Legacy IRA Act

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Legacy IRA Act''.

SEC. 2. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT ACCOUNTS FOR 
              CHARITABLE PURPOSES.

    (a) In General.--Paragraph (8) of section 408(d) of the Internal 
Revenue Code of 1986 (relating to tax treatment of distributions) is 
amended to read as follows:
            ``(8) Distributions for charitable purposes.--
                    ``(A) In general.--No amount shall be includible in 
                gross income by reason of a qualified charitable 
                distribution.
                    ``(B) Limitations.--
                            ``(i) In general.--The aggregate amount 
                        excluded from gross income by subparagraph (A) 
                        for a taxable year shall not exceed $400,000.
                            ``(ii) Organization and entity specific 
                        limitations.--The amount excluded from gross 
                        income by subparagraph (A) for a taxable year 
                        shall not exceed--
                                    ``(I) $100,000, in the case of any 
                                distribution described in subparagraph 
                                (C)(i)(I), and
                                    ``(II) $400,000, in the case of any 
                                distribution described in subparagraph 
                                (C)(i)(II).
                    ``(C) Qualified charitable distribution.--For 
                purposes of this paragraph, the term `qualified 
                charitable distribution' means any distribution from an 
                individual retirement account--
                            ``(i) which is made directly by the 
                        trustee--
                                    ``(I) to a specified charitable 
                                organization, or
                                    ``(II) to a split-interest entity, 
                                and
                            ``(ii) which is made on or after the date 
                        that the individual for whose benefit the 
                        account is maintained has attained--
                                    ``(I) in the case of any 
                                distribution described in clause 
                                (i)(I), age 70\1/2\, and
                                    ``(II) in the case of any 
                                distribution described in clause 
                                (i)(II), age 65.
                    ``(D) Special rules relating to distributions.--For 
                purposes of this paragraph--
                            ``(i) Distribution must be otherwise 
                        includible.--A distribution from an individual 
                        retirement account shall be treated as a 
                        qualified charitable distribution only to the 
                        extent that the distribution would be 
                        includible in gross income without regard to 
                        subparagraph (A).
                            ``(ii) Limitation on income interests.--A 
                        distribution from an individual retirement 
                        account to a split-interest entity may only be 
                        treated as a qualified charitable distribution 
                        if--
                                    ``(I) no person holds an income 
                                interest in the split-interest entity 
                                other than the individual for whose 
                                benefit such account is maintained, the 
                                spouse of such individual, or both, and
                                    ``(II) the income interest in the 
                                split-interest entity is nonassignable.
                            ``(iii) Contributions must be otherwise 
                        deductible.--A distribution from an individual 
                        retirement account to a specified charitable 
                        organization may be treated as a qualified 
                        charitable distribution only if--
                                    ``(I) in the case of a distribution 
                                to a charitable remainder annuity trust 
                                or a charitable remainder unitrust, a 
                                deduction for the entire value of the 
                                remainder interest in the distribution 
                                for the benefit of a specified 
                                charitable organization would be 
                                allowable under section 170 (determined 
                                without regard to subsection (b) 
                                thereof and this paragraph), and
                                    ``(II) in the case of a charitable 
                                gift annuity, a deduction in an amount 
                                equal to the amount of the distribution 
                                reduced by the value of the annuity 
                                described in section 501(m)(5)(B) would 
                                be allowable under section 170 
                                (determined without regard to 
                                subsection (b) thereof and this 
                                paragraph).
                    ``(E) Specified charitable organization defined.--
                For purposes of this paragraph, the term `specified 
                charitable organization' means an organization 
                described in section 170(b)(1)(A) (other than any 
                organization described in section 509(a)(3) or any fund 
                or account described in section 4966(d)(2)).
                    ``(F) Split-interest entity defined.--For purposes 
                of this paragraph, the term `split-interest entity' 
                means--
                            ``(i) a charitable remainder annuity trust 
                        (as defined in section 664(d)(1)), but only if 
                        such trust is funded exclusively by a qualified 
                        charitable distribution,
                            ``(ii) a charitable remainder unitrust (as 
                        defined in section 664(d)(2)), but only if such 
                        unitrust is funded exclusively by one or more 
                        qualified charitable distributions, or
                            ``(iii) a charitable gift annuity (as 
                        defined in section 501(m)(5)), but only if such 
                        annuity is funded exclusively by a qualified 
                        charitable distribution and commences fixed 
                        payments of 5 percent or greater not later than 
                        one year from date of funding.
                    ``(G) Special rules.--
                            ``(i) Charitable remainder trusts.--
                        Notwithstanding section 664(b), distributions 
                        made from a trust described in clause (i) or 
                        (ii) of subparagraph (F) shall be treated as 
                        ordinary income in the hands of the beneficiary 
                        to whom is paid the annuity described in 
                        section 664(d)(1)(A) or the payment described 
                        in section 664(d)(2)(A).
                            ``(ii) Charitable gift annuities.--
                        Qualified charitable distributions made for a 
                        charitable gift annuity shall not be treated as 
                        an investment in the contract for purposes of 
                        section 72(c).
                            ``(iii) Application of section 72.--
                        Notwithstanding section 72, in determining the 
                        extent to which a distribution is a qualified 
                        charitable distribution, the entire amount of 
                        the distribution shall be treated as includible 
                        in gross income without regard to subparagraph 
                        (A) to the extent that such amount does not 
                        exceed the aggregate amount which would have 
                        been so includible if all amounts in all 
                        individual retirement plans of the individual 
                        were distributed during the taxable year and 
                        all such plans were treated as 1 contract for 
                        purposes of determining under section 72 the 
                        aggregate amount which would have been so 
                        includible. Proper adjustments shall be made in 
                        applying section 72 to other distributions in 
                        such taxable year and subsequent taxable years.
                            ``(iv) Determining deduction under section 
                        170.--Qualified charitable distributions shall 
                        not be taken into account in determining the 
                        deduction under section 170.
                            ``(v) Required minimum distributions.--The 
                        entire amount of a qualified charitable 
                        distribution shall be taken into account for 
                        purposes of section 401(a)(9).
                    ``(H) Termination with respect to split-entities.--
                Subparagraph (A) shall not apply to a distribution to a 
                split-interest entity after December 31, 2020.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to distributions made in taxable years ending after the date of the 
enactment of this Act.

Summary: Legacy IRA Act This bill amends the Internal Revenue Code to expand the tax exclusion for distributions from individual retirement accounts (IRAs) for charitable purposes. The bill increases from $100,000 to $400,000 the annual limit on the aggregate amount of distributions for charitable purposes that may be excluded from the gross income of a taxpayer. The bill permits tax-free distributions from IRAs to a split-interest entity until December 31, 2020. A split-interest entity is exclusively funded by charitable distributions and includes: a charitable remainder annuity trust, a charitable remainder unitrust, or a charitable gift annuity. A charitable gift annuity must commence fixed payments of at least 5 no later than one year from the date of funding. A distribution to a split-interest entity may only be treated as a qualified charitable distribution if: (1) no person holds an income interest in the entity other than the individual for whose benefit the account is maintained, the spouse of such individual, or both. And (2) the income interest in the entity is nonassignable. The bill limits the exclusion annually to: $100,000 for distributions to charitable organizations, and $400,000 for distributions to split-interest entities. Tax-free distributions to a split-interest entity may be made when the account beneficiary attains age 65.