It's crunch time for a tax break that lets people tap their IRAs and give the proceeds to a charity without the Internal Revenue Service claiming part of the money.

The provision that lets people aged at least 70 ½ pull money out of their individual retirement accounts and channel it tax-free to charity expires at the end of the year. With charitable giving down 2% last year and expected to be off in 2009 as well, there's a push on Capitol Hill to keep the tax break – and even to broaden it.

If the IRA-giving provision is allowed to lapse on Dec. 31, then no one will be able to re-direct IRA money to charity without first paying taxes on that money. Charity officials fear the loss of the tax break will further reduce donations. Ordinarily, taking money out of an IRA, whether for living expenses or any other purpose, means you owe taxes on the withdrawn sum.

"We're hopeful this will be extended a year or two," says Janne Gallagher, general counsel of the Council on Foundations, an association of philanthropic groups.

The only thing that would stop a renewal of the IRA-giving provision is concern about the budget deficit, say Capitol Hill aides. Tax breaks cost the government revenue. But odds are the IRA-charity break will be renewed, because it doesn't cost very much. Since the provision was enacted in 2006, Congress estimates it has generated an extra $140 miilion for charity. Meanwhile, it has cost the Treasury about $50 million — not a lot in Washington terms.

Beyond the extension of the current provision, some lawmakers have proposed expanding the tax benefit; a version of that plan may be included in the massive tax-code revamp that the Obama administration is mulling for next year.

Under this proposal, sponsored by Sen. Byron Dorgan (D-N.D.), you could tap your IRA to give to a broader range charitable vehicles, without the current donation cap and at a younger age.

The new idea: If you are 59 ½ years old, you could pull money out of your IRA with no tax penalty and channel it to a trust you set up to provide you with retirement income during your lifetime. When you die, the money from this charitable remainder trust goes to a charity you designate.

Right now, only people age 70 ½ and up can withdraw money from their IRAs and donate directly to charities, and they can't give it to a charitable remainder trust tax-free.

The big fear in the charity community is that, with health-care clogging up Congress' agenda, the IRA break won't be addressed this year. If so, then the provision likely would be passed next year, retroactive to year-end 2009, say congressional aides. "Not much time is left on the calendar," says Celia Roady, a lawyer who works on philanthropic issues for Morgan, Lewis & Brockius. "Doing it retroactively means a lot of confusion."