February 2024 eRate

Money Talks, But Can It Follow Instructions? The Proposed Donor Advised Fund Regulations

Just before the holiday season began in the fall of 2023, the Treasury Department published and sought comments on proposed regulations governing donor advised funds (DAFs). Although long anticipated, the proposed regulations caught many of us off guard. Was this the opening salvo, a continuing assault on DAFs, or the final barrage? Is there more here than meets the eye or less? And what’s coming next?

For decades, donor advised funds existed in legal limbo. As funds of a public charity (the community foundation), they have operated under a web of legal concepts and regulations governing community trusts and nonprofit fund accounting. Finally, the Pension Protection Act of 2006 provided legislative direction and then, 17 years later in the fall of 2023, these proposed regulations were issued.

For the most part, the proposed regulations are focused on providing definitions, clarifying the roles and responsibilities of the parties, and clarifying the distinction between donor advised funds and private foundations. The regulatory approach, the big stick if you will, is to define certain donor advised fund distributions as taxable and apply an excise tax on them.

WEBINAR January 25

Gift Terminations and Appraisals – Q&A Webinar (FREE)

An income tax charitable deduction can result when the beneficiary of a life income gift ends the arrangement by giving up their right to receive all future payments. However, a qualified appraisal is required to substantiate a deduction greater than $5,000 for such a gift. In this free Q&A webinar, Craig Wruck, who includes “qualified appraiser of life income interests” among his many skills, will review the steps involved in terminating a life income gift and answer your questions.

Presented by
Craig Wruck

Thursday,
January 25, 2024
1:00 - 2:00 pm ET

UPCOMING TRAINING

When the IRS Needs Your 1099s: GiftWrap Steps to Filing Success – FREE!

January 23, Online (90 Minutes)

PGM Anywhere and Charitable Remainder Trusts

February 6-7, Online (4 hours over 2 days)

PIF K-1s – FREE!

February 27, Online (90 Minutes)

PGM Anywhere Introductory and Advanced

February 28, Introductory - In-person, New York City (9:00-4:00 ET)
February 29, Advanced - In-person, New York City (9:00-4:00 ET)

GiftWrap Quick Tip: Do Not Scale When Printing 1099-Rs

GiftWrap can print 1099-R forms Copy B or Copy C for annuitants onto the actual forms or onto blank paper. GiftWrap produces the 1099-R information in the exact size required to fit data into the boxes on the actual 1099-R forms. However, many printers and some browsers automatically default to resizing before printing. You can identify the resizing issue because the data will typically print a little too low relative to the boxes on the top half of the 1099-R form, and too high on the bottom half of the form.

To ensure proper printing, follow these steps:

Export the 1099-R file from GiftWrap as a PDF. If you are running GiftWrap in Firefox, check the settings under Tools – Options – Applications. In the Content Type column, find “Portable Document Format (PDF)” and make sure it is set to “Use Adobe Acrobat (in Firefox).” If this is set to any other value, the printing alignment will be off.
Go to Print and in the Print dialog window, look for the setting that controls sizing (you may need to click “More Settings”). Printer drivers use different terms, but you want to review “Page Scaling” or “Scale.” Make sure there is no scaling by setting the field to “None,” or to “Actual Size,” or to “100%.” In Chrome, there is a checkbox labeled “Fit to page,” and this box must be unchecked.

Contact Client Services at support@pgcalc.com or 888-474-2252 if you have any questions or need help.

PG Calc Blog Post: Gift Annuity Voluntary Termination – What to Do and How to Do It

If you have an annuitant who finds their gift annuity income “nice, but not necessary,” they may be interested in voluntarily giving up their right to future annuity payments. Voluntarily releasing, or terminating, their interest in a charitable gift annuity (CGA) allows the charity to access the residuum early. The charity can also count part of the released amount as a new outright gift.

Voluntary termination is also an effective way of managing the issue of a CGA that is wasting. An annuitant who is charitably inclined may agree to terminate their annuity to spare the charity the continued expense of paying the annuity from general operating funds.

Read the blog post . . .

