[Congressional Record Volume 141, Number 141 (Tuesday, September 12, 1995)]
[Extensions of Remarks]
[Page E1763]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


 A BILL TO IMPOSE AN EXCISE TAX ON AMOUNTS OF PRIVATE EXCESS BENEFITS 
                     FROM CHARITABLE ORGANIZATIONS

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                           HON. AMO HOUGHTON

                              of new york

                    in the house of representatives

                      Tuesday, September 12, 1995
  Mr. HOUGHTON. Mr. Speaker, I am pleased to join my colleague, the 
gentleman from California [Mr. Stark] in introducing the Exempt 
Organization Reform Act of 1995. This is an important piece of 
bipartisan legisaltion that would help solve a problem that we have 
attempted to address a number of times in the past. Basically, the 
issue is one of private inurement involving tax-exempt organizations, 
where the organization's insiders are using the charity's asserts for 
their own personal benefit. The problem is how to handle abuses in that 
area, short of revoking the tax-exempt status of the organization. At 
the present time, the only tool normally available to the Internal 
Revenue Service, in private inurement situations is revocation. 
Revocation is often too severe and does not punish the illegal acts of 
the insider. Intermediate sanctions are needed to prevent organization 
insiders from using a charity's assets for their own personal benefit.
  In the 103d Congress, the Oversight Subcommittee and the full Ways 
and Means Committee made a number of attempts to address the issue. 
Most recently, a bipartisan proposal was suggested by Ways and Means 
members as part of the GATT implementation legislation. Unfortunately, 
it was not included in the final conference report by the House and 
Senate. Both in the past and currently, the Treasury and IRS have 
continued to urge that legislation be enacted to fix this problem.
  The bill would include provisions to: First, extend the current law 
prohibition on private inurement applicable to charities to social 
welfare organizations (section 501(c)(4) organizations), second, 
provide for intermediate sanctions in the form of penalty excise taxes 
where the organization engages in an excess benefit transaction; as 
well as imposing dollar sanctions on certain disqualified individuals--
for example, insiders--who improperly benefit from such a transaction, 
and third, require reporting of excise tax penalties imposed so that 
contributors can make an independent judgment on supporting the 
organization, and provide for public availability of annual reports.
  These changes are designed to solve the current problems resulting 
from the lack of a range of enforcement tools. This legislation will 
also improve the ability of contributors to scrutinize the activities 
of organizations they support.
  We welcome the support of our colleagues in cosponsoring this 
important legislation.


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