|
|
CARE Act of 2003 (S.476)
Status
The U.S. Senate passed the CARE Act
S. 476
(PDF) on April 9, 2003, by a
vote of 95 to
5. The House passed its companion bill, H.R.
7, on September 17,
2003. A House-Senate conference to resolve differences
between the two bills was not convened
before the 108th Congress adjourned in December 2004.
Efforts to include portions of the CARE Act in tax bills that
were moving through Congress were unsuccessful.
Independent Sector joined nearly 40 other
charitable organizations in sending a
letter
(PDF)
to the White House in September 2004 asking President
Bush to urge Congress to include the CARE Act in either of two
tax bills that were taken up before Congress adjourned. This supported the efforts of Senators Rick Santorum (R-PA) and Joe Lieberman
(D-CT) who sent a letter
(PDF)
to the Senate conferees on the corporate tax bill (H.R. 4520 FSC/ETI)
asking them to include the “significant provisions” shared by
both the CARE Act and the Charitable Giving Act and to give
“full and fair consideration” to the provisions that differ. The
FSC/ETI tax bill includes provisions limiting the deductibility
of charitable
donations of vehicles, patents and intellectual property.
Senators Santorum and Lieberman urge that revenue raised through
such charitable reforms in the FSC/ETI bill should be dedicated to
expanding charitable giving incentives.
|
|
|
Republican Senate leaders made numerous attempts during October
and November of 2003 to get a “unanimous consent” agreement to send the CARE Act
(S. 476) to conference with the House. Though the substantive
differences appeared to have been resolved, attempts to
reach an agreement were rejected by Democratic Senators, who protested their exclusion from active conference
negotiations and were concerned that
key provisions in the
Senate version of the bill would be dropped or cut back in the
conference process. Particular concern was expressed regarding protection of the restoration of full
funding for the Social Services Block Grant program, which was a
part of the Senate bill but was not included in the House
version, and assurance that the bill would include sufficient
tax changes to offset the cost of the bill.
Differences between H.R. 7 and the CARE Act
Among the differences between the Charitable Giving
Act, H.R. 7, and the CARE Act, S. 476 are:
- Offsets—the Senate bill contains provisions that pay for, or
offset the revenue loss of the bill. The House bill contains no
offsets.
- SSBG funds—unlike the House bill, the Senate bill restores
funding for the Social Services Block Grant to $2.8 billion (an
increase of $1.1 billion).
- IDA tax credit—the Senate bill provides tax credits for
individual development accounts, the House bill does not.
- IRA rollover—the Senate bill has a lower age (59 ½ instead
of 70 ½ years) for eligibility for a deferred gift. Both bills are
70 ½ years for direct gifts.
- Foundation excise tax—the House bill lowers the excise tax
on foundation investment income from 2% to 1%. The Senate bill
does not.
- Foundation administrative expenses—the House bill restricts
which administrative expenses can count towards a private
foundation's "payout" requirements.
- Food donation—the Senate bill calculates fair market value
of food donations based on the price at which similar foods are
sold. The House bill follows current law for valuation.
- Corporate charitable contributions—the House bill gradually
increases the cap on
corporate charitable deductions from 10% to 20% of taxable income.
The Senate bill does not include this provision.
- Disclosure and accountability provisions—the Senate bill
contains an authorization of $80 million for IRS oversight of
exempt organizations, and a number of “sunshine” provisions that
are not in the House bill.
Summary of the CARE Act (S. 476)
The CARE Act contains important tax incentives to encourage
charitable donations including:
The bill also restores funding for the
Social Services Block Grant
to an annual appropriation of
$2.8 billion and includes provisions to expand the Individual Development
Account program. It also includes a provision to simplify the lobbying
expenditure limitation for charitable
nonprofits, which Independent Sector
has supported. This provision would allow charitable
nonprofits to spend their total lobbying allowance on any
combination of grassroots and direct lobbying efforts. The measure
also includes several "sunshine" provisions to improve the
oversight of tax-exempt organizations and authorizes a specific
appropriation of $80 million for the administration of the exempt
organizations oversight operations of the IRS. The sunshine
provisions would:
- Expand the number of written determinations by the IRS and
related documents that are
made available to the public.
