Insights for Strategic and Tax Changes for 2013

Jeffrey D. Byrne    

by Jeffrey D. Byrne
President + CEO

As Congress passed legislation in the early hours of the New Year, much changes for tax and fiscal issues for 2013. The two things we know about life is: sooner or later we all pay taxes and we can’t take our money with us when we die. So, let me tackle what I know about the fiscal and tax changes that were enacted earlier this month.

Two-Year Retroactive IRA Charitable Rollover Extension: H.R. 8 includes a two-year retroactive extension of the IRA Charitable Rollover provision that lapsed on December 31, 2011. Specifically, the new law retroactively reinstates the Rollover for 2012 and allows any otherwise eligible gifts made after December 31, 2012 and before February 1, 2013 to be treated as a 2012 donation. The new law also specifies that any portion of a distribution from an IRA to a taxpayer made after November 30, 2012 and before January 1, 2013 may be treated as a qualified charitable distribution for purposes of the IRA Charitable Rollover. Finally, the IRA Charitable Rollover has been reinstated for all of 2013 and will now expire at the end of this year, on December 31, 2013. (The Chronicle of Philanthropy, 7 Jan. 2013)

Core of the Fiscal Cliff Legislation & Tax Changes: According to an article I read in a U. S. Trust Investment Strategy Strategic Insights Advisory recently: The core of the 2012 tax Act once again extends “most” of the so-called Bush tax cuts, but not all. The 2012 Tax Act will permanently extend taxable income tax rates for all single taxpayers with taxable incomes below $400,000 and married couples with incomes below $450,000. The top marginal income tax rate increases to 39.6% from 35% and the top marginal dividend and capital gain tax rates rise to 20% from 15% on investments held for more than one year. Adding in the 3.8% health care tax results in an even higher effective tax rate. Additionally, various tax deduction and credits phase out for individuals earning more than $250,000 and couples making more than $300,000. The agreement also extends unemployment benefits for one year, delays automatic spending cuts for two months, raises the estate tax rate to 40% from 35% with a $5 million exemption, indexes the Alternative Minimum Tax (AMT), extends accelerated depreciation allowances for businesses for another year, renews the research and development (R&D) tax credit and extends the “Doc Fix” (cuts in Medicare payments to doctors).

Finally, the Estate Tax Exemption beginning January 1, 2013 is $5,250,000. This exemption is permanent. It is subject to an inflation adjustment annually.

The bottom line is it’s all generally good news for your organization and the donors who care for it. While there are still discussion of further limits on charitable deductions, we will keep you informed of major changes in legislation that impact your donors. In the meantime, I recommend letting your donors know about the opportunities presented to them by the changes in the IRA Charitable Rollover. They may find that NOW is the time to make a gift to your organization.

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