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H.R. 5171 (114th): Legacy IRA Act

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The summary below was written by the Congressional Research Service, which is a nonpartisan division of the Library of Congress, and was published on May 6, 2016.

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. (Under current law, the beneficiary must attain the age of 70-1/2 for IRA distributions to a charitable organization.)