Personal Philanthropy Accounts

(a)

In general

Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to additional itemized deductions for individuals) is amended by redesignating section 224 as section 225 and by inserting after section 223 the following new section:

224.

Personal philanthropy accounts

(a)

Allowance of deduction

In the case of an individual, there shall be allowed as a deduction for the taxable year an amount equal to the aggregate amount paid in cash during such taxable year by or on behalf of such individual to a personal philanthropy account of such individual. (b)

Personal philanthropy account

For purposes of this section, the term personal philanthropy account means a trust created or organized in the United States exclusively for the purpose of making distributions for the charitable purposes designated by an individual who is the account holder of the trust (and designated as an personal philanthropy account at the time created or organized), but only if the written governing instrument creating the trust meets the following requirements: (1)No contribution will be accepted unless it is in cash. (2)The trustee is a bank (as defined in section 408(n)), community foundation, or another person who demonstrates to the satisfaction of the Secretary that the manner in which that person will administer the trust will be consistent with the requirements of this section or who has so demonstrated with respect to any personal philanthropy account and who is not disqualified under subsection (f). (3)No part of the trust assets will be invested in life insurance contracts. (4)The assets of the trust shall not be commingled with other property except in a common trust fund or common investment fund. (c)

Definitions and special rules

For purposes of this section— (1)

Default distribution rules

(A)

In general

No account shall be treated as a personal philanthropy account unless at all times there are in effect qualified default charitable organization designations under subparagraphs (B) and (C). (B)

Qualified default charitable organization designation

For purposes of subparagraph (A), a qualified default charitable organization designation in effect under this subparagraph is the designation by the account holder of an organization to which the remainder of such account may be made in the form of a qualified philanthropy payment upon the death of the account holder in any case in which the account holder fails to provide by will or other suitable estate document for the distribution of the assets of such account. (C)

Trustee designation

For purposes of subparagraph (A), a qualified default charitable organization designation in effect under this subparagraph is the designation by the trustee of the personal philanthropy account of an organization to which a payment under subparagraph (B) will be made if the organization designated under subparagraph (B) is not qualified to receive a qualified philanthropy payment at the time of such payment. (2)

Minimum distribution requirements

(A)

In general

No account shall be treated as a personal philanthropy account for a taxable year unless such account meets the minimum distribution requirements for such taxable year. (B)

Minimum distribution requirement

An account meets the minimum distribution requirements for a taxable year if the aggregate distributions from the account for the taxable year are not less than 5 percent of the balance of such account as of the last day of the preceding taxable year. (C)

Exception for accounts with a balance of less than $10,000

Subparagraph (A) shall not apply to any account for a taxable year if the balance of such account as of the last day of the preceding taxable year is less than $10,000. (3)

Denial of deduction to dependents

No deduction shall be allowed under this section to any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual's taxable year begins. (4)

Community foundation

For purposes of this section, the term community foundation means a non-sectarian organization— (A)whose long-term goal is to build permanent, named component funds established by many separate donors for the broad-based charitable benefit of the residents of a defined geographic area, and (B)which— (i)is described in section 501(c)(3) and exempt from tax under section 501(a), (ii)is not a private foundation, and (iii) is not controlled directly or indirectly by one or more disqualified persons (as defined in section 4946, determined without regard to subsection (a)(1)(B) thereof). (d)

Tax treatment of distributions

(1)

In general

Any distribution from a personal philanthropy account shall be includible in the gross income of the account holder in the manner as provided in section 72. (2)

Qualified philanthropy payments

(A)

In general

No amount shall be includible in gross income under paragraph (1) to the extent that such distribution is a qualified philanthropy payment. (B)

Qualified philanthropy payment defined

For purposes of this section, the term qualified philanthropy payment means a distribution from a personal philanthropy account— (i)which is made, pursuant to a request by the account holder, by the trustee of the account within 30 days after receipt by the trustee of a certification under subparagraph (C), and (ii)which is paid for a purpose specified in section 170(c).

A trustee who fails to meet the 30-day requirement of clause (i) shall be subject to disqualification as a trustee.

(C)

Organization certification

For purposes of subparagraph (B)(i), a certification under this subparagraph is a certification by an organization pursuant to a written request by the trustee of a personal philanthropy account that the organization is an organization which— (i)is described in section 501(c)(3) and exempt from tax under section 501(a), and (ii)is not a personal philanthropy account. (D)

Coordination with charitable contributions

(i)No deduction shall be allowed under sections 170, 642(c), 2055, 2106(a)(2), or 2522 for any amount excluded from gross income under subparagraph (A), (ii)under regulations, the amount allowable as a deduction under sections 170, 642(c), 2055, 2106(a)(2), or 2522 (as appropriate) for the taxable year (without regard to this clause) shall be reduced by the amount excluded from gross income for the taxable year under subparagraph (A), and (iii)section 170(d) shall not apply to any amount excluded from gross income under subparagraph (A). (3)

Rollover contributions

(A)

In general

Paragraph (1) shall not apply to any amount paid or distributed from a personal philanthropy account to the extent that the amount received is paid, not later than the 60th day after the date of such payment or distribution, into another personal philanthropy account of the same account holder. The preceding sentence shall not apply to any payment or distribution if it applied to any prior payment or distribution during the 12-month period ending on the date of the payment or distribution. (B)

Heir

Paragraph (1) shall not apply to any amount paid or distributed from a personal philanthropy account of a decedent to the extent that the amount received is paid, not later than the 60th day after the date of such payment or distribution, into the personal philanthropy account of an heir of the decedent, as designated by the will of the decedent. (e)

