[Congressional Record Volume 143, Number 134 (Wednesday, October 1, 1997)]
[Senate]
[Pages S10294-S10295]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself and Mr. Sessions): S. 1244. A bill 
        to amend title 11, United States Code, to protect certain 
        charitable contributions, and for other purposes; to the 
        Committee on the Judiciary.


     THE RELIGIOUS LIBERTY AND CHARITABLE DONATIONS PROTECTION ACT

  Mr. GRASSLEY. Mr. President, I rise today to introduce the Religious 
Liberty and Charitable Donations Protection Acts. This bill represents 
a giant step forward in protecting the religious freedom of many 
Americans who tithe. In the House of Representatives, Congressman Ron 
Packard will today introduce a companion measure. I ask consent that 
the bill be printed in the Record following my remarks.

  As my colleagues may know, bankruptcy judges across the country have 
been ordering churches to refund large sums of money when a parishioner 
declares bankruptcy. This causes serious hardship to churches and is a 
frontal assault on religious freedom of worship. After the Supreme 
Court's recent decision striking the Religious Freedom Restoration Act 
[RFRA] down as unconstitutional, I believe that Congress has a 
responsibility to act now to protect religious freedom. Because I chair 
the Subcommittee on Administrative Oversight and the Courts--which has 
primary jurisdiction over bankruptcy--I have an obligation to respond 
to this renewed threat to religious liberty.
  Of course, there are other areas where Congress needs to protect 
religious freedom, and I look forward to assisting Chairman Hatch--who 
is a strong leader in protecting religious liberty--in these efforts.
  But in the context of tithing and bankruptcy, I feel the time to act 
is now. The Supreme Court just vacated and remanded a case from the 
Eighth Circuit Court of Appeals which had ruled that RFRA protected 
churches from bankruptcy lawsuits seeking the return of money given as 
a tithe. This is a particular concern to me, since my home State of 
Iowa is in the eighth circuit and will be affected by this court case. 
The pastor of the church involved in this case, Pastor Steven Goold of 
the Crystal Free Evangelical Church, testified before my subcommittee 
as to the difficulties his church has faced in trying to protect itself 
from bankruptcy judges, including the huge legal costs associated with 
fighting the bankruptcy judge's ruling. Pastor Goold supports this 
legislation, as does Americans United for Separation of Church and 
State. So, the bill has broad support from many diverse sectors of our 
society.
  In addition to preventing Federal judges from ordering churches to 
pay refunds of previous tithes, the legislation I'm introducing today 
will protect postbankruptcy tithing in chapter 13 cases. As currently 
interpreted, chapter 13, which permits debtors to repay their creditors 
at a discounted rate, also allows debtors to budget a moderate amount 
of money for entertainment expenses. But, several courts have said that 
debtors can't budget money to tithe to their church. In other words, if 
you're in chapter 13 bankruptcy, you can budget money for a hamburger 
and a movie, but you can't take that same money and give it to your 
church--even if you believe your faith requires that.
  This is an obvious assault on the freedom of religion. Would our 
founding fathers have wanted a Federal judge to tell a citizen that 
he's not allowed to tithe to his church? Obviously not. Such a 
situation is antithetical to the American tradition of liberty and 
separation of church from State.
  As a result of my hearing, I have made several minor changes to 
accommodate various concerns that have been raised about possible 
unintended consequences. I hope that the legislation as now drafted 
will receive the support of every Member of Congress who is concerned 
about protecting freedom generally and restoring freedom of religion--
our first freedom--to its rightful place in American society.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1244

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Religious Liberty and 
     Charitable Donation Protection Act of 1997''.

[[Page S10295]]

     SEC. 2. DEFINITIONS.

       Section 548(d) of title 11, United States Code, is amended 
     by adding at the end the following:
       ``(3) In this section, the term `charitable contribution' 
     means a charitable contribution, as that term is defined in 
     section 170(c) of the Internal Revenue Code of 1986, if that 
     contribution--
       ``(A) is made by a natural person; and
       ``(B) consists of--
       ``(i) a financial instrument (as that term is defined in 
     section 731(c)(2)(C) of the Internal Revenue Code of 1986); 
     or
       ``(ii) cash.
       ``(4) In this section, the term `qualified religious or 
     charitable entity or organization' means--
       ``(A) an entity described in section 170(c)(1) of the 
     Internal Revenue Code of 1986; or
       ``(B) an entity or organization described in section 
     170(c)(2) of the Internal Revenue Code of 1986.''.

