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May 14, 2008, 09:21 AM ET
Lawmaker Proposes New Twist on IRA Donation Incentives
Charities have been facing an uphill battle persuading Congress to make permanent a tax break that encourages older Americans to give money from their individual retirement accounts to nonprofit causes.
Now a Democratic lawmaker is pushing the idea — but he wants to do so in a way that encourages colleges to lower their tuition costs, The Chronicle of Higher Education reports.
Rep. Peter F. Welch, a Democrat of Vermont, wants to forbid donors from taking advantage of the tax break if they give their money to colleges that are not using their money to reduce tuition.
In a letter to the House Ways and Means Committee, Mr. Welch said wealthy colleges were among the biggest beneficiaries of those IRA distributions and should not be eligible to receive them unless they started using their endowments “specifically for containing college costs” for needy students. He urged the Ways and Means Committee to modify the Internal Revenue code as part of its drafting of a tax bill under consideration.
Mr. Welch has previously proposed requiring colleges to spend at least 5 percent of their endowments every year, and to report annually on how much of their endowments had been spent.
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