[Congressional Record Volume 144, Number 70 (Wednesday, June 3, 1998)]
[House]
[Pages H3999-H4005]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              {time}  1530
    RELIGIOUS LIBERTY AND CHARITABLE DONATION PROTECTION ACT OF 1998

  Mr. GEKAS. Mr. Speaker, I move to suspend the rules and pass the bill 
(H.R. 2604) to amend title 11, United States Code, to protect certain 
charitable contributions, and for other purposes, as amended.
  The Clerk read as follows:

                               H.R. 2604

       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 1998''.

     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). Any claim by any person to 
     recover a transferred contribution described in the preceding 
     sentence under Federal or State law in a Federal or State 
     court shall be preempted by the commencement of the case.''.
       (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.).

  The SPEAKER pro tempore (Mr. Pease). Pursuant to the rule, the 
gentleman from Pennsylvania (Mr. Gekas) and the gentleman from New York 
(Mr. Nadler) each will control 20 minutes.
  The Chair recognizes the gentleman from Pennsylvania (Mr. Gekas).


                             General Leave

  Mr. GEKAS. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days within which to revise and extend their remarks 
on the bill under consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Pennsylvania?
  There was no objection.
  Mr. GEKAS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I urge adoption of this legislation and wish to set the 
stage for some of the comments that we will hear during the debate on 
this measure.
  This issue was brought to our attention by the gentlewoman from Idaho 
(Mrs. Chenoweth) and the gentleman from California (Mr. Packard) on two 
separate pieces of legislation that dealt with the same issue. Their 
legislative efforts came from different angles and from different 
perspectives, but the ultimate purpose was the same: to try to rectify 
a situation in which a contributor to a charitable organization, for 
the purpose of our hypothetical say to a church organization, makes a 
contribution, he subsequently files for bankruptcy, and a decision is 
made by the bankruptcy court and direction is given to the bankruptcy 
trustee to recover that amount paid by contribution to the church 
because it came within a certain period of time and, therefore, was not 
subject to be clear of the bankruptcy laws. So now we have the strange 
situation of a bankruptcy trustee having to assert a claim against a 
church.
  Mr. Speaker, that seemed unseemly to a great number of people. The 
gentlewoman from Idaho and the gentleman from California took to the 
legislative process to try to bring about a change. Hence their 
legislation, hence the action of the Committee on the Judiciary, and we 
have arrived at this stage.
  What we have done ultimately is to mirror, or try to mirror as much 
as we can, the Senate version of this same issue in legislation that 
they have passed so that we can be better prepared when the time comes 
for ultimate decision to be made by a conference in the two bodies. 
That is why we have come to the floor at this moment with the vehicle 
being H.R. 2604.
  Mr. Speaker, after the gentleman from New York (Mr. Nadler) presents 
his opening statement, I will yield to these two Members so that they 
can fully explain the contents of the legislation, the purpose, et 
cetera.
  Mr. Speaker, I urge adoption of H.R. 2604, the ``Religious Liberty 
and Charitable Donation

[[Page H4000]]

