Now it’s easier than ever to make the gift of a lifetime.

IRAs can qualify for tax-free charitable distributions.

North Valley Community Foundation can help turn your individual retirement accounts (IRAs)into tax-saving charitable gifts. New tax benefits allow more people to experience the joy of giving during their lifetimes.

You can give more for less.

Thanks to recently passed legislation, American seniors can make the gift of a lifetime by giving their IRAs to charity without federal tax penalty. So your retirement funds can go further than ever before.

Charitable IRA

For years, estate planners have recommended that retirement assets may be the most tax-effective asset in larger estates to distribute to charity. These assets are not only vulnerable to heavy taxation as part of an
estate but also can be taxed again as income in respect to a decedent on the tax returns of heirs.

Until now, there was a disincentive for retirees to give IRAs to charity during their lifetimes because withdrawals from IRAs were
subject to income tax—even those given to charity.

New tax law. As of January 1, 2006, retirement assets may become a preferred charitable gift for seniors. IRA distributions to charity can now receive new tax advantages. Americans age 70½ and up can make tax-free IRA contributions to public charities such as NVCF.

There is so much more we’d like you to know.

To learn more, contact Alexa Valavanis at 530.891.1150.

You can make a difference.

NVCF can help you connect to the causes
you care about most. You can set up a charitable fund in your name or make an
unrestricted gift. Giving is one of life’s pleasures; we can help you enjoy it
today.

By giving through NVCF, you can use your gift to meet ever-changing community needs—including future needs that often cannot be anticipated at thetime your gift is made. Your gift can target the causes and programs you care about most.

North Valley Community Foundation understands our community’s most pressing issues and can
help you establish a fund to make an impact in areas of need or opportunity
that are important to you. Here are three great ways to turn your IRA into
community good:

North Valley Community Fonudation Community Fund —Meeting ever-changing community
needs.

Address a
broad range of current and future needs. NVCF evaluates all aspects of community well-being—arts and culture, community development, education, environment, health and human
services—and awards strategic grants to high-impact projects and programs.

Field of Interest Fund—Connecting personal values to high-impact opportunities.

Target gifts to the cause most important to you: arts, AIDS services, urban education, neighborhood revitalization, youth welfare and more. NVCF awards grants to community organizations and programs addressing your special interest area.

Designated Fund—Helping local organizations sustain and grow.

Support the
good work of a specific nonprofit organization—a senior center, museum or any
qualifying nonprofit charitable organization—by creating a specially Designated
Fund. The community foundation will invest your gift for long-term growth and
issue grants to your favorite nonprofit on a regular basis.

There is so much more we’d like you to know.

To learn more, contact Alexa Valavanis at 530.891.1150.

Why do donors want to give IRA assets to their community
foundation?

After decades of deliberate saving and favorable investment
returns, some retirees have more money in their IRAs than they’ll ever need.
For larger estates, a good portion of IRA wealth goes to estate taxes and
income taxes of non-spousal beneficiaries; heirs may receive only 25 percent to
30 percent of IRA assets passed on to them through estates.

Instead, IRA holders may choose to leave their IRAs to
qualified charitable organizations—choosing charity over taxes.

Which donors stand to benefit
most from giving their IRAs to charity?

Because charitable IRA transfers are
not included in taxable income and not available for itemized charitable
deductions, these special rules may benefit many different types of
individuals:

· High-income
earners—Donors who itemize deductions may find
that they cannot take full advantage of their tax deductions. Often referred to
as the 3 percent floor, a taxpayer must reduce itemized deductions by 3 percent
of the amount by which the taxpayer’s adjusted gross income exceeds a certain
amount that is adjusted annually for inflation (currently $150,500 or $75,250 each
for married people filing separately). For the years 2006 and 2007, the
reduction on itemized deductions for affected taxpayers is reduced by
one-third.

Example:
In the 2006 tax year, a married couple filing jointly has $1,000,000 in
adjusted gross income (AGI). Because the couple’s AGI exceeded $150,500, the
phase-out rules will apply to the couple’s itemized deductions. A complex
formula shows that the couple’s itemized deductions will be reduced by $16,990
and, as a result, the couple can claim $133,010 in itemized deductions.
Presuming the couple’s tax rate is 35 percent, the reduction in itemized
deductions potentially results in additional taxes of approximately $5,945. (Note
that this is a simplified example; please see your professional tax advisor for
how it may affect you.)

· Generous
donors—When
making a major gift, some taxpayers may give more to charity than they can
deduct that year. Donors cannot deduct more than 50 percent of their income for
gifts of cash to public charities (30 percent, if giving to private
foundations). Although amounts over 50 percent can be carried forward and
deducted in future years, taxpayers will face an immediate tax bill and may
lose some of the benefit of the deduction if they die before the gift has been
fully deducted. Donors who consistently give above the limit will not be able
to take advantage of the carry forward provisions.

