Amongst the various "extenders" included in the American Taxpayer Relief Act of 2012 (ATRA) was the reinstatement of rules allowing an individual to make a "Qualified Charitable Distribution" (QCD) from an IRA to a charity with favorable tax consequences, assuming the individual has reached the minimum 70 1/2 age, stays within the $100,000 dollar limit, and meets other requirements regarding the distribution and the receiving charity. Unfortunately, though, bringing back QCDs retroactively for 2012 was of limited use when the law wasn't even passed until the first week of 2013 and the 2012 tax year was already closed!
To accommodate, Congress included two special lookback rules under ATRA - the first allows QCDs done in January of 2013 to be treated as a 2012 QCD, and the second allows December 2012 IRA distributions to be recharacterized as a QCD if a comparable amount of cash is donated to a charity after the IRA distribution but before the end of January, 2013. While these two rules are nice to have, though, the reality is that neither may be very useful, except for a few unique situations, such as those who already plan to max out their QCDs up to the $100,000 limit for 2013 and are looking to donate more. In addition, most clients will still benefit more by contributing appreciated securities to a charity, than by donating cash (with or without the QCD treatment). Nonetheless, the new rules do open up some useful planning scenarios for some client situations, and with only a few weeks available to take advantage of the rules, the time window is short to decide whether or not to take advantage of the two new special 2012 lookback rules for QCDs!