[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 1514 Introduced in Senate (IS)]






108th CONGRESS
  1st Session
                                S. 1514

  To amend the Internal Revenue Code of 1986 to reform certain excise 
    taxes applicable to private foundations, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                July 31 (legislative day, July 21), 2003

Mrs. Hutchison introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
  To amend the Internal Revenue Code of 1986 to reform certain excise 
    taxes applicable to private foundations, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; ETC.

    (a) Short Title.--This Act may be cited as the ``Philanthropy 
Expansion and Responsibility Act of 2003''.
    (b) Amendment of 1986 Code.--Whenever in this Act an amendment or 
repeal is expressed in terms of an amendment to, or repeal of, a 
section or other provision, the reference shall be considered to be 
made to a section or other provision of the Internal Revenue Code of 
1986.

SEC. 2. REFORM OF CERTAIN EXCISE TAXES RELATED TO PRIVATE FOUNDATIONS.

    (a) Reduction of Tax on Net Investment Income.--Section 4940(a) 
(relating to tax-exempt foundations) is amended by striking ``2 
percent'' and inserting ``1 percent''.
    (b) Repeal of Reduction in Tax Where Private Foundation Meets 
Certain Distribution Requirements.--Section 4940 (relating to excise 
tax based on investment income) is amended by striking subsection (e).
    (c) Modification of Excise Tax on Self-Dealing.--The second 
sentence of section 4941(a)(1) (relating to initial excise tax imposed 
on self-dealer) is amended by striking ``5 percent'' and inserting ``25 
percent''.
    (d) Modification of Excise Tax on Failure To Distribute Income.--
            (1) Certain administrative expenses not treated as 
        distributions.--
                    (A) In general.--Section 4942(g)(1)(A) (defining 
                qualifying distributions) is amended by striking 
                ``(including that portion of reasonable and necessary 
                administrative expenses)'' and inserting ``(including 
                that portion of reasonable and necessary administrative 
                expenses which are directly attributable to direct 
                charitable activities, grant selection activities, 
                grant monitoring and administration activities, 
                compliance with applicable Federal, State, or local 
                law, or furthering public accountability of the private 
                foundation, except as provided in paragraph (4))''.
                    (B) Limitations.--Section 4942(g) is amended by 
                striking paragraph (4) and inserting the following new 
                paragraphs:
            ``(4) Limitation on administrative expenses treated as 
        distributions.--For purposes of paragraph (1)(A), the following 
        administrative expenses shall not be treated as qualifying 
        distributions:
                    ``(A) Any compensation paid to persons who are 
                considered disqualified persons.
                    ``(B) Any traveling expenses incurred for travel 
                outside the United States.
                    ``(C) Any traveling expenses incurred for 
                transportation by air solely from one point in the 
                United States to another point in the United States via 
                first-class transportation on a commercial aircraft or 
                via a private aircraft.
            ``(5) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to carry out the purposes of 
        paragraphs (1) and (4). Such regulations shall provide that 
        administrative expenses which are excluded from qualifying 
        distributions solely by reason of the limitations in paragraph 
        (1) or (4) shall not subject a private foundation to any other 
        excise taxes imposed by this subchapter.''.
            (2) Disallowance not to apply to certain private 
        foundations.--
                    (A) In general.--Section 4942(j)(3) (defining 
                operating foundation) is amended--
                            (i) by striking ``(within the meaning of 
                        paragraph (1) or (2) of subsection (g))'' each 
                        place it appears, and
                            (ii) by adding at the end the following new 
                        sentence: ``For purposes of this paragraph, the 
                        term `qualifying distributions' means 
                        qualifying distributions within the meaning of 
                        paragraph (1) or (2) of subsection (g) 
                        (determined without regard to subsection 
                        (g)(4)).''.
                    (B) Conforming amendment.--Section 4942(f)(2)(C)(i) 
                is amended by inserting ``(determined without regard to 
                subsection (g)(4))'' after ``within the meaning of 
                subsection (g)(1)(A)''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.
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