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February 16, 2009

Qualified Charitable Distribution (QCD)

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Definition

A distribution that is excludable from the distributee’s income, as a result of meeting the following requirements:

  1. It is made after the distributee reaches age 70 ½
  2. It is made from a Traditional IRA or Roth IRA, or a SEP or SIMPLE IRA that is not ongoing. .For QCD purposes, an SEP IRA or SIMPLE IRA is ‘ongoing’, SEP or SIMPLE contributions are made for the plan year ending with or within the IRA owner’s taxable year in which the QCD would be made.
  3. It is delivered to an eligible charity as described under IRC § 170(b)(1)(A), VIA a trustee-to-trustee transfer
  4. The amount would have been includible in income, had it not been for the fact that it satisfied the above requirements
  5. The amount would otherwise qualify for a charitable contribution deduction under IRC § 170 without regard to the percentage limitation under IRC § 170(b)
  • QCDs are limited to $100,000 per year per eligible individual.
  • An ongoing SEP or SIMPLE is described as one that is maintained under an employer arrangement under which an employer contribution is made for the plan year ending with or within the IRA owner’s taxable year in which the charitable contributions would be made.
  • QCDs can be made from an IRA maintained for a beneficiary if the beneficiary has attained age 70½ before the distribution is made

Referring Cite

IRC § 408(d)(8), IRS Notice 2007-7

IRS Publication 78 Cumulative List of Organizations described in Section 170(c)

www.guidestar.org provides information on Non-profit organizations

Additional Helpful Information

    • The QCD provision was added under section 1201(a) of the Pension Protection Act of 2006 (PPA ’06)
    • PPA added the provision only for 2006 and 2007. 
    • The Tax Extenders and Alternative Minimum Tax Relief Act of 2008/ Emergency Economic Stabilization Act of 2008 extended the QCD through December 31, 2009.
    • The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 extended the QCD through December 31, 2011. It also provided that QCDs for 2010 could be distributed as late as before February 1, 2011.
    • QCD Extended under “fiscal cliff bill”. H.R.8. American Taxpayer Relief Act of 2012 (the “fiscal cliff bill”) extended the qualified charitable distributions (QCD) provision to December 31, 2013.
    • The amount of a QCD is not deductible as a charitable contribution under IRC § 170. However, they must still satisfy the requirements to be deductible charitable contributions under § 170 (other than the percentage limits of § 170(b)), including the substantiation requirements under IRC § 170(f)(8).
    • QCDs are not subject to withholding under § 3405
    • For purposes of determining whether a distribution requested by an IRA owner satisfies the requirements of a QCD, the IRA trustee, custodian, or issuer may rely upon reasonable representations made by the IRA owner.
    • A check representing a distribution from an IRA made payable to an eligible charitable organization and delivered by the IRA owner to the charitable organization is considered a trustee-to-trustee transfer to the organization
    • A QCD is taken into account in determining whether the required minimum distribution requirements for the year is satisfied
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