Legacy IRA Act

II 116TH CONGRESS 1ST SESSION S. 1257 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 APRIL 30, 2019 Mr. CRAMER (for himself and Ms. STABENOW) 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 23:12 May 03, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1257.IS S1257 kjohnson on DSK79L0C42 with BILLS 2 •S 1257 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 quali- 15 fied charitable distributions for a taxable 16 year shall not exceed $400,000. 17 ‘‘(ii) SPLIT-INTEREST ENTITIES.— 18 The aggregate amount excluded from gross 19 income under subparagraph (A) for a tax- 20 able year with respect to distributions de- 21 scribed in subparagraph (C)(i)(I) shall not 22 exceed $100,000. 23 ‘‘(C) QUALIFIED CHARITABLE DISTRIBU- 24 TION.—For purposes of this paragraph, the 25 term ‘qualified charitable distribution’ means 26 VerDate Sep 11 2014 23:12 May 03, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1257.IS S1257 kjohnson on DSK79L0C42 with BILLS 3 •S 1257 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, or 6 ‘‘(II) to a split-interest entity, 7 and 8 ‘‘(ii) which is made on or after the 9 date on which the individual for whose 10 benefit the account is maintained has at- 11 tained— 12 ‘‘(I) in the case of any distribu- 13 tion described in clause (i)(I), age 14 701⁄2, and 15 ‘‘(II) in the case of any distribu- 16 tion described in clause (i)(II), age 17 65. 18 ‘‘(D) SPECIAL RULES RELATING TO DIS- 19 TRIBUTIONS.—For purposes of this para- 20 graph— 21 ‘‘(i) DISTRIBUTION MUST BE OTHER- 22 WISE INCLUDIBLE.—A distribution from 23 an individual retirement account shall be 24 treated as a qualified charitable distribu- 25 VerDate Sep 11 2014 23:12 May 03, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1257.IS S1257 kjohnson on DSK79L0C42 with BILLS 4 •S 1257 IS tion only to the extent that the distribution 1 would be includible in gross income with- 2 out regard to subparagraph (A). 3 ‘‘(ii) LIMITATION ON INCOME INTER- 4 ESTS.—A distribution from an individual 5 retirement account to a split-interest entity 6 shall be treated as a qualified charitable 7 distribution only if— 8 ‘‘(I) no person holds an income 9 interest in the split-interest entity 10 other than the individual for whose 11 benefit such account is maintained, 12 the spouse of such individual, or both, 13 and 14 ‘‘(II) the income interest in the 15 split-interest entity is nonassignable. 16 ‘‘(iii) CONTRIBUTIONS MUST BE OTH- 17 ERWISE DEDUCTIBLE.—A distribution 18 from an individual retirement account to a 19 specified charitable organization shall be 20 treated as a qualified charitable distribu- 21 tion only if— 22 ‘‘(I) in the case of a distribution 23 to a charitable remainder annuity 24 trust or a charitable remainder uni- 25 VerDate Sep 11 2014 23:12 May 03, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1257.IS S1257 kjohnson on DSK79L0C42 with BILLS 5 •S 1257 IS trust, a deduction for the entire value 1 of the remainder interest in the dis- 2 tribution for the benefit of a specified 3 charitable organization would be al- 4 lowable under section 170 (determined 5 without regard to subsection (b) 6 thereof and this paragraph), and 7 ‘‘(II) in the case of a charitable 8 gift annuity, a deduction in an 9 amount equal to the amount of the 10 distribution reduced by the value of 11 the annuity described in section 12 501(m)(5)(B) would be allowable 13 under section 170 (determined with- 14 out regard to subsection (b) thereof 15 and this paragraph). 16 ‘‘(E) SPECIFIED CHARITABLE ORGANIZA- 17 TION.—For purposes of this paragraph, the 18 term ‘specified charitable organization’ means 19 an organization described in section 20 170(b)(1)(A) (other than any organization de- 21 scribed in section 509(a)(3) or any fund or ac- 22 count described in section 4966(d)(2)). 23 VerDate Sep 11 2014 23:12 May 03, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1257.IS S1257 kjohnson on DSK79L0C42 with BILLS 6 •S 1257 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 of 5 percent or 16 greater not later than 1 year from the date 17 of funding. 18 ‘‘(G) SPECIAL RULES.— 19 ‘‘(i) CHARITABLE REMAINDER 20 TRUSTS.—Notwithstanding section 664(b), 21 distributions made from a trust described 22 in clause (i) or (ii) of subparagraph (F) 23 shall be treated as ordinary income in the 24 hands of the beneficiary to whom the an- 25 VerDate Sep 11 2014 23:12 May 03, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1257.IS S1257 kjohnson on DSK79L0C42 with BILLS 7 •S 1257 IS nuity described in section 664(d)(1)(A) or 1 the payment described in section 2 664(d)(2)(A) is paid. 3 ‘‘(ii) CHARITABLE GIFT ANNUITIES.— 4 Qualified charitable distributions made to 5 fund a charitable gift annuity shall not be 6 treated as an investment in the contract 7 for purposes of section 72(c). 8 ‘‘(iii) APPLICATION OF SECTION 72.— 9 Notwithstanding section 72, in determining 10 the extent to which a distribution is a 11 qualified charitable distribution, the entire 12 amount of the distribution shall be treated 13 as includible in gross income to the extent 14 that such amount does not exceed the ag- 15 gregate amount which would have been so 16 includible if all amounts in all individual 17 retirement plans of the individual were dis- 18 tributed during the taxable year and all 19 such plans were treated as 1 contract for 20 purposes of determining under section 72 21 the aggregate amount which would have 22 been so includible. Proper adjustments 23 shall be made in applying section 72 to 24 VerDate Sep 11 2014 23:12 May 03, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1257.IS S1257 kjohnson on DSK79L0C42 with BILLS 8 •S 1257 IS other distributions in such taxable year 1 and subsequent taxable years. 2 ‘‘(iv) DETERMINING DEDUCTION 3 UNDER SECTION 170.—Qualified charitable 4 distributions shall not be taken into ac- 5 count in determining the deduction under 6 section 170. 7 ‘‘(v) REQUIRED MINIMUM DISTRIBU- 8 TIONS.—The entire amount of a qualified 9 charitable distribution shall be taken into 10 account for purposes of section 401(a)(9). 11 ‘‘(H) TERMINATION WITH RESPECT TO 12 SPLIT-INTEREST ENTITIES.—Subparagraph (A) 13 shall not apply to a distribution to a split-inter- 14 est entity in taxable years beginning after the 15 date which is 4 years after the date of the en- 16 actment of the Legacy IRA Act.’’. 17 (b) EFFECTIVE DATE.—The amendment made by 18 this section shall apply to distributions made in taxable 19 years ending after the date of the enactment of this Act. 20 Æ VerDate Sep 11 2014 23:12 May 03, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6301 E:\BILLS\S1257.IS S1257 kjohnson on DSK79L0C42 with BILLS