Analysis—H.R. 7, Community Solutions Act  of 2001

TITLE I, CHARITABLE GIVING INCENTIVES PACKAGE

1) Nonitemizer Charitable Deduction 
Charitable deduction for nonitemizers is created. Taxpayers who claim the standard deduction for purposes of calculating their taxable income would be permitted to claim an additional deduction for cash contributions, capped at the following "allowable amount": 2002 & 2003 - $25; 2004-6 -$50; 2007-2009 -$75; 2010 & thereafter - $100. For joint filers, the allowable amount is doubled. There is no carry forward for gifts in excess of this limit.

The charitable contribution deduction for nonitemizers is only available for cash contributions. It is not subject to the substantiation requirement, because the allowable amount does not exceed $100 ($200 for joint-filers). It is also not subject to the percentage-of-AGI limitations. Effective for contributions made after 12/31/01.

2)  IRA Charitable Rollover 
Individuals over 70 1/2 are allowed to roll assets from an Individual Retirement Account into a charity without incurring any income tax consequences.

3) Increase in the Cap on Corporate Charitable Contributions 
A corporation's annual charitable contribution deduction limit is increased from 10 percent to 15 percent. This increase is phased in over time.

4) Expansion of the Deduction for Food Inventory 
The deduction for gifts of food inventory now afforded only to corporations is expanded to all taxpayers engaged in a trade or business who donated inventory of "apparently wholesome food". For purposes of establishing fair market value of food that will not be sold, the price at which same or similar items are sold is taken into account.

5)  Reduction in the Excise Tax for Foundations 
The bill reduces the two percent excise tax on tax-exempt private foundations to one percent.

6)  Change in Treatment of UBTI for Charitable Remainder Trusts 
Revises tax provisions concerning charitable remainder trusts to provide, in general, that in the case of a charitable remainder annuity trust or a charitable remainder unitrust that has unrelated business taxable income (UBTI), there is imposed on such trust or unitrust an excise tax equal to the amount of such unrelated business taxable income.

7)  Change in Requirements for Gifts of Scientific Property 
The more favorable treatment available for gifts of scientific property and computer technology would apply not only to gifts of property constructed by the donor but also to property assembled by the donor.

TITLE II, EXPANSION OF CHARITABLE CHOICE

Charitable Choice is expanded to include programs involving activities related to prevention and treatment of juvenile delinquency; prevention of crime and assistance to crime victims and offenders' families; assistance under Federal housing statutes; the Workforce Investment Act (subtitle B or D of title I); the Older Americans Act; intervention in and prevention of domestic violence; hunger relief; the Job Access and Reverse Commute grant program; and assisting students in obtaining secondary school diplomas.

• The bill allows Federal preemption of State laws with respect to religious discrimination in employment. The bill preempts any state and local laws that prohibit discrimination in hiring based on sexual orientation if the religious organization does it for religious reasons. Sexual orientation is not a protected class under federal civil rights laws however race, color, national origin, sex, disability and age are afforded protection.
  
• It also expands Charitable Choice by specifically adding an option to provide services through vouchers at the discretion of the Secretary of the department administering program. The bill's prohibition on proselytizing would only apply to programs that receive direct federal fund not vouchers. It might also allow providers under vouchers to expel a beneficiary if that beneficiary does not adhere to certain religious beliefs.
  
• Organizations that accept vouchers and do not segregate their federal funds would not be subject to a government audit. Most federal programs structured as grants have mandatory financial reporting requirements that can take the form of an audit. It is unclear whether these same financial reporting requirements would apply to vouchers. All organizations whether they receive their funding through vouchers or grants would be required to conduct an annual self-audit to be submitted to the appropriate government agency. The bill does not provide guidance on standards for the self-audit.
  
• The bill does not require that religious organizations create a separate 501(c)(3) to ensure that funds are not commingled.
  
• It establishes $50 million in federal funds for training and technical assistance for small nongovernmental organizations including assistance with creating a 501(c)(3); grant writing; referral to nongovernmental organizations to provide expertise in accounting, legal and tax issues; program development and a variety of other organizational areas; and information about compliance with federal nondiscrimination statutes.

TITLE III, INDIVIDUAL DEVELOPMENT ACCOUNTS

The bill expands availability and use of Individual Development Accounts (IDAs), which are matched savings accounts that encourage asset building by low-income individuals. The definition of eligible IDA participants is expanded to include individuals whose AGI does not exceed $20,000. The program has also been extended for an additional five years.

TITLE IV, CHARITABLE DONATIONS LIABILITY

• The bill prevents a business from being subject to civil liability relating to any injury or death that results from the use of equipment that has been donated and the use of a motor vehicle or aircraft that has been loaned by a business entity to a nonprofit organization.
  
• It also prevents a business from being subject to civil liability relating to any injury or death that results from the use of facilities if within the scope of that business entity when loaned to the nonprofit organization.
  
• The legislation provides to states the option to disregard this section if all of the parties in the dispute are citizens of that state, and the state has passed a statute declaring that these restrictions on civil action do not apply.