Legacy IRA Act

II 117TH CONGRESS 1ST SESSION S. 243 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. IN THE SENATE OF THE UNITED STATES FEBRUARY 4, 2021 Mr. CRAMER (for himself, Ms. STABENOW, Mr. DAINES, Ms. ROSEN, and Mr. CORNYN) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL 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 Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Legacy IRA Act’’. 4 VerDate Sep 11 2014 21:11 Feb 20, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S243.IS S243 pamtmann on DSKBC07HB2PROD with BILLS 2 •S 243 IS SEC. 2. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RE- 1 TIREMENT ACCOUNTS FOR CHARITABLE 2 PURPOSES. 3 (a) IN GENERAL.—Paragraph (8) of section 408(d) 4 of the Internal Revenue Code of 1986 is amended to read 5 as follows: 6 ‘‘(8) DISTRIBUTIONS FOR CHARITABLE PUR- 7 POSES.— 8 ‘‘(A) IN GENERAL.—No amount shall be 9 includible in gross income by reason of a quali- 10 fied charitable distribution. 11 ‘‘(B) LIMITATIONS.— 12 ‘‘(i) IN GENERAL.—The aggregate 13 amount excluded from gross income under 14 subparagraph (A) with respect to all types 15 of qualified charitable distributions for a 16 taxable year shall not exceed $400,000. 17 ‘‘(ii) LIMITATION ON OUTRIGHT CON- 18 TRIBUTIONS.—The aggregate amount ex- 19 cluded from gross income under subpara- 20 graph (A) for a taxable year with respect 21 to distributions described in subparagraph 22 (C)(i)(I) shall not exceed $130,000. 23 ‘‘(C) QUALIFIED CHARITABLE DISTRIBU- 24 TION.—For purposes of this paragraph, the 25 term ‘qualified charitable distribution’ means 26 VerDate Sep 11 2014 21:11 Feb 20, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S243.IS S243 pamtmann on DSKBC07HB2PROD with BILLS 3 •S 243 IS any distribution from an individual retirement 1 account— 2 ‘‘(i) which is made directly by the 3 trustee— 4 ‘‘(I) to a specified charitable or- 5 ganization as an outright contribu- 6 tion, or 7 ‘‘(II) to a split-interest entity, 8 and 9 ‘‘(ii) which is made on or after the 10 date on which the individual for whose 11 benefit the account is maintained has at- 12 tained— 13 ‘‘(I) in the case of any distribu- 14 tion described in clause (i)(I), age 15 701⁄2, and 16 ‘‘(II) in the case of any distribu- 17 tion described in clause (i)(II), age 18 65. 19 ‘‘(D) SPECIAL RULES RELATING TO DIS- 20 TRIBUTIONS.—For purposes of this para- 21 graph— 22 ‘‘(i) DISTRIBUTION MUST BE OTHER- 23 WISE INCLUDIBLE.—A distribution from 24 an individual retirement account shall be 25 VerDate Sep 11 2014 21:11 Feb 20, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S243.IS S243 pamtmann on DSKBC07HB2PROD with BILLS 4 •S 243 IS treated as a qualified charitable distribu- 1 tion only to the extent that the distribution 2 would be includible in gross income with- 3 out regard to subparagraph (A). 4 ‘‘(ii) LIMITATION ON INCOME INTER- 5 ESTS.—A distribution from an individual 6 retirement account to a split-interest entity 7 shall be treated as a qualified charitable 8 distribution only if— 9 ‘‘(I) no person holds an income 10 interest in the split-interest entity 11 other than the individual for whose 12 benefit such account is maintained, 13 the spouse of such individual, or both, 14 and 15 ‘‘(II) the income interest in the 16 split-interest entity is nonassignable. 17 ‘‘(iii) CONTRIBUTIONS MUST BE OTH- 18 ERWISE DEDUCTIBLE.—A distribution 19 from an individual retirement account to a 20 specified charitable organization shall be 21 treated as a qualified charitable distribu- 22 tion only if— 23 ‘‘(I) in the case of a distribution 24 to a charitable remainder annuity 25 VerDate Sep 11 2014 21:11 Feb 20, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S243.IS S243 pamtmann on DSKBC07HB2PROD with BILLS 5 •S 243 IS trust or a charitable remainder 1 unitrust, a deduction for the entire 2 value of the remainder interest in the 3 distribution for the benefit of a speci- 4 fied charitable organization would be 5 allowable under section 170 (deter- 6 mined without regard to subsection 7 (b) thereof and this paragraph), and 8 ‘‘(II) in the case of a charitable 9 gift annuity, a deduction in an 10 amount equal to the amount of the 11 distribution reduced by the value of 12 the annuity described in section 13 501(m)(5)(B) would be allowable 14 under section 170 (determined with- 15 out regard to subsection (b) thereof 16 and this paragraph). 