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Charity Aid, Recovery, and Empowerment (CARE) Act of 2002
Action was taken on several bills containing charitable tax
incentives during the 107th Congress. One bill passed the
House in July 2001 (the Community Solutions Act, H.R. 7), and
another cleared the Senate Finance Committee in June 2002 (the
CARE Act). Unfortunately, despite efforts into the final
days of the 107th Congress, an agreement to bring the CARE Act
to the Senate floor was not reached.
The Senate Finance Committee passed the Charity Aid, Recovery,
and Empowerment Act (CARE Act) on June 18, 2002, but it was not
ultimately voted on by the full Senate despite the efforts of
Senators Tom Daschle (D-SD), Rick Santorum (R-PA) and the White
House to negotiate an agreement to bring the bill to the
Senate floor before the end of the session. The CARE Act was largely based on the bill
(S. 1924) by the same name introduced by Senators
Joe Lieberman (D-CT) and Santorum
(R-PA), but there are several significant differences outlined
below.
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IS CEO Sara Meléndez urges Senate leaders to vote on the CARE Act at a press conference in the
Capitol on July 18, along with (from left) Sen. Wayne Allard, Cass Wheeler, Sen. Rick Santorum, Dot Ridings, and Sen. Joseph
Lieberman.
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Highlights of the Senate Committee on Finance Mark of the CARE Act of 2002
I. Charitable Giving Incentives
Charitable Deduction for Nonitemizers
Donors can claim an above the line deduction for charitable contributions for two years. Individual donors must exceed $250 floor while married donors filing jointly must exceed $500 floor. A ceiling of $500 applies to individual donors while a ceiling of $1,000 applies to joint filers. For example, an individual who donates $450 during the year could claim a deduction of $200 (amount in excess of the $250 floor); an individual who donates $700 could claim a deduction of $250 (amount over the $250 floor, but under the $500 ceiling). The direct charitable deduction generally would be subject to the tax rules normally governing charitable contribution deductions, such as substantiation requirements. The Treasury Department is required to complete a study by the end of 2003 that measures the effect of the proposal on charitable giving and taxpayer compliance.
IRA Charitable Rollover
Donors who are at least 59 ˝ would be able to rollover amounts from a traditional or Roth IRA to create a life income gift. Donors who are at least 70 ˝ would be eligible to rollover amounts also from an IRA as direct gifts. The proposal is permanent.
Contributions of Food and Book Inventories
The enhanced tax deduction for food donations that currently applies only to C Corporations remains the same. (Although, efforts are underway to increase the amount of the deduction for eligible contributions for Senate floor consideration). C Corporations enhanced deduction for book inventory would provide that the fair market value of a book is any bona fide published market price for the book (using the same printing and same edition), published within 7 years preceding the contribution. These proposals would be permanent.
Charity Contribution Deduction for Scientific Property Used for Research and Computer Technology and Equipment Used for Educational Purposes
Expands the donation of scientific property or computer technology and equipment to include “assembled” donations. The proposal would be permanent.
Modify Basis Rules for Gifts of S Corporation Stock
The rules for adjusting the basis of S Corporation stock would be modified when the corporation makes a donation of certain appreciated property. The proposal would be permanent.
II. Disclosure of Information Relating to Tax-Exempt Organizations
Disclosure of Written Determinations
Requires disclosure in redacted form of certain written determinations relating to the tax-exempt status of a 501(c) or (d) organization.
Disclosure That Form 990 is Publicly Available
Requires the IRS to notify the public in Publication 17, Publication 526 and the Instructions to Schedule A of Form 1040 that an exempt organization’s Form 990, Form 990-EZ, and Form 990-PF are publicly available.
Disclosure to State Officials of Proposed Actions Related to Section 501(c)(3) Organizations
Upon written request by an appropriate State officer, the IRS may disclose: 1) a notice of proposed refusal to recognize an organization as tax-exempt; 2) a notice of proposed revocation of tax-exemption; 3) with respect to private foundations, the issuance of a proposed deficiency of tax; 4) the names and taxpayer identification numbers of organizations that have applied for recognition as tax-exempt organizations; and 5) returns and return information of organizations containing information disclosed under 1-4 above. Return information would also be open to inspection by an appropriate State officer. Disclosure or inspection would be permitted only to the extent necessary for administering State laws regulating tax-exempt organization. Appropriate State officer means the State attorney general or head of any State agency that is charged with overseeing tax-exempt organizations.
III. Other Charitable and Exempt Organizations
Simplification of Lobbying Expenditure Limitation
Eliminates the separate limitation for grassroots lobbying expenditures for charities taking the 501(h) election. (Currently grassroots lobbying expenditures may not exceed 25% of the total lobbying allowance.)
Expedited Review Process for Certain Tax-Exempt Organizations
Organizations that are organized and operated for the primary purpose of providing social services would be granted expedited consideration of applications for tax-exempt status by the IRS. Such organizations that have average annual gross receipts of less than $50,000 for the previous four years would be entitled to a waiver of any fee for the application for tax-exempt status.
IV. Charitable Initiatives Including Social Services Block Grant
Restoration of the Social Services Block Grant
States are allowed to transfer up to 10 percent of TANF funds to their Social Services Block Grant, and seeks to restore SSBG funds to their 1996 authorized levels. It would increase funding to $1.975 billion for the SSBG for FY 2003 and $2.8 billion for FY 2004.
Individual Development Accounts
Creates a nonrefundable tax credit for financial institutions that have an existing Individual Development Accounts (IDAs) program. IDAs are matched savings accounts for low-income families for the purpose of buying a home, starting or expanding a small business, or paying for post-secondary education. The initiative would provide a dollar-for-dollar tax credit, up to $500 per account, to financial institutions that match contributions by low-income savers for major asset purchasers. The credit would apply to the first 300,000 IDAs opened before January 1, 2011, and with respect to matching contributions made after December 31, 2003, and before January 1, 2011.
V. Items Not Included from the Original CARE Act
Reduction in the excise tax on foundations was not included in the mark. An earlier proposal giving contributions of certain bonds the same treatment for determining appreciated value as is currently used for contributions of stock was eliminated in the final mark.
Last updated December 20, 2002
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2004 Independent Sector. All Rights Reserved.
