On Aug. 17, President Bush signed into law the most comprehensive reform of pension funding laws since 1974: The Pension Protection Act of 2006. It contains many provisions that will hopefully protect current pension funding, including changing the formula that companies must use when contributing to their pension plans, so that they can't claim to contribute more than they actually are.

However, while most of the act deals with pension issues, its other tax changes will have an impact on many of us:

Saver's credit made permanent
This credit is allowed for taxpayers who make qualified retirement contributions and are within certain income limits. It was scheduled to expire after the 2006 tax year but has now been made permanent.

Direct deposit of tax refunds into an IRA account
Currently, taxpayers can direct their tax refunds into a checking or savings account with a bank or other financial institution, such as a brokerage firm, credit union, or mutual fund. This act allows for the direct deposit of a tax refund directly into an IRA account. The Treasury Department was directed to develop forms under which all or a portion of a taxpayer's refund may be deposited directly into an IRA held by the taxpayer, or the taxpayer's spouse in the case of a joint return.

Non-spouse beneficiaries
Generally, the spousal beneficiary of a deceased person is allowed to "roll over" any IRA distribution into his or her individual IRA account, eliminating current taxes on such distributions. Non-spouse beneficiaries were not allowed such latitude. Instead, they were generally required to remove the funds virtually immediately in a lump sum, incurring substantial additional taxes. The new law allows non-spouse beneficiaries to treat the IRA of a deceased taxpayer more like distributions under a qualified pension plan, in that the distribution can be made over a five-year period, or over the life expectancy of the non-spousal beneficiary.

Relief from early-distribution penalty
The new law eliminates the 10% early-withdrawal tax on distributions from a governmental defined-benefit pension plan to qualified public safety employees (including, but not limited to, police, fire, and EMT employees) who separate from service after age 50. This provision of the new law is effective immediately, but only for any distributions made after Aug. 17.

Charitable distributions from an IRA
The new law allows for taxpayers to avoid taxes when making a direct distribution from an IRA, either traditional or Roth, to a qualified charity. The amount of the distribution is limited to $100,000 per year per taxpayer. Under the old rules, the taxpayer was first required to take the distribution into income and then claim the charitable contribution deduction. This might sound like the same thing, but it's certainly not, because of the various limits on charitable contributions and tax computations driven by adjusted gross income (AGI).

New charitable recordkeeping requirements for cash contributions
Speaking of charitable contributions, they have been tightened up again in the new law. Not long ago, there were substantial changes to the recordkeeping requirements and documentation required when a vehicle was donated. Now the rules have been changed for cash contributions as well. Under the new law, taxpayers must keep records of all cash donations. Period. Individuals must show a receipt from the charity, a canceled check, or a credit card statement to prove their donation. No tax deduction will be allowed if the taxpayer cannot provide any supporting documentation. No longer will cash contributions be allowed without a receipt or cancelled check. Those of you making your charitable contributions in cash had better change your ways immediately.

New non-cash contribution rules
Congress didn't stop with cash contributions. The new law also toughens the rules for non-cash donations. Donated items, such as clothing and household goods, must be in "good condition." If the items are not in "good condition," no deduction is allowed. Alas, the new law does not define the term "good condition." What should you do if you intend to make contributions of clothing or household goods? It might be a good idea to take pictures of these items before packing them up and taking them to your local charity.

Investment advice
The new law permits plan fiduciaries to be compensated for giving participants investment advice, effective for advice rendered after Dec. 31, 2006. A fiduciary that is a registered investment company, bank, insurance company, or registered broker-dealer will be allowed to give investment advice, provided that either its fee does not vary based on the investment choices that participants make, or that its recommendations are based on a computer model certified by an independent third party. In other words, the qualified investment advisor can be paid out of the taxpayer's retirement account (such as a 401k, IRA, or other plan) without incurring a penalty or tax for distribution from the plan.

Again, these are just a few of the provisions packed into the new law. If you'd like to read more about the highlights of the new law, go to this article on the CCH website.

When he's not dealing with tax issues, Fool contributor Roy Lewis is a motivational speaker who lives in a trailer down by the river. He understands that The Motley Fool is all about investors writing for investors. You can take a look at the stocks he owns, as long as you promise not to ask him which stock to buy. He'll be glad to help you compute your gain or loss when you finally sell a stock, though.