Article: 13
David G. Shaftel, 2002 © All Rights Reserved.

Many charitable organizations have established charitable gift annuity programs. Under these programs, a donor transfers money to the charitable organization in return for the organization providing an annuity to the donor that is payable over one or two lives. The actuarial value of the annuity is less than the value of the money transferred by the donor, and the difference in value constitutes a charitable deduction for federal income tax purposes.

House Bill 121 passed by the Alaska Legislature on May 8, 2001, enacts Alaska Statute 21.03.070. This new statute exempts “qualified charitable gift annuities” from regulation by the Division of Insurance of the Alaska Department of Community and Economic Development. In order to qualify the annuity, the charitable organization must disclose to the donor in the agreement that a qualified charitable gift annuity is not an insurance policy in Alaska, is not subject to regulation by the Division of Insurance, and is not protected by the Alaska Life and Health Insurance Guarantee Association. Further, a charitable organization that issues its first qualified charitable gift annuity shall notify the Division of Insurance in writing within 90 days after the issuance. The notice must identify the charitable organization and certify that the charitable organization is a charitable organization and that the charitable gift annuities are qualified charitable gift annuities. Failure to comply with these notice requirements will result in a civil penalty in an amount not to exceed $1,000 for each qualified charitable gift annuity issued.

The new statute defines a charitable organization as a person identified:

(1) in the definition of “charitable contribution” in 26 U.S.C. § 170(c) as a person to whom or for whose use a contribution or gift is made; or (2) as an exempt organization under 26 U.S.C. § 501(c)(3). A “qualified charitable gift annuity” is defined as an annuity described in 26 U.S.C. § 501(m)(5) and 26 U.S.C. § 514(c)(5), if the annuity is issued by a charitable organization that on the date of the issuance has

(A) a minimum of (i) $300,000 in unrestricted cash, in cash equivalents, or in publicly traded securities, exclusive of the assets funding the annuity; and (ii) three years of continuous operation or is a successor or affiliate of a charitable organization that has been in continuous operation for at least three years; or

(B) a guarantee that the obligations of the annuity contract will be met by a charitable organization that meets the requirements of (A) of this paragraph.

Subparagraph (B), above, was added to enable a new charitable organization to adopt a charitable gift annuity program if the program is guaranteed by an established charitable organization that meets the capital and continuous operation requirements.

H.B. 121 is presently awaiting transmittal to the governor of Alaska. This new act will be effective 90 days after the governor signs the bill into law.