New Tax Act Is Good News for OBU Contributors

Article Date

December 2, 2005

A recent, but temporary, change to the Internal Revenue Code is good news for Oklahoma Baptist University contributors.

With approval of the Katrina Emergency Tax Relief, the U.S. Congress made giving opportunities more appealing by increasing the maximum allowable charitable deduction for an individual from 50 percent of adjusted gross income to 100 percent.

"This is a temporary opportunity for those who are planning to include OBU, or any charity, in the distribution of their estates," said John Little, OBU director of estate and gift planning. "Typically, in estates which are subject to estate taxation, IRAs will be taxed in the estate and again in the hands of most beneficiaries, through income taxation of its distributions.

"Ordinarily, because of this taxable nature of IRAs, they are also a difficult asset to use in making lifetime gifts," said Little. "This is true because 100 percent of an IRA draw-down comes into one's taxable income, and except during the window of opportunity provided by the Katrina Emergency Act, the donor in the case of large donations will only be able to deduct 50 percent. Because OBU is not subject to income tax, the tax nature of the property will not matter."

Congress passed this relief act in order to help charities assisting in the Hurricane Katrina relief. This allows unlimited gifts to charity, up to a donor's total income, until the end of 2005.

"For those who would like to see the results of their gifts to Christian education during their lifetime, this may be the only chance to be able to draw-down from IRAs, make a significant gift and have very little, if any, tax cost associated with it," said Little.

He also noted that the legislation does not allow for the rollover of the proceeds from an IRA into an income-producing gift, but Little said there is still legislation pending in Congress which could allow for such gifts.

Those interested in further information about the act or other estate planning or gift planning may contact Little at 405-878-2718 or john.little@okbu.edu.