Legacy IRA Act
Bill: S.243 | Sponsor: Sen. Cramer, Kevin (R-ND)
Policy area: Taxation

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 for four years after the enactment of this bill. 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.

To amend the Internal Revenue Code of 1986 to expand tax-free 
distributions from individual retirement accounts to include rollovers 
       for charitable life-income plans for charitable purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

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 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 under subparagraph 
                        (A) with respect to all types of qualified 
                        charitable distributions for a taxable year 
                        shall not exceed $400,000.
                            ``(ii) Limitation on outright 
                        contributions.--The aggregate amount excluded 
                        from gross income under subparagraph (A) for a 
                        taxable year with respect to distributions 
                        described in subparagraph (C)(i)(I) shall not 
                        exceed $130,000.
                    ``(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 as an outright 
                                contribution, or
                                    ``(II) to a split-interest entity, 
                                and
                            ``(ii) which is made on or after the date 
                        on which 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 shall be 
                        treated as a qualified charitable distribution 
                        only 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 shall 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.--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.--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 qualified 
                        charitable distributions,
                            ``(ii) a charitable remainder unitrust (as 
                        defined in section 664(d)(2)), but only if such 
                        unitrust is funded exclusively by 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 qualified 
                        charitable distributions and commences fixed 
                        payments not later than 1 year from the 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 the annuity described in section 
                        664(d)(1)(A) or the payment described in 
                        section 664(d)(2)(A) is paid.
                            ``(ii) Charitable gift annuities.--
                        Qualified charitable distributions made to fund 
                        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 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).''.
    (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.
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