     SEC. 3. TREATMENT OF PRE-PETITION QUALIFIED CHARITABLE 
                   CONTRIBUTIONS.

       (a) In General.--Section 548(a) of title 11, United States 
     Code, is amended--
       (1) by inserting ``(1)'' after ``(a)'';
       (2) by striking ``(1) made'' and inserting ``(A) made'';
       (3) by striking ``(2)(A)'' and inserting ``(B)(i);
       (4) by striking ``(B)(i)'' and inserting ``(ii)(I)'';
       (5) by striking ``(ii) was'' and inserting ``(II) was'';
       (6) by striking ``(iii)'' and inserting ``(III)''; and
       (7) by adding at the end the following:
       ``(2) A transfer of a charitable contribution to a 
     qualified religious or charitable entity or organization 
     shall not be considered to be a transfer covered under 
     paragraph (1)(B) in any case in which--
       ``(A) the amount of that contribution does not exceed 15 
     percent of the gross annual income of the debtor for the year 
     in which the transfer of the contribution is made; or
       ``(B) the contribution made by a debtor exceeded the 
     percentage amount of gross annual income specified in 
     subparagraph (A), if the transfer was consistent with the 
     practices of the debtor in making charitable 
     contributions.''.
       (b) Trustee as Lien Creditor and as Successor to Certain 
     Creditors and Purchasers.--Section 544(b) of title 11, United 
     States Code, is amended--
       (1) by striking ``(b) The trustee'' and inserting ``(b)(1) 
     Except as provided in paragraph (2), the trustee''; and
       (2) by adding at the end the following:
       ``(2) Paragraph (1) shall not apply to a transfer of a 
     charitable contribution (as that term is defined in section 
     548(d)(3)) that is not covered under section 548(a)(1)(B), by 
     reason of section 548(a)(2).''.
       (c) Conforming Amendments.--Section 546 of title 11, United 
     States Code, is amended--
       (1) in subsection (e)--
       (A) by striking ``548(a)(2)'' and inserting 
     ``548(a)(1)(B)''; and
       (B) by striking ``548(a)(1)'' and inserting 
     ``548(a)(1)(A)'';
       (2) in subsection (f)--
       (A) by striking ``548(a)(2)'' and inserting 
     ``548(a)(1)(B)''; and
       (B) by striking ``548(a)(1)'' and inserting 
     ``548(a)(1)(A)''; and
       (3) in subsection (g)--
       (A) by striking ``section 548(a)(1)'' each place it appears 
     and inserting ``section 548(a)(1)(A)''; and
       (b) by striking ``548(a)(2)'' and inserting 
     ``548(a)(1)(B)''.

     SEC. 4. TREATMENT OF POST-PETITION CHARITABLE CONTRIBUTIONS.

       (a) Confirmation of Plan.--Section 1325(b)(2)(A) of title 
     11, United States Code, is amended by inserting before the 
     semicolon the following: ``, including charitable 
     contributions (that meet the definition of `charitable 
     contribution' under section 548(d)(3)) to a qualified 
     religious or charitable entity or organization (as that term 
     is defined in section 548(d)(4)) in an amount not to exceed 
     15 percent of the gross income of the debtor for the year in 
     which the contributions are made''.
       (b) Dismissal.--Section 707(b) of title 11, United States 
     Code, is amended by adding at the end the following: ``In 
     making a determination whether to dismiss a case under this 
     section, the court may not take into consideration whether a 
     debtor has made, or continues to make, charitable 
     contributions (that meet the definition of `charitable 
     contribution' under section 548(d)(3)) to any qualified 
     religious or charitable entity or organization (as that term 
     is defined in section 548(d)(4)).''.

     SEC. 5. APPLICABILITY.

       This Act and the amendments made by this Act shall apply to 
     any case brought under an applicable provision of title 11, 
     United States Code, that is pending or commenced on or after 
     the date of enactment of this Act.

     SEC. 6. RULE OF CONSTRUCTION.

       Nothing in the amendments made by this Act is intended to 
     limit the applicability of the Religious Freedom Restoration 
     Act of 1993 (42 U.S.C. 2002bb et seq.).
                                 ______