Protection Act of 1998'' This legislation, introduced by my colleague, 
Mr. Packard, on October 2, 1997, has as of today more than 120 
bipartisan co-sponsors. It was reported out of the Judiciary Committee 
without objection.
  H.R. 2604, with amendment, which is before you for consideration 
today, contains one substantial change from the bill as reported by the 
Judiciary Committee which is in accord with the members of the other 
body. The additional provision it contains prevents creditors from 
using remedies available under state law to avoid transfers of 
religious or charitable contributions. H.R. 2604, as amended, is now 
identical to its Senate counterpart, S. 1244, which passed the other 
body on a vote of 100 to 0 on May 13, 1998. Favorable action today in 
this body can send this legislation to the President for his approval.
  The principal component of H.R. 2604 protects certain prepetition 
charitable contributions made by an individual debtor to qualified 
religious or charitable entities within one year preceding the filing 
date of the debtor's bankruptcy petition from being subsequently 
avoided by a bankruptcy trustee under Section 548 of the Bankruptcy 
Code. The bill defines ``charitable contribution'' and ``qualified 
religious or charitable entity or organization'' by reference to 
applicable provisions of the Internal Revenue Code. In addition, its 
sets certain limits on the amount of charitable contributions that 
would be exempt from Section 548.
  Important policy considerations support this bill. Voluntary 
donations should be treated differently than other types of property 
transfers under the Bankruptcy Code. The inherent nature of charitable 
contributions is that they are made specifically without the intent of 
receiving anything in return. This principal is recognized in the 
Internal Revenue Code's provisions concerning the deductibility of 
certain charitable contributions.
  Under current law, the courts often conduct a very fact-specific 
analysis to determine whether a debtor received reasonably equivalent 
value in exchange for a charitable contribution. In the religious 
context, courts consider, for example, whether the debtor received 
certain services from the religious entity, such as counseling, in 
exchange for his or her donation. This analysis essentially places 
courts in the untenable position of having to value spiritual benefits 
and has led to disparate case law development.
  Other policy considerations favoring the exemption of charitable 
contributions from the purview of Section 548 include the fact that 
religious and charitable organizations provide valuable services to 
society and serve the common good. Another consideration is the fact 
that most religious and charitable organizations simply lack the funds 
to litigate a recovery action filed a bankruptcy trustee under Section 
548 and therefore must simply return the funds received. Particularly 
in light of the longer reachback period permitted under state law made 
applicable under Section 544(b) of the Bankruptcy Code, a charitable 
organization or religious entity may have to return funds it received 
from a debtor over a period extending several years.
  The bill also addresses problems presented by the current unclear 
state of the law that exists in light of a recent decision by the 
Supreme Court that places the continuing validity of the Religious 
Freedom Restoration Act in doubt.
  It is important to keep in mind that H.R. 2604 is not intended to 
diminish any of the protections against prepetition fraudulent 
transfers available under section 548 of the Bankruptcy Code. First, it 
applies to transfers that a debtor makes on an aggregate basis during 
the one-year reachback period preceding the filing of the debtor's 
bankruptcy case. Second, if a debtor, on the eve of filing for 
bankruptcy relief, suddenly donates 15 percent of his or her gross 
income to a religious organization, the debtor's fraudulent intent, if 
any, would be subject to scrutiny under section 548(a)(1) of the 
Bankruptcy Code. This fifteen percent ``safe harbor'' merely shifts the 
burden of proof and limits litigation to where there is evidence of a 
change in pattern large enough to establish fraudulent intent.
  In addition, H.R. 2604 protects the right of certain debtors to tithe 
or make charitable contributions after filing for bankruptcy relief. 
This protection is required because some courts have held that tithing 
is not a reasonably necessary expense or have dismissed these debtors' 
bankruptcy cases on the ground that such tithing constituted a 
``substantial abuse'' under section 707(b) of the Bankruptcy Code.
  For all of these laudatory reasons, I urge the adoption of H.R. 2604, 
as amended.
  Mr. Speaker, I reserve the balance of my time.
  Mr. NADLER. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I want to begin by thanking the honorable gentleman from 
California (Mr. Packard), my friend, for originally introducing this 
legislation. I also thank the honorable gentleman from Pennsylvania 
(Mr. Gekas), for bringing this legislation forward.
  Mr. Speaker, given the spirited debates we have been having on our 
subcommittee and on the full committee on certain other bankruptcy 
legislation the gentleman is sponsoring, I am glad we have been able to 
work together to develop this bill and to bring it to the floor as 
bipartisan legislation today.
  This bipartisan legislation would protect religious and other 
charitable institutions that receive donations from individuals who 
later declare bankruptcy, and would permit debtors in bankruptcy to 
continue to make donations to such organizations of up to 15 