· Non-itemizers—Donors
who regularly give a portion of their income to charity are not able to enjoy a
tax break from the contribution because the standard deduction is still greater
than the total of all itemized deductions. This may be especially true if state
and local income taxes are low.

· Financially
comfortable—Individuals or couples who distribute
the minimum from their IRA—and have other forms of income to pay living
expenses—may find that transferring their minimum distributions to the
community foundation helps fulfill personal charitable goals, tax-free.

In the past, how did the tax law treat charitable gifts made
from IRAs?

Under past law, IRA holders faced a disincentive for giving
retirement assets to charity during their lifetimes because all withdrawals
from traditional IRAs were subject to income tax. Thanks to the new tax
provision, retirees will be able to give far more support without being penalized,
doing so during their lifetimes and seeing their gifts benefit their
communities.

In the past, when a donor of any age withdrew IRA funds to
make a charitable gift, he or she was liable to pay income tax on the
withdrawal, offset to varying degrees by a charitable deduction for the gift.
(Charitable deductions are limited by legal restrictions, such as the
percentage of adjusted gross income [AGI] limitation on charitable deductions
and the 3 percent floor on all itemized deductions. If an individual does not
itemize on his or her income tax return, no charitable deduction can be taken.)

As a consequence of this unfavorable tax treatment, very few
individuals donated IRA funds to charity during their lifetimes.

How has the tax law changed?

The Pension Protection Act of 2006 permits individuals to
transfer up to $100,000 from individual retirement accounts directly to a
qualifying charity without recognizing the assets transferred as income for
federal tax purposes. In tax years beginning after December 31, 2005, a donor
who has reached age 70½ is now allowed to exclude from his or her income tax
calculations certain IRA withdrawals. In most circumstances, these charitable contributions
are not tax deductible unless the retirement accounts were funded with
after-tax dollars.

This provision is time-limited. It will
not apply to any distribution made in taxable years beginning after December
31, 2007.

What are the advantages of this new law?

The tax benefits now available to American seniors will
encourage new contributions from individuals who will no longer have to pay tax
on a charitable gift of IRA funds. When given through a community foundation,
these contributions can support all aspects of community well-being: arts and
culture, economic development, education, environment, health and human
services, neighborhood revitalization and more.

Now it is easier than ever for more people to enjoy the
experience of making the tax-free gift of
a lifetime using their excess retirement assets.

What if a donor contributes more
than $100,000 from an IRA?

Because the amount that the donor is
able to exclude from income is limited to $100,000 under the act, the remaining
amount would be recognized as income. Within a married couple, each person can
transfer $100,000 from his or her account. A $100,000 charitable distribution
may be made in 2006 and again in 2007.

Donors may choose to contribute
additional amounts to charity; however, the extent to which additional amounts
can be deducted from their income will be determined following general rules of
itemized deductions where the charitable percentage limitations and itemized deduction
reduction are factors.

Does a donor also receive a
charitable deduction when he or she transfers assets to a charity under this
provision?

No. The benefit under this provision is
that the individual does not realize the amount contributed directly from the IRA
to a qualifying charity. Because a donor does not include the amount in his or her
gross income, the individual may not take a charitable contribution deduction
for the contribution. To do so would allow a donor to receive a double benefit
from the contribution. For this reason, charitable contribution deductions are
explicitly prohibited.

How will charitable distributions
affect the minimum required distributions from a taxpayer’s IRA?

Shortly after an individual reaches age
70½, he or she is generally required to receive distributions from his or her
traditional IRA. Distributions from an IRA to a charity will receive the same
treatment as distributions to the individual taxpayer for the purposes of
minimum required distributions.

Are there any IRA transfers to
the community foundation that do not qualify for preferred tax treatment?

Yes. Transfers to Supporting Organizations
and Donor Advised Funds do not qualify. In addition, split interest gifts, such
as Charitable Annuities, Charitable Lead Trusts and Charitable Remainder Trusts,
do not qualify. Further, an individual may not receive a benefit in return for
an IRA distribution.

Because such transfers do not count as
qualified distributions under these special rules, the donor will have to first
recognize those distributions as income. The donor’s charitable deduction must
then be calculated as a regular itemized deduction.

How can an IRA gift be made?

IRAs are typically held by a financial service or trust
company. These custodians will likely provide a form that could be used to
transfer the IRA directly to charity, with no tax incurred.

The
information provided here is based on continuing analysis of the Pension
Protection Act of 2006. Every effort has been made to ensure accuracy of the answers
to these questions. However, due to the complexity of the bill and the fact
that many of these provisions introduce issues that are new to the Internal
Revenue Code, this information may be subject to change. It is not a substitute
for expert legal, tax or other professional counsel and we strongly encourage
donors to work with their professional advisors to determine the impact of this
legislation on their particular situations. This information may not be relied
upon for the purposes of avoiding any penalties that may be imposed under the
Internal Revenue Code.