Things We Are Following: (Yet Another) Revised Form 8283

The IRS has proposed additional changes to Form 8283. Key to substantiating charitable deductions for noncash contributions, the 8283 has been modified almost annually. Now, in a seemingly endless quest to discover exactly which straw will break the camel’s back, two items have been added highlighting details of qualified conservation contributions and a new question asks whether the contribution was previously reported by a different taxpayer.

The proposed changes should have minimal impact for most donors, but there may be some confusion as to which version of Form 8283 should be used. As of this writing, the official version is still the one dated November, 2022. The proposed new version, dated December 2023, is only a draft. However, some popular tax preparation software appears to have incorporated the December 2023 draft in their packages. The current version of Form 8283 and instructions can be found on the IRS website.

PGM Anywhere Updated with New ACGA Rates, Effective 1/1/2024

On December 26, we sent an email to all PGM Anywhere users to let them know we had updated their application with the new maximum annuity rates suggested by the American Council on Gift Annuities (ACGA). The new ACGA rate became effective 1/1/2024. At typical annuitant ages, one-life rates are 0.4%-0.5% higher and two-life rates are 0.3%-0.4% higher than the rates they replace.

While at it, we also updated all relevant Help topics with the indexed federal tax tables for 2024. The only tax table used in PGM Anywhere calculations that was affected was the federal income tax table for estates and trusts, which is used to compute lead trust income taxes.

Detailed PGM Anywhere release notes are available from a link on the PGM Anywhere login screen.

Contact PG Calc Client Services at support@pgcalc.com or 888-474-2252 if you have any questions about this update.

New NY Max Annuity Rates Law Goes Into Effect on 1/24/2024!

On January 24, 2024, just eight days from now, New York legislation will go into effect that is designed to greatly reduce the likelihood any New York maximum annuity rates will be lower than the corresponding maximum rate suggested by the American Council on Gift Annuities (ACGA).

Even before the new law takes effect, we know that all one-life New York maximum rates for the current quarter (Q1 2024) are higher than their ACGA rate counterparts. Hence, New York’s maximum 1-life rates are not a problem for charities that follow the ACGA rates. For gift annuities funded prior to January 24th, we can’t be as sure about 2-life gift annuities or 1-life and 2-life deferred gift annuities: in our testing we have found 1-life and 2-life deferred gift annuities where the New York maximum rate is lower than the ACGA rate. For these annuities, the safe thing to do while the old method is still in play is to determine the New York maximum rate and then offer that rate or the ACGA rate, whichever is lower.

From January 24, 2024 onward, New York maximum annuity rates should never be lower than their corresponding ACGA rates. We will confirm that for ourselves once New York publishes its new 1-life rates and the interest rate it used to compute them.

If you are working with a New York donor who wishes to fund a two-life immediate gift annuity, or a one-life or two-life deferred gift annuity, before January 24, 2024, contact us. We will determine the maximum annuity rate New York will allow you to offer your donor. Go here to learn more about our New York Rate Calculations Service or to submit a calculation request form.

A Magical Time – the Season of RMD Notices

‘Tis that magical time of year again. No, not the holidays! It’s January, which means Required Minimum Distribution (RMD) Notification Season! Administrators of traditional IRAs are required to send notices by January 31 regarding the minimum amount that must be withdrawn by December 31. Once an IRA owner reaches a particular age (currently 73), federal rules require a calculated portion of the retirement fund to be withdrawn each calendar year. The RMD is the federal government’s way of finally taxing those previously untaxed wages. Though a mystery to many, there are certain IRA owners who don’t need – and don’t want – the annual distribution for living purposes. This represents the perfect opportunity for the much-heralded Qualified Charitable Distribution (QCD). Once an IRA owner reaches 70½, they may choose to transfer up to $105,000* directly to a charitable organization each calendar year as an outright gift.

