A. DUIE LATTA, ESQUIRE

The recently enacted "Emergency Economic Stabilization Act of 2008" (the "Act") contains more than just a "bailout" for troubled financial companies. It also contains several important tax opportunities for individuals. One such tax provision is the Act's extension of the provision enacted in 2006 that allows individuals to make tax-free distributions to certain charities from an Individual Retirement Account (an "IRA").

Section 408(d)(8) of the Internal Revenue Code (the "Code") allowed individuals who are at least 70-½ years old to distribute up to $100,000 of their IRA to certain charitable organizations without it being included in gross income. Section 408(d)(8) of the Code was enacted as part of the Pension Protection Act of 2006, and was originally designed to be temporary, and was scheduled to "sunset" after December 31, 2007. Instead, the Act has extended this provision, which will allow individuals to make such tax-favored distributions from an IRA through 2008 and 2009.

Essentially, this provision allows an individual to make a charitable contribution via a distribution from the individual's IRA, but without the distribution being included in the individual's gross income. For an individual to obtain the tax-favored treatment, the contribution must be a "qualified charitable distribution," which means that the distribution must be made directly to certain charitable organizations described in section 170(b)(1)(A) of the Code. Such organizations include churches, hospitals, and certain educational and medical care organizations. It is important to note, however, that contributions to private foundations will not qualify as a "qualified charitable distribution." Accordingly, if an individual's goal is to obtain the favorable tax treatment for the charitable distribution, it is important to be certain that the recipient of the charitable contribution is a qualified section 170(b)(1)(A) organization.

The Emergency Economic Stabilization Act of 2008 has created significant controversy, and this provision for tax relief for certain IRA distributions is ancillary to the primary focus of the Act. That said, this extension will be welcomed by many taxpayers whose charitable giving and estate planning is enhanced by the opportunity to continue making tax-efficient IRA distributions to charity. Likewise, this extension will be welcomed by many charitable organizations, since it will assist them in their fundraising.

The attorneys at MacElree Harvey can assist you if you have any concerns regarding Section 408(d)(8) or another provision of the Act. Please feel free to contact us with any questions.

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