Tax treatment of account

(1)

In general

A personal philanthropy account shall be exempt from taxation under this subtitle. Notwithstanding the preceding sentence, the personal philanthropy account shall be subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable organizations). (2)

Account terminations

Rules similar to the rules of paragraphs (2) and (4) of section 408(e) shall apply to any personal philanthropy account. (f)

Disqualification of trustee

The trustee of a personal philanthropy account shall not be qualified to be a trustee of such account after a final determination by the Secretary that the trustee has disbursed more than 10 percent of its payments from personal philanthropy accounts to non-qualifying organizations in a calendar year. (g)

Reports

The trustee of a personal philanthropy account shall make such reports regarding such account to the Secretary and to the holder the account with respect to contributions, distributions, and such other matters as the Secretary may require. The reports required by this subsection shall be filed at such time and in such manner and furnished to such individuals at such time and in such manner as may be required.

(b)

Deduction allowed whether or not individual itemizes other deductions

Subsection (a) of section 62 of such Code is amended by inserting before the flush sentence at the end the following new paragraph:

(21)

Personal philanthropy accounts

The deduction allowed under section 224.

(c)

Exclusion for employer contributions to personal philanthropy accounts

(1)

In general

Part III of subchapter B of chapter 1 of such Code is amended by inserting after section 139A the following new section:

139B.

Contributions by employer to personal philanthropy accounts

(a)

In general

Gross income of an employee does not include contributions by the employer to the personal philanthropy account of the employee. (b)

Personal philanthropy account

For purposes of this section, the term personal philanthropy account shall have the meaning given to such term by section 224. (c)

Exclusion not to exceed compensation

(1)

Employees

The amount excluded from gross income by subsection (a) with respect to an employee shall not exceed such employee's wages, salaries, tips, and other employee compensation which are attributable to such employee's employment by the employer referred to in such subsection. (2)

Self-employed individuals

The amount excluded from gross income by subsection (a) for contributions with respect to an individual who is self employed shall not exceed such individual's earned income (as defined in section 401(c)(2)) derived by the taxpayer from the trade or business with respect to which the individual is self-employed. (3)

Community property laws not to apply

The limitations under this subsection shall be determined without regard to community property laws.

(2)

Conforming amendments

(A)Section 3121(a) of such Code is amended by striking or at the end of paragraph (21), by striking the period at the end of paragraph (22) and inserting ; or , and by inserting after paragraph (22) the following new paragraph:

(23)any payment made to a personal philanthropy account (as defined in section 224) of an employee.

(B)Section 3231(e) of such Code is amended by adding at the end the following new paragraph:

(13)

Personal philanthropy account contributions

The term compensation shall not include any payment made to a personal philanthropy account (as defined in section 224) of an employee.

(C)Section 3306(b) of such Code is amended by striking or at the end of paragraph (18), by striking the period at the end of paragraph (19) and inserting ; or, and by inserting after paragraph (19) the following new paragraph:

(20)any payment made to a personal philanthropy account (as defined in section 224) of an employee.

(D)Section 3401(a) of such Code is amended by striking or at the end of paragraph (21), by striking the period at the end of paragraph (22) and inserting ; or, and by inserting after paragraph (22) the following new paragraph:

(23)any payment made to a personal philanthropy account (as defined in section 224) of an employee.

(E)Section 6051(a) of such Code is amended by striking and at the end of paragraph (12), by striking the period at the end of paragraph (13) and inserting , and, and by inserting after paragraph (13) the following new paragraph:

(14)the amount contributed to any personal philanthropy account (as defined in section 224) of such employee or such employee’s spouse.

(d)

Prohibited transactions

(1)

Exception for taxable distributions from personal philanthropy accounts

Subsection (c) of section 4975 of such Code (defining to prohibited transaction) is amended by adding at the end the following new paragraph:

(7)

Special rule for personal philanthropy accounts

An individual for whose benefit a personal philanthropy account is established and any contributor to such account shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if section 224(d) applies with respect to such transaction.

(2)

Plan defined

Paragraph (1) of section 4975(e) of such Code is amended by striking or at the end of subparagraph (F), by striking the period at the end of subparagraph (G) and inserting , or, and by inserting after subparagraph (G) the following new subparagraph:

(H)a personal philanthropy account described in section 224.

(e)

Penalty on failure to report

Paragraph (2) of section 6693(a) of such Code (relating to provisions) is amended by striking and at the end of subparagraph (D), by striking the period at the end of subparagraph (E) and inserting , and, and by inserting after subparagraph (E) the following new subparagraph:

(F)section 224(f) (relating to personal philanthropy accounts).

(f)

Conforming amendment

Paragraph (2) of section 26(b) of such Code is amended by striking and at the end of subparagraph (R), by striking the period at the end of subparagraph (S) and inserting , and, and by adding at the end the following new subparagraph:

(T)section 224(d)(3) relating to (relating to additional tax with respect to distributions not used for charitable contribution purposes).

(g)

Clerical amendments

(1)The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by redesignating the item relating to section 224 as an item relating to section 225 and by inserting after the item relating to section 223 the following new item:

Sec. 224. Personal philanthropy accounts

(2)The table of sections for part III of subchapter B of chapter 1 of such Code is amended by inserting after the item relating to section 139A the following new item:

Sec. 139B. Contributions by employer to personal philanthropy accounts

(h)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2004.