[Congressional Record Volume 143, Number 51 (Friday, April 25, 1997)]
[Senate]
[Page S3727]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRAMS (for himself and Mr. Wellstone):
  S. 651. A bill to amend the Internal Revenue Code of 1986 to provide 
that the conducting of certain games of chance shall not be treated as 
an unrelated trade or business; to the Committee on Finance.


THE UNRELATED BUSINESS INCOME TAX CHARITABLE GAMBLING EXEMPTION ACT OF 
                                  1997

  Mr. GRAMS. Mr. President, I rise today to introduce S. 651, a bill to 
amend the Internal Revenue Code to exempt charitable gambling 
activities from Federal unrelated business income tax [UBIT].
  Charitable gambling consists mostly of games such as pull tabs and 
raffles. The difference between charitable and regular gambling is 
where and how the profit is spent. Most of the income derived from 
charitable gambling games are spent in communities to fund activities 
such as Boy and Girl Scouts, Head Start, and city and school programs.
  In fact, charitable gambling and bingo games have become one of the 
most important sources to provide funding for many activities in 
communities for people of all ages. In my home State, Minnesota, 
charitable gambling pumped up $77.5 million in profits into a variety 
of community and charitable causes in 1995. The beneficiaries include 
youth recreation and eduction, as well as organizations serving the 
sick, handicapped, retarded and disabled and many other community 
programs.
  Many charitable gambling games are set up solely for the purpose of 
raising money for public projects, thus reducing the burden on 
taxpayers. For example, Minnesota Belle Plaine Friends of the Library 
charitable gambling was started 4 years ago for the purpose of helping 
fund a new library in town. Today, they have donated more than $105,000 
to the library project.

  In 1978, President Carter signed into law a bill that classified 
bingo income as related business income. As a result, this charitable 
game is not subject to the Federal UBIT. But the law did not include 
other forms of charitable gambling. Consequently, the income of these 
charitable gambling games is taxed under the UBIT.
  Taxes take a big bite out of charitable gambling income. It has 
seriously undermined nonprofit organizations' ability to provide 
financial assistance for local activities. Here is an example of the 
revenue loss. Last year, the Minnesota American Legion donated $103,000 
to the Cancer Research Center at the University of Minnesota. However, 
under current law, the income is subject to the UBIT. Only $5,150 of 
the $103,000 was a deductible contribution, and $97,850 was taxed at 
rates up to 38 percent.
  This is simply not fair. Charitable donations should be encouraged, 
not penalized, to fund more local initiatives, projects and programs 
that benefit our communities. That's what the bill is all about.
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