17 ‘‘(E) SPECIFIED CHARITABLE ORGANIZA- 18 TION.—For purposes of this paragraph, the 19 term ‘specified charitable organization’ means 20 an organization described in section 21 170(b)(1)(A) (other than any organization de- 22 scribed in section 509(a)(3) or any fund or ac- 23 count described in section 4966(d)(2)). 24 VerDate Sep 11 2014 21:11 Feb 20, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S243.IS S243 pamtmann on DSKBC07HB2PROD with BILLS 6 •S 243 IS ‘‘(F) SPLIT-INTEREST ENTITY.—For pur- 1 poses of this paragraph, the term ‘split-interest 2 entity’ means— 3 ‘‘(i) a charitable remainder annuity 4 trust (as defined in section 664(d)(1)), but 5 only if such trust is funded exclusively by 6 qualified charitable distributions, 7 ‘‘(ii) a charitable remainder unitrust 8 (as defined in section 664(d)(2)), but only 9 if such unitrust is funded exclusively by 10 qualified charitable distributions, or 11 ‘‘(iii) a charitable gift annuity (as de- 12 fined in section 501(m)(5)), but only if 13 such annuity is funded exclusively by quali- 14 fied charitable distributions and com- 15 mences fixed payments not later than 1 16 year from the date of funding. 17 ‘‘(G) SPECIAL RULES.— 18 ‘‘(i) CHARITABLE REMAINDER 19 TRUSTS.—Notwithstanding section 664(b), 20 distributions made from a trust described 21 in clause (i) or (ii) of subparagraph (F) 22 shall be treated as ordinary income in the 23 hands of the beneficiary to whom the an- 24 nuity described in section 664(d)(1)(A) or 25 VerDate Sep 11 2014 21:11 Feb 20, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S243.IS S243 pamtmann on DSKBC07HB2PROD with BILLS 7 •S 243 IS the payment described in section 1 664(d)(2)(A) is paid. 2 ‘‘(ii) CHARITABLE GIFT ANNUITIES.— 3 Qualified charitable distributions made to 4 fund a charitable gift annuity shall not be 5 treated as an investment in the contract 6 for purposes of section 72(c). 7 ‘‘(iii) APPLICATION OF SECTION 72.— 8 Notwithstanding section 72, in determining 9 the extent to which a distribution is a 10 qualified charitable distribution, the entire 11 amount of the distribution shall be treated 12 as includible in gross income to the extent 13 that such amount does not exceed the ag- 14 gregate amount which would have been so 15 includible if all amounts in all individual 16 retirement plans of the individual were dis- 17 tributed during the taxable year and all 18 such plans were treated as 1 contract for 19 purposes of determining under section 72 20 the aggregate amount which would have 21 been so includible. Proper adjustments 22 shall be made in applying section 72 to 23 other distributions in such taxable year 24 and subsequent taxable years. 25 VerDate Sep 11 2014 21:11 Feb 20, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S243.IS S243 pamtmann on DSKBC07HB2PROD with BILLS 8 •S 243 IS ‘‘(iv) DETERMINING DEDUCTION 1 UNDER SECTION 170.—Qualified charitable 2 distributions shall not be taken into ac- 3 count in determining the deduction under 4 section 170. 5 ‘‘(v) REQUIRED MINIMUM DISTRIBU- 6 TIONS.—The entire amount of a qualified 7 charitable distribution shall be taken into 8 account for purposes of section 9 401(a)(9).’’. 10 (b) EFFECTIVE DATE.—The amendment made by 11 this section shall apply to distributions made in taxable 12 years ending after the date of the enactment of this Act. 13 Æ VerDate Sep 11 2014 21:11 Feb 20, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6301 E:\BILLS\S243.IS S243 pamtmann on DSKBC07HB2PROD with BILLS