|
|
Charitable Giving Act of 2003
(H.R. 7)
|
The House of Representatives passed the
Charitable Giving Act (H.R.
7 bill text [PDF]) by an overwhelming
vote of 408 to 13
on September 17, 2003.
The Senate passed its companion bill,
the
CARE Act
(S. 476), on
April 9, 2003 by a vote of 95 to 5. 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 on September 15, 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.
H.R. 7 provided a number of important
incentives designed to encourage charitable giving, including the nonitemizer deduction and the IRA rollover provision. The
nonitemizer deduction allows nonitemizing taxpayers to deduct
giving over $250 up to a ceiling of $500 (joint filers can
deduct giving over $500 up to $1,000). The IRA rollover
provision allows individuals who are at least 70 ½ years of age
to make direct or deferred gifts from their individual
retirement accounts without suffering adverse tax consequences.
Another provision of the bill would have simplified the lobbying
expenditure requirements for nonprofit organizations, allowing
them to spend all or any part of their lobbying expenditure
limit on either direct or grassroots lobbying.
During the House Ways and Means Committee consideration of H.R.
7,
a compromise proposal was adopted regarding the administrative expenditures that
private foundations can count towards their annual qualifying
charitable distributions. The Committee excluded from qualifying
distributions: compensation paid to “disqualified persons” (e.g.,
board members, chief executives, and chief operating officers)
in excess of $100,000 per person; and air transportation that is
not coach-class commercial travel. The bill also would
have raised
the excise tax penalties for self-dealing from 5 percent to 25
percent. |
|
|
Current Status
The House passed H.R. 7 on September 17,
2003. The Senate passed its companion bill,
the
CARE Act
(S. 476), on
April 9, 2003 by a vote of 95 to 5.
A House-Senate conference
to resolve differences between the two bills was not convened
before the 108th Congress adjourned in December 2004.
Republican Senate leaders made numerous attempts during October
and November 2003 to get a “unanimous consent” agreement to send the CARE Act
(S. 476) along with a tax package, including child tax credit
refund legislation and the extension of several expiring tax
provisions, to conference with the House. Though the substantive
differences appeared to have been resolved, the second attempt to
reach an agreement was rejected by Democratic Senators, who were protesting 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 CHARITABLE GIVING ACT, H.R. 7
As passed by the House Ways & Means Committee
Charitable Giving Incentives
Charitable Deduction for Nonitemizers—This provision is
similar to the Senate CARE Act but
would be in effect only for tax years 2004 and 2005. Individuals who
take the standard deduction
could take a deduction of up to $250 for contributions once their
giving exceeds a $250 floor,
while married donors filing jointly can deduct up to $500 for
contributions in excess of a $500
floor. The bill requires that Treasury complete a study by end of
2005 on the effect of the proposal
on increased charitable giving, and of taxpayer compliance.
IRA Charitable Rollover—The bill provides that donors who
are at least 70 ½ would be eligible to
rollover amounts from an IRA as direct or split-interest gifts. The
proposal is permanent.
Increase Cap on Corporate Charitable Contributions—The
bill would increase the cap on
corporate charitable deductions from 10 percent to 20 percent of taxable income.
The cap would be 11 percent from
2004, 12 percent in 2005, 13 percent in 2006, 14 percent in 2007, 15
percent in 2008-2011, and
20 percent in 2012 and
thereafter.
Excise Tax on Foundations—The bill reduces the excise tax
on private foundation investment
income from the current two-tiered system (1% to 2%) to a flat 1
percent of investment income.
Foundation Administrative Expenses—Administrative
expenses directly attributable to direct charitable activities,
grant selection, grant monitoring and administration, compliance
with federal, state or local law, or furthering public
accountability of the private foundation may be treated as
qualifying distributions. Compensation paid to disqualified persons
that exceeds $100,000 annually, and expenses incurred for air
transportation that is not coach-class commercial travel may not
be treated as qualifying distributions.
Excise Tax Penalty on Self-Dealing—The
foundation excise tax on self-dealing would be raised from 5 percent
to 25 percent.
Donations of Scientific Property, Computer Technology and
Equipment—The bill provides for an expansion of the
charitable deduction for scientific property used for research and
for computer
technology and equipment used for educational purposes.
S Corporation Stock for Charitable Purposes—The bill
provides an adjustment to the basis of S
corporation stock for certain charitable contributions.
Other Charitable Giving Incentives—The bill provides an
enhanced deduction for donations of food that is slightly narrower
than the provision in the Senate bill. The bill does not provide an
enhanced deduction for donations of book inventory, gifts of
property for conservation purposes, or
donations of artistic, literary, musical and scholarly works.
Oversight Provisions
Lobbying Simplification—The bill eliminates the separate
limitation for grassroots lobbying expenditures applicable to electing charities. Electing charities
would remain subject to the overall
limitation on lobbying expenditures, which would not change in
amount, but electing charities
would not be required to limit grassroots expenditures as a
percentage of overall lobbying.
Provision is effective December 31, 2003.
Suspension of Tax-Exempt Status of Terrorist Organizations—The bill authorizes 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.
Landowner Incentives Program—The bill provides that funds
received by private landowners from
the Department of Interior to carry out habitat restoration or
wildlife protection measures are tax-free. The provision would treat
Department of Interior and United States Department of Agriculture conservation grants similarly for tax liability purposes.
Other Provisions
Individual Development Accounts—The bill extends the
program for an additional five years,
through fiscal year 2008. The program establishes matched savings
accounts for low-income working families. The annual program
authorization would be to $25 million for 5 years.
Compassion Capital Fund—The bill provides authorizations
for several agencies to issue grants
for technical assistance and capacity building to nongovernmental
organizations that operate
social service programs or a cooperative agreement whereby another
organization provides
technical assistance to another entity that provides social
services. The provision authorizes $150
million in 2004, and such sums as necessary for fiscal years 2005
through 2008.
Maternity Group Homes—The bill authorizes the Secretary
of HHS to award $33 million
for FY2003 for competitive grants to states, local governments,
Indian tribes, or public or
private nonprofit agencies, organizations or institutions to
establish, expand, or enhance a
maternity group home.
Sense of the Congress Regarding Corporate Contributions to
Faith-Based Organizations—The bill provides that it is the
sense of Congress that corporations are important partners with
government in efforts to overcome difficult societal problems, and
corporations should not adopt
policies that prohibit the corporation from contributing to
organizations merely because such
organization is faith-based.
Background
On May 7, 2003, Representatives Roy Blunt (R-MO) and Harold Ford,
Jr. (D-TN), introduced the
Charitable Giving Act (H.R. 7 bill text—PDF), the House version of the
CARE Act of 2003 (S.
476) passed by the Senate in April. The bill does not include the
controversial faith-based program provisions that was a feature of a
similar bill passed by the House in the last session of Congress.
The Blunt-Ford bill as introduced included a new provision not in the
Senate bill that would exclude
administrative expenses from qualifying distributions for private
foundations.
The House Ways and Means Committee passed H.R. 7 on September
9, 2003 after approving a compromise proposal on the
administrative expenditures that private foundations can count
towards their annual qualifying charitable distributions.
Last updated: December 9, 2004
|
|
Copyright ©
2004 Independent Sector. All Rights Reserved.
