TaxAlmanac:Featured article/August 12, 2006

From TaxAlmanac

Pension Protection Act of 2006

Summary

On August 3, 2006, Congress passed the Pension Protection Act of 2006 (H.R. 4). President Bush signed the legislation into law on Thursday, August 17, 2006. Below is a summary of the major provisions.

Tax Provisions

• Makes permanent the provisions from the Economic Growth and Tax Relief Reconciliation Act of 2001 related to individual retirement accounts and pensions

• Increase in annual contribution limit for IRAs

• Increase in the contribution limits on 401(k) plans

• Catch-up contributions for people age 50 and over

• Tax credit for pension start-up costs

• Treatment of elective deferrals as after-tax Roth contributions

• Makes permanent the saver's tax credit aimed at lower income taxpayers

• Provides for increased flexibiility and favorable tax treatment of annuity and life insurance contracts with a long-term care insurance option

• Provides for direct deposit of tax refunds into IRAs

• Waives the 10 percent early withdrawal penalty for distributions to public safety employees over 50 who may retire early

• Waives the early withdrawal penalties on distributions from an IRA or pension plan taken by members of the National Guard and Reserves called to active duty

• Permanently extends Section 529 qualified tuition programs

Charitable Provisions

• Provides for tax-free distributions from IRAs for chariable purposes

• Provides a basis adjustment to stock of S corporation contributing property

• Extends the charitable deduction for contributions of book inventory

• Extends the charitable deduction for contributions of food inventory

• Changes the tax treatment of certain payments to controlling exempt organizations

• Raises the deduction limit for qualified conservation contributions

• Provides for an excise tax exemption for blood collector organizations

• Provides for recapture of tax benefit for charitable contributions of exempt use property

• Modifies the record keeping requirements for certain charitable contributions

• Modifies the rules for chariable contributions of clothing and household items

• Changes the rules relating to donations of a fractional interest in property