According to the IRS, a qualified charitable distribution is an otherwise taxable distribution from an IRA (other than an ongoing SEP or SIMPLE IRA) owned by an individual who is age 70½ or over that is paid directly from the IRA to a qualified charity.
Donors might give from their IRA as a way to meet their required minimum distribution while lowering their adjusted gross income (AGI). This means that, as a benefit, this would allow them to pay less in taxes without having to itemize them like they would for regular donations.
Now, acknowledging these gifts is similar to acknowledging any regular gift. But there are rules on how qualified charitable distributions can be made, so it is important to document that these rules have been followed when acknowledging these gifts.
While the check will likely come from the IRA custodian, the gift should be tracked on the actual donor's record. In other words, this should not be entered as a passthrough gift.
For example: Bob Smith has decided to contribute through his IRA with Charles Schwab. You receive a check from Charles Schwab. The gift would still be on Bob Smith's record because he should still get a receipt for this donation. Charles Schwab would not be entered as a passthrough giver, either.
While you would not indicate anyone as a passthrough giver, it is still important to mention the name of the IRA custodian in the gift. You can include this either in:
- Gift notes
- A gift custom field
This is because you will need to be able to pull the name of the IRA custodian into the receipt, so inserting that information into a field that can be used as a merge field in a receipt will make that easier. Just be sure to pick one and stick with it - if you include the name in Gift Notes, always include the custodian name in Gift Notes, and if you include the name in a gift custom field, always include the custodian name in that gift custom field for consistency.
When entering gifts, those coming from an IRA are indicated using the Qualified Charitable Distribution gift type.
With receipts requiring special language for IRA gifts, make sure that you have a specific query, receipt template, and maybe even a receipting group to manage these specific donations.
Build the query: Because you enter IRA gifts as having the Qualified Charitable Distribution gift type, you can use this as a parameter (at minimum) for the gift query associated with your IRA-specific receipt:
Create the template: You can build your receipt template the way you would build any other. The only difference here is the language, and there are specific items to include:
- Name of the IRA custodian
- Keep in mind that the charitable contribution must be made directly from the IRA custodian or trustee in order to qualify as a QCD
- The merge field you use here will be based on whether you use the custodian's name in Gift Notes or a gift custom field.
- Date of the gift
- Amount of the gift
- Note that the gift is a qualified charitable distribution under Sec. 408(d)(8)(A)
- State that no goods or services were provided in exchange for the gift
- the purpose of the gift; where the money is going toward (in other words, the Virtuous Project)
- that your organization qualifies as a Sec. 170(b)(1)(A) public charity
- Your organization must be a 501(c)(3) charity in order to qualify to receive qualified charitable contributions.
- the gift is not going to a Sec. 509(a)(3) supporting organization (private foundation) or Sec. 4966(d)(2) (donor-advised fund)
- Private foundations and DAFs do not qualify for qualified charitable contributions.
Generate your receipts: These will be generated the same way you generate any other receipt - these simply have specific rules and templates to acknowledge IRA gifts specifically.