1.Modifications to rules for
fractional gifts
(a)
(1)Additional
requirements for deductionParagraph (1) of section 170(o) of the
Internal Revenue Code of 1986 is amended to read as follows:
(1)Denial of
deduction in certain cases
(A)No deduction shall be allowed for a contribution of an
undivided portion of a taxpayer's entire interest in tangible personal property
unless—
(i)all interests in
the property are held immediately before such contribution by—
(I)the taxpayer,
or
(II)the taxpayer and
the donee,
(ii)in the case of
an initial fractional contribution, such contribution is an undivided portion
of not less than 10 percent of all interests in the property,
(iii)in the case of
an initial fractional contribution, the contribution is made pursuant to a
written binding contract which requires the donor—
(I)to contribute not
less than 20 percent of all interests in the property on or before the date
that is 11 years after the date of the initial fractional contribution,
and
(II)to contribute
all of the interests in such property to the donee (or if such donee is no
longer in existence, to any person described in subsection (c)) on or before
the earlier of the date of the death of the donor or the date which is 20 years
after the date of the initial fractional contribution, and
(iv)if the value of
the tangible personal property with respect to which the undivided portion of
the taxpayer's entire interest relates is greater than $1,000,000 (or such
greater amount as determined by the Secretary), the taxpayer attaches to the
return for the taxable year in which such contribution is made a statement of
value obtained from the Internal Revenue Service.
(B)The
Secretary may, by regulation, provide for exceptions to subparagraph (A)(i) in
cases where all persons who hold an interest in the property make proportional
contributions of an undivided portion of the entire interest held by such
persons. Such regulations may modify the requirements of clauses (ii) and (iii)
of subparagraph (A) to the extent necessary to carry out the purposes of this
subparagraph.
.
(2)Valuation of
subsequent giftsParagraph (2) of section 170(o) of such Code is
amended to read as follows:
(2)Valuation of
subsequent giftsIn the case of any additional contribution, the
fair market value of such contribution shall be determined by
multiplying—
(A)the fair market
value of all of the donor's interest in the property immediately before the
additional contribution, and
(B)the interest in
the property (expressed as a percentage) contributed in such additional
contribution.
.
(3)Paragraph (3) of section 170(o) of such Code is
amended—
(A)by redesignating
subparagraph (B) as subparagraph (C), and
(B)by striking
subparagraph (A) and inserting the following:
(A)The
Secretary shall provide for the recapture of the amount of any deduction
allowed under this section (plus interest) with respect to any contribution of
an undivided portion of a taxpayer's entire interest in tangible personal
property—
(i)in any case in
which the donor fails to meet the requirements described in paragraph
(1)(A)(iii), and
(ii)in any case
where such property is not in the physical possession of the donee and used in
a use which is related to a purpose or function constituting the basis for the
donee organization's exemption under section 501 during any applicable period
for a period of time which bears substantially the same ratio to 5 years
as—
(I)the percentage of
the undivided interest of the donee in the property (determined on the day
after such contribution was made), bears to
(II)100
percent.
(B)For purposes of subparagraph (A), the applicable period
means—
(i)the 5-year period
beginning on the date of the later of the initial fractional contribution,
and
(ii)each subsequent
5-year period occurring during the 20-year period described in paragraph
(1)(A)(iii)(II).
.
(b)Paragraph (1) of section 2055(g) of the Internal Revenue Code
of 1986 is amended to read as follows:
(1)Valuation of
subsequent giftsIn the case of any additional contribution, the
fair market value of such contribution shall be determined by
multiplying—
(A)the fair market
value of all of the donor's interest in the property immediately before the
additional contribution, and
(B)the interest in
the property (expressed as a percentage) contributed in such additional
contribution.
.
