURPOSES

                                 ______
                                 

                           HON. WALLY HERGER

                             of california

                    in the house of representatives

                       Wednesday, April 13, 2005

  Mr. HERGER. Mr. Speaker, I rise today to introduce legislation 
entitled the ``Public Good IRA Rollover Act.'' I am introducing this 
bill to encourage increased charitable giving by correcting certain 
provisions in the tax code related to Individual Retirement Accounts 
(IRAs). Americans should have the opportunity to make tax-free 
charitable contributions directly from their IRA accounts.
  This legislation is designed to allow individuals age 59\1/2\ or 
older to contribute amounts currently held in IRA accounts directly to 
qualified charities without having to first recognize the income for 
tax purposes and then take a charitable deduction. This legislation 
will give individuals more freedom to allocate their resources as they 
see fit while providing badly needed funding for charities, churches, 
museums, universities, and many other nonprofit organizations.
  The IRA was intended to encourage individuals to save for retirement, 
but due to a strong economy and an increase in asset values, many 
individuals have more funds in these accounts that they anticipated or 
now need to retire comfortably. Thus, it is very common for retirees to 
donate some of their wealth to charities and, in some cases, that 
wealth is held in an IRA.
  Individuals may withdraw funds from an IRA without incurring an early 
withdrawal penalty once they reach age 59\1/2\. Currently, however, 
these IRA withdrawals are generally taxed as income, even if the 
individual donates the money to charity. Many donors are reluctant to 
make charitable contributions from their IRA assets because of the 
additional tax costs they will incur. Congress has exempted withdrawals 
from IRA accounts under certain circumstances, such as to finance the 
purchase of a home or a college education. Congress should also make it 
possible for older Americans to support charities by allowing 
withdrawals from their IRA assets without suffering adverse tax 
consequences.
  This legislation also addresses other obstacles to charitable giving 
created by the current tax code. A taxpayer could readily recognize the 
IRA withdrawal income for tax purposes and, after making a charitable 
gift, take a charitable tax deduction. Unfortunately, in many cases 
under current law such a simple arrangement results in a loss of some 
portion of the charitable deduction. For example, charitable 
contributions are subject to the itemized deduction ``haircut'' under 
which certain taxpayers lose a portion of their charitable deduction.
  It is very difficult to estimate the amount of capital trapped by the 
current tax and rollover rules, and thus not available to our nation's 
charities. According to one report, there is over $1 trillion held in 
IRA accounts. If only 1 percent of this would be donated to charity but 
for the tax problems associated with charitable rollovers, this 
represents a $10 billion loss of resources to these organizations that 
do so much good.

  I will give just one example from my state of California, where 
universities and colleges receive tremendous support from private 
individuals. These donations and financial gifts are critical to 
providing the funding needed to maintain quality higher education and 
keep it available and affordable. In the UC system, private 
contributions provide more than $369 million for individual university 
departments, $291 million for research, $225 million for campus 
improvements, and $84 million for scholarships and student support 
services. In addition, planned gifts such as charitable remainder 
trusts, gift annuities, and pooled income funds are a tremendously 
valuable source of funding for the University of California System. 
This legislation encourages more charitable gifts such as this, which 
will greatly benefit universities and many other charities. This is 
sound and greatly needed legislation. Similar legislation has 
consistently received strong bi-partisan support in both chambers of 
Congress. This bill was part of the CARE Act that passed the House last 
year. In addition, President Bush has endorsed this proposal and it was 
included in the Administration's budget request for FY2005 and FY2006.
  This legislation is crucial to many local and national charities, 
including American Red Cross and the YMCA. Associations that represent 
thousands of our nation's charities and nonprofit professionals, such 
as the Council for Advancement and Support of Education, the National 
Committee on Planned Giving, INDEPENDENT SECTOR, and the Association of 
Fundraising Professionals, hear daily from their members whose donors 
want to make gifts from their IRA assets.
  I look forward to working with my colleagues to advance this 
legislation to increase private giving to charitable organizations by 
removing the disincentive currently in the tax code. We must continue 
to support proposals such as this that strengthen and increase 
resources for the nonprofit sector, a sector that plays such an 
important role in lives of millions of Americans every day. I know this 
legislation is needed in California and in your local communities as 
well. I hope my colleagues will join me in passing this important 
legislation.

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