I'm on the board of a small local 501(c)3 charity, about to start our annual giving drive. Since a number of our donors and friends are past age 70½, and thus compelled to take a Required Minimum Distribution that they may not actually need, it strikes me that it might be nice to tell them about Qualified Charitable Distributions.
I must not be looking in the right way, because I haven't been able to find a clear statement on the IRS site of which charities qualify. Is it simply that all 501(c)3 charities qualify, or does a charity need to do something additional to become eligible to receive QCDs?
A charity that qualifies for a deduction also qualifies for the QCD. The individual charity doesn't have some further step or qualification for this.
But, QCDs do *not* qualify for a donor-advised fund. This is not your question, i know, just something that may come up, and is related. It also substantiates my familiarity with QCDs, which is among the most overlooked tax breaks, IMHO.
In addition to Donor Advised Funds, there appears to be at least one additional type of organization (a "supporting organization as described in section 509(a)(3).") that does not qualify for QCDs. Some charities are clear that they qualify for QCDs and others do not seem to understand the issue if you ask them.
From A Doctors Without Borders confirmation: "We acknowledge that we received your gift directly from your plan trustee/adminstrator and our understanding is that it is your intention for your gift to qualify as a qualified charitable distribution from your IRA, under section 408(d)(8) of the Internal Revenue Code of 1986, as amended. We confirm that MSF is qualified under section 170(b)(1)(A) of the Internal Revenue Code and that your gift was not and will not be transferred to either a donor advised fund or supporting organization as described in section 509(a)(3)."
Many thanks to Joe Taxpayer and BignTall for answering. I've looked up the definitions of donor advised and supporting organizations, and our charity is not even close to either, so I think we're good.
I'd like to write a letter to over-70½ donors, laying out some benefits of contributing to us via a QCD, rather than out of taxable retirement income. Here's my list, and I'd welcome corrections or additions:
It "uses up" part or all of your required minimum distribution without incurring tax liability.
You get the tax benefit whether you take the standard deduction or itemize.
If your other deductions are less than the standard deduction amount, you can take the standard deduction, reducing taxable income even further.
Less of your Social Security may be taxable.
You may have have to pay less for Medicare.
It may keep your adjusted gross income below the thresholds for deduction phaseout, alternative minimum tax, net investment tax, and others.
Other benefits??
Naturally, I'd include a suggestion for people to consult their financial adviser or tax professional.
Those restrictions are pretty clearly to keep people from making a QCD but retaining control over where the money goes. DAFs all make it really clear that's what they are, e.g.
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The supporting organizations I know don't accept donations from the public.
I would be extraordinary leery about giving 70.5+ year old donors generalized QCD advice beyond pointing out that a QCD may be advantageous and they should check with their financial and tax advisors. The QCD rules are complicated enough that donors may not do things properly or the QCD may not result in the tax savings they expect. IRA custodians also have different QCD procedures and this creates another whole set of issues. The last thing you want is for donors to blame you and your charity for their QCD problems.
If you really want to give generalized QCD advice to 70.5+ year old donors, I suggest you don't write the advice yourself. Keep your cover letter short and limited to pointing out that a QCD may be advantageous and they should check with their financial and tax advisors and then include something like basic QCD info from Fidelity or another financials services company. e.g.:
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If your charity does receive QCD checks deposit them immediately. Ideally, a QCD check will clear before December 31 but all you can do is make sure it is deposited as quickly as possible so if the QCD ends up credited to the wrong year it isn't your fault.
FYI, There was a Kitces blog post in 2016 you may find useful.
long time. 2018 was the first time the check indicated it came from an IRA (the previous checks just showed the mutual fund name). The charity said they don't accept QCDs, returned the check, and asked that it be reissued directly to the organization that was being supported. The people handling the contribution had no idea why or where this policy came from other than "the lawyers said we had to do this". I have no idea how common the supporting organizations problem is.
Yes, you make a good point. Of course I can _say_ they should check with their tax advisor, but if I seem to be giving tax advice they may blame me -- and sue the organization -- if things go south. Thank you for the "reality check".
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