(c)
(1)Additional
requirements for deductionParagraph (1) of section 2522(e) of
the Internal Revenue Code of 1986 is amended to read as follows:
(1)Denial of
deduction in certain cases
(A)No deduction shall be allowed for a contribution of an
undivided portion of a taxpayer's entire interest in tangible personal property
unless—
(i)all interests in
the property are held immediately before such contribution by—
(I)the taxpayer,
or
(II)the taxpayer and
the donee,
(ii)in the case of
an initial fractional contribution, such contribution is an undivided portion
of not less than 10 percent of all interests in the property,
(iii)in the case of
an initial fractional contribution, the contribution is made pursuant to a
written binding contract which requires the donor—
(I)to contribute not
less than 20 percent of all interests in the property on or before the date
that is 11 years after the date of the initial fractional contribution,
and
(II)to contribute
all of the interests in such property to the donee (or if such donee is no
longer in existence, to any person described in section 170(c)) on or before
the earlier of the date of the death of the donor or the date which is 20 years
after the date of the initial fractional contribution, and
(iv)if the value of
the tangible personal property with respect to which the undivided portion of
the taxpayer's entire interest relates is greater than $1,000,000 (or such
greater amount as determined by the Secretary), the taxpayer attaches to the
return for the taxable year in which such contribution is made a statement of
value obtained from the Internal Revenue Service.
(B)The
Secretary may, by regulation, provide for exceptions to subparagraph (A)(i) in
cases where all persons who hold an interest in the property make proportional
contributions of an undivided portion of the entire interest held by such
persons. Such regulations may modify the requirements of clauses (ii) and (iii)
of subparagraph (A) to the extent necessary to carry out the purposes of this
subparagraph.
.
(2)Valuation of
subsequent giftsParagraph (2) of section 2522(e) of such Code is
amended to read as follows:
(2)Valuation of
subsequent giftsIn the case of any additional contribution, the
fair market value of such contribution shall be determined by
multiplying—
(A)the fair market
value of all of the donor's interest in the property immediately before the
additional contribution, and
(B)the interest in
the property (expressed as a percentage) contributed in such additional
contribution.
.
(3)Paragraph (3) of section 2522(e) of such Code is
amended—
(A)by redesignating
subparagraph (B) as subparagraph (C), and
(B)by striking
subparagraph (A) and inserting the following:
(A)The
Secretary shall provide for the recapture of the amount of any deduction
allowed under this section (plus interest) with respect to any contribution of
an undivided portion of a taxpayer's entire interest in tangible personal
property—
(i)in any case in
which the donor fails to meet the requirements described in paragraph
(1)(A)(iii), and
(ii)in any case
where such property is not in the physical possession of the donee and used in
a use which is related to a purpose or function constituting the basis for the
donee organization's exemption under section 501 during any applicable period
for a period of time which bears substantially the same ratio to 5 years
as—
(I)the percentage of
the undivided interest of the donee in the property (determined on the day
after such contribution was made), bears to
(II)100
percent.
(B)For purposes of subparagraph (A), the applicable period
means—
(i)the 5-year period
beginning on the date of the later of the initial fractional contribution,
and
(ii)each subsequent
5-year period occurring during the 20-year period described in paragraph
(1)(A)(iii)(II).
.
(d)Section 6033 of the Internal Revenue Code of 1986 is
amended by redesignating subsection (m) as subsection (n) and by inserting
after subsection (l) the following new subsection:
(m)Additional
provisions relating to organizations described in section
170(c)Every organization
described in section 170(c) shall, on any return required under subsection (a),
list each charitable contribution received by the organization during the
period covered by the return which represents a contribution of an undivided
portion of a taxpayer's entire interest in tangible personal property and
provide such other information with respect to such contribution as required by
the
Secretary.
.
(e)
(1)Except as provided in paragraph (2), the amendments made
by this section shall apply to contributions, bequests, and gifts made after
the date of the enactment of this Act.
(2)The amendments made by subsection (d) shall apply to
returns for taxable years ending after the date of the enactment of this
Act.
(f)In the case of any additional contribution (as defined in
section 170(o)(4) of the Internal Revenue Code of 1986) with respect to an
initial fractional contribution (as defined in such section) made after August
17, 2006, and before the date of the enactment of this Act—
(1)except for
purposes of determining the fair market value of such contribution under
sections 170(o)(2), 2055(g)(1), and 2522(e)(2) of the Internal Revenue Code of
1986 (as such sections were amended by this Act), such contribution shall be
treated as an initial fractional contribution (as so defined) subject to the
amendments made by this section, and
(2)sections
170(o)(3)(A)(i) and 2522(e)(3)(A)(i) of such Code (as in effect before the date
of the enactment of this Act) shall not apply with respect to any prior
contribution of an undivided portion of the taxpayer's interest in the
property.