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On December 22, 2017, the President signed into law an “Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018.” That’s quite a mouthful, so this article will refer to the law as the “Tax Reform Act” for convenience. There has been some alarm in the charitable community about the impact of this law on charitable giving. The intention of the analysis that follows is twofold. First, it explains which laws affecting planned giving have changed and which laws remain intact. Second, it offers five suggestions on the best ways donors can continue to make tax-efficient planned gifts.

PG Calc's Jeffrey Frye and his colleagues in our Client Services department have reviewed all the product support calls we received this year and have culled out the ten top calls for 2017.  These calls cover a broad spectrum of topics and questions, the answers to which will be of great interest to users of PG Calc's products.  We will follow this article with a posting of the top 10 planned giving questions for the year, so keep an eye out for that article in a future eRate. 

Under Republican leadership, Congress is working feverishly to complete the details of sprawling tax reform legislation, the Tax Cuts and Jobs Act, and have it on President Trump’s desk for his signature by the end of this year. The House bill was voted on and approved on November 16.  On the same day, the Senate Finance Committee approved their version of the package.

Including revocation language serves two purposes. First, it may enable the donor to avoid making a taxable gift to the annuitant. Second, it preserves flexibility in the event of a change in circumstances, such as the dissolution of a marriage. The decision on whether to include the revocation language is ultimately the donor’s, but it is helpful if the charity understands the issues to help inform that decision. 

By their nature, life income gifts (Charitable Gift Annuities, charitable remainder trusts, and pooled income funds) are arrangements where the donor transfers assets now, but delays the charity’s use of the funds until a future date, normally the death of one or more income beneficiaries. A charitable remainder trust can be established for a term of years, but until the expiration of what can be a term of up to twenty years, the assets of the trust are unavailable to charity.

One of the most frequent challenges encountered in the administration of life income gifts is the issue of uncashed checks. The typical response to an uncashed check is to place a stop payment on the check after a specific period of time, and to reissue payment in the form of a replacement check. If the replacement check is cashed within a reasonable period of time, it is assumed that the original uncashed check was just an anomaly and no further action is required. But what happens when the replacement check, and subsequent checks are not cashed?  This article addresses what a charity should do when a beneficiary stops cashing life income payments.

Mutual funds are easy to purchase, simple to understand, and they allow for continual reinvestment of income over the long run. As planned gift donors review their financial assets and determine which ones to use as the funding for charitable gift annuities, mutual funds present an obvious choice. But gift planners should be aware of some particular aspects of mutual funds that can cause significant complications in the process.  Read about the complexities in mutual funds transactions and tax accounting.

Fundraisers consider a well-functioning gift annuity program the cornerstone of a robust planned gift fundraising effort.  Although bequests and beneficiary designations typically produce most of the realized planned gift revenue, offering gift annuities is usually the mark of a mature planned giving program.  Nonetheless, among those charities that have offered gift annuities, many frequently worry about the continued viability of offering them.

Everyone likes to avoid capital gains – or more specifically, we should say, everyone likes to avoid the taxes on realized capital gains. That’s a given. When an investor sells assets that have appreciated over time, typically there is tax on the built-up appreciation in those holdings, at least by the federal government, and frequently by the state government as well. The owner of the stock reports capital gains even if the owner of the stock uses the sale proceeds immediately to make charitable gifts. On the other hand, if the donor uses appreciated assets for outright charitable gifts, there is no taxation on the long-term appreciation in the holdings.

Since its temporary inclusion in the Pension Protection Act of 2006, Congress has extended the IRA charitable rollover provision in two-year increments through 12/31/2014.  Congress did not extend the provision before it expired at the end of 2014.  That all changed at the end of 2015 when the House and Senate passed, and the President signed into law, the Protecting Americans from Tax Hikes (PATH) Act.  The PATH Act made the IRA charitable rollover permanent. Now is a good time to review the impact of permanent adoption of the IRA charitable rollover on its first anniversary.