Planned Giving

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Thursday November 21, 2019

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Senators Thune and Casey Support CHARITY Act

On May 15, Senators John Thune (R-SD) and Bob Casey (D-PA) introduced the Charities Helping Americans Regularly Throughout the Year (CHARITY) Act. The bill expands giving options for IRA charitable rollovers and addresses other charitable provisions.

The CHARITY Act includes four major provisions. If it is passed by the House and Senate and signed by the President, it would generally permit donors over age 70½ to transfer up to $100,000 per year directly from an IRA to a donor advised fund. Second, the act would simplify the excise tax paid by private foundations on investment income.

Volunteers who drive their vehicles on qualified charitable trips can currently deduct $0.14 per mile. That charitable mileage amount would be increased to the same rate as is currently permitted for medical and moving expenses. The medical and moving expense rate for 2019 is $0.20 per mile.

Finally, the CHARITY Act requires nonprofits to file their annual tax returns electronically. While nonprofits are exempt and ordinarily do not pay tax, they must file an information return each year.

Editor's Note: While the CHARITY Act has not yet passed, it is encouraging to see Congressional support for philanthropy and, especially, the existing IRA rollover. Americans over age 70½ should consider making an IRA rollover gift in 2019. The IRA charitable rollover is a great planning option for eligible IRA owners who are among the 90% of Americans who do not itemize. Because the IRA rollover qualifies for part or all of an IRA owner's required minimum distribution (RMD), IRA owners can make gifts from their IRAs, reduce their tax bill from their RMDs and still take the full standard deduction. For all donors, the IRA rollover is a convenient way to make gifts in 2019.

Bipartisan Senate Support for RESA


On May 14, the Senate Finance Committee held a hearing on the Retirement Enhancement and Savings Act of 2019 (RESA). This bill was introduced by Senate Finance Committee Chairman Chuck Grassley (R-IA) and Ranking Member Ron Wyden (D-OR).

RESA's key improvement for retirement planning is enabling multiple employers to join together to offer Sec. 401(k) retirement plans. Sen. Grassley explained this concept at a May 14 Washington conference. He noted, "The centerpiece of the bill is a concept called 'Open Multiple Employer Plans' or 'Open MEPs.' The bill would expand the existing multiple employer plan to create Open MEP plans, which will allow unrelated employers to join together to sponsor a group retirement plan for their workers."

The Open MEP concept eliminates the current requirement that limits multiple employer retirement plans. Under the current rules, only businesses that share a significant common purpose may join together to create qualified retirement plans. RESA also reduces the disqualification risk if one employer in a joint plan is not compliant.

Grassley continued, "RESA also eliminates the so called 'One Bad Apple' rule. Under this rule, if one employer within a multiple employer plan fails to meet any one of the rules covering these plans, then the entire MEP can be disqualified. This is true even if the other employers are fully compliant."

Sen. Wyden also supports the plan. He explained that over 100 million Americans do not have retirement plans. Social Security is intended to be only a partial supplement for retirement, so Congress must act to facilitate creation of qualified plans for these employees.

Wyden stated, "First, this committee worked on a bipartisan basis to put together the Retirement Enhancement and Savings Act. Our bill is all about making it easier for employers – particularly small businesses – to offer retirement plans to their employees. Giving those small businesses an opportunity to ban together and offer a common retirement plan is a simpler and more cost-effective way of helping more people save."

Editor's Note: There is bipartisan support in both the House and Senate for improving retirement plans. As a result, there is a good chance that a major retirement bill may be passed in 2019.

IRS Revenue Agents Use Data Analytics


Data analytics are omnipresent in our society. In the era of "big data," analytics are an essential tool to find and make use of information.

With over 100 million tax returns filed each year, the IRS faces a classic "big data" challenge. In recognition of this need, the IRS has been steadily moving forward with its acquisition of analytical tools. The IRS is planning to use the data analytics tools and artificial intelligence to meet its big data challenge.

At a May 16 conference at Quinnipiac University School of Law in North Haven, CT, IRS Criminal Investigation (CI) Special Agent Kristina O'Connell (Boston Office) explained the IRS's analytics efforts. IRS CI has hired several hundred new revenue agents and ten data scientists. The data scientists work closely with the revenue agents to select the most potentially productive audits. O'Connell stated, "We have never had that before and those investigative analysts can review the data in their area and farm out cases to the agents that are staffed in the area."

Data scientists review the "big data" from years of tax filings and also include public data information in their models. The public databases could include information on criminal history, motor vehicle records and real estate records.

Some conference attendees expressed concern about potential privacy violations with the new data analytics methods. O'Connell responded, "We only run the data analytics on areas of noncompliance, so I would say that your name would only be reviewed if you are noncompliant."

Editor's Note: With the proliferation of data analytics by thousands of U.S. companies, it is understandable that the IRS is also using sophisticated methods to find noncompliant taxpayers. However, these analytics and artificial intelligence tools can be very intrusive and could potentially reduce the privacy of Americans. There will continue to be a need for Congressional oversight to protect privacy rights as the IRS moves forward with implementation of more sophisticated data analytics tools.

Applicable Federal Rate of 2.8% for June -- Rev. Rul. 2019-14; 2019-23 IRB 1 (16 May 2018)


The IRS has announced the Applicable Federal Rate (AFR) for June of 2019. The AFR under Section 7520 for the month of June is 2.8%. The rates for May of 2.8% or April of 3.0% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2019, pooled income funds in existence less than three tax years must use a 2.2% deemed rate of return.


Published May 17, 2019
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