There will be no tax on the withdrawal from the IRA, but also, there will be no tax deduction for the gift transaction. As part of that $105,000, the IRA owner may use up to $53,000* in 2024 to establish a charitable gift annuity (CGA) or charitable remainder trust (CRT). (This special situation is allowed only once in the donor’s lifetime.) As with the outright gift, there is no tax on the IRA withdrawal, but also no tax deduction for the charity’s gift. Moreover, with the CGA or CRT, all the payments will be taxed as ordinary income (no tax-free component of payments that occurs under other circumstances). Maybe it is not too late to send those “Happy New Year” cards with a special message about IRAs!

*QCD limitations are indexed each year for inflation.

Free Training Will Prepare You to File 1099-Rs Electronically

In 2024, charities that anticipate issuing more than nine 1099-Rs must file their 1099-Rs electronically. This number is cumulative for organizations, so if you have nine charitable gift annuities and also issued a 1099 in 2023 to a vendor, you will be required to electronically file all of your 1099-Rs. This is a big change from 2022’s paper filing limit of 250 CGAs and has caught some organizations off guard. Happily, GiftWrap can create an electronic file for upload to the IRS’s Filing Information Returns Electronically (FIRE) system.

Join PG Calc on January 23rd for our free online training, When the IRS Needs Your 1099s: GiftWrap Steps to Filing Success. We will review the 1099-R process, from printing and sending the forms to your annuitants, to preparing your electronic file for submission to FIRE. Clients can register here.

To electronically file with the IRS, your organization will need a Transmitter Control Code (TCC). We strongly recommend that you begin your TCC application process prior to attending our training. More information can be found on the IRS website.

We look forward to seeing you on the 23rd!

**A Helluva Town, a Helluva Training: PGM Anywhere in Person in NYC**

PG Calc returns to New York City for two days of in-person training this winter. Please join us for PGM Anywhere Introductory on Wednesday, February 28 and for PGM Anywhere Advanced on Thursday, February 29, both days from 9:00 - 4:00 ET.

This hands-on training uses PGM Anywhere as a laboratory, and attendees will model a range of gift types and donor scenarios on their way to mastering the software. PGM Anywhere Introductory will focus on the charitable gift annuity (CGA), including two types of deferred gift annuity (DGA). PGM Anywhere Advanced will dive into charitable remainder trusts, charitable lead trusts, and retained life estates. Both classes will review the tax and charitable benefits of planned gifts and discuss how different asset types can be modeled in the software.

Come join us off-off-off-off-Broadway. We look forward to seeing you there.

Remember: PIF K-1s Are Not Due in January

Most everyone knows that Form 1099-Rs for charitable gift annuities are due in January – they must be sent by January 31 of each year. But some gift annuity donors are also participants of pooled income funds, and it is worth noting that the deadline for sending PIF Form K-1s is NOT January 31. That deadline is actually the filing deadline for the PIF’s completed tax returns – April 15 or the first business day thereafter.

Unlike Form 1099-R, which is unique and specific to each gift annuity, the PIF Form K-1s are actually part of the overall tax returns for pooled income funds. They cannot be produced until the tax returns themselves are essentially completed. While April 15 is technically the deadline, many PIF administrators try to send out their K-1s by sometime in March, at the latest. PG Calc will be offering a FREE online training session to demonstrate the production of PIF Form K-1s in GiftWrap on February 27.

Please use this link to sign up for the session.

**Feeding America Relies on PG Calc’s Gift Administration Services Team**

“I am very fortunate to partner with PG Calc on Feeding America’s Charitable Gift Annuity program. I reach out to Helene Darby and Jeff Piazza regularly for guidance on specific gift scenarios, to review unique agreements and gift illustrations or just to get their insight on something I’m not 100% sure on. They are excellent partners, always responding quickly and with thoughtful feedback and information that helps me when communicating with donors and to broaden my understanding on charitable gift annuities. I am lucky to have them to lean on when needed, which helps me feel confident on the information I’m sharing not only with donors but also with our food bank partners for whom we manage gift annuities on their behalf.”

-- Jessica Noe
Director of Development and Planned Giving
Feeding America

Learn more about Feeding America.

Learn more about PG Calc’s Gift Administration Services.

PG Calc 129 Mount Auburn Street Cambridge, MA United States

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