Bill for permanent tax deduction of charitable gifts from IRAs sails through House panel

The measure has bipartisan support going forward, but hurdles remain.
JUL 15, 2014
The U.S. House of Representatives' top tax committee approved a proposal Thursday that would make permanent a tax deduction for charitable contributions from individual retirement accounts. The legislation, written by Rep. Aaron Schock, R-Ill., was one of several so-called tax extenders that the House Ways and Means Committee passed. It was agreed to by a vote of 23 to 14. Under the bill, taxpayers age 70½ and older could make charitable contributions of up to $100,000 from their IRAs and Roth IRAs without having to treat the money as taxable income. Such a provision was extended for 2012 and 2013 in the fiscal cliff bill that Congress passed in January 2013. As of the end of last year, it had expired for 2014. “The time has come to make this temporary provision permanent,” Mr. Schock said before the vote. “By supporting this measure, we will strengthen our nation's network of charities that fight on the front lines against poverty, homelessness, illness, illiteracy and hunger in communities throughout the United States and around the world.” Hundreds of millions of dollars have been donated to charities through IRAs since the tax incentive was first allowed, he said. The committee also approved other measures related to charitable giving, including a bill to allow taxpayers who make charitable donations after the first of the year, but before the April 15 tax-filing deadline, to deduct those contributions from the previous tax year. Another measure would replace a two-tiered tax system for private charitable foundations with a flat 1% tax. Ways and Means Committee Chairman Dave Camp, R-Mich., is rolling out several tax extenders as stand-alone bills for votes by the panel and on the House floor. Recently, a bill that would permanently extend a research and development tax credit was approved by the House. The Senate took up a bill two weeks ago that would continue for two years about 50 tax extenders. It got bogged down over fighting centered on how many amendments Republicans could offer on the bill. The chamber is likely to come to an agreement on procedure and give it a strong bipartisan vote, according to Dean Zerbe, national managing director of alliantgroup, a small-business tax services consulting firm. But obstacles still loom. The Obama administration is reluctant to permanently extend the tax breaks — as the piecemeal House bill would do — without having them paid for by cuts elsewhere in the budget. The Senate bill is not paid for either. In addition, the House is dealing with tax extenders one by one and making them permanent, while the $85 billion Senate package would extend them all only for two years. They affect small businesses, families and individuals. “The Senate is doing a tango, and the House is putting on waltz music,” Mr. Zerbe said. But both sides of Capitol Hill are addressing extenders sooner than usual. In past years, they have languished until the end of the year or into the next year.

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