- Require tax-exempt organizations to include on its annual
return (Form 990, 990-EZ or 990-PF) any name under which the
organization operates or does business and any Internet web
site address of the organization.
- Modify the reporting of capital transactions by private
foundations.
- Require the IRS to notify the public “in appropriate
publications and other materials” the extent to which Form 990, 990-EZ and 990-PF are publicly
available.
- Allow the IRS to disclose to appropriate state officers
certain information about investigations related to refusal to
recognize an organization as tax-exempt or revocation of
tax-exemption. The IRS would only be permitted to disclose this
information to state officials charged with overseeing tax-exempt
organizations and the information could only be used to administer
state laws regulating tax-exempt organizations.
- Expand penalties on preparers of Form 990 for omission or
misrepresentation of any information that was known or should have been known by the
preparer.
- Provide a new annual reporting requirement for nonprofits that
do not currently file an annual information return (such as the 990) because their gross
annual receipts do not exceed $25,000. The new report would cover
the legal name of the organization; any name under which it does
business; its mailing address and Internet web site address; its
taxpayer identification number; the name and address of a
principal officer; evidence of the continuing basis for the
organization’s exemption from filing the 990; and upon
termination, notice of that termination. Failure to file the
annual notice for three consecutive years would result in
revocation of tax-exempt status. There are no monetary penalties
for failure to file the notice. The IRS would be required to
notify every organization of this new requirement by mail, by
Internet or by other means of outreach.
- Institute an automatic revocation of tax-exempt status for any
organization that is
required to file a Form 990 and fails to file that form in three
consecutive years.
The oversight provisions also included a provision to authorize
the IRS to suspend the tax-exempt status of an organization that has been designated by the
president or the secretary of state as a terrorist organization or as supporting terrorist
activities. This provision was enacted separately in November 2003
as part of the Military Family Tax Relief Act (H.R. 3365).
More
Other
Provisions
Compassion Capital Fund
Provides authorizations for several agencies
(HHS, Corporation for National and Community Service, Department of
Justice, and HUD) to issue grants and enter into cooperative
agreements with nongovernmental organizations to provide technical assistance to community-based organizations. The authorization is through 2007 and is $85 million per year
through HHS; $15 million through the Corporation for National and
Community Service; $35 million through DOJ; and $15 million through
HUD.
Maternity Group Homes
The manager’s amendment authorizes the Secretary of HHS to award $33
million per year for FY2003-2007 for competitive grants to states,
local governments, Indian tribes, or public or private nonprofit
organizations to establish or expand a maternity group home.
Legislative History
Consideration in the Senate Finance Committee
The Senate Finance Committee passed the CARE Act of 2003 on
February 5, 2003. The bill approved by the Finance
Committee was based on S. 256,
described as the "tax section of the CARE Act," which was
introduced on January 30 by Senator Charles Grassley (R-IA),
chairman of the Senate Finance Committee, Senators Max Baucus
(D-MT) (ranking member of the Finance Committee), Rick Santorum
(R-PA), and Joseph Lieberman (D-CT).
There were a few technical modifications to the bill and
several new
provisions were added including an IRS notification requirement for
exempt organizations that are not currently required to file an
annual information return; extension of the enhanced deduction for
inventory to include public schools; and a new matching grant program
for nonprofit organizations that provide tax preparation assistance
to low-income taxpayers.
Senate Floor Action
Two amendments were debated before Senate passage of the CARE Act
(S.476) on April 9, 2003 by a vote of 95 to 5. One
amendment, which was offered by Senator Nickles (R-OK), was
defeated. It would have extended to all charitable
purposes the bill's preferred capital gains tax rate for sales
of land for conservation-related purposes.
The second, which was adopted,
incorporated some of the provisions from the broader version of
the CARE Act (S. 272) introduced by Senators Santorum (R-PA) and
Lieberman (D-CT). The "equal treatment" provisions that had
aroused controversy were not included in the final bill.
Last updated: December 9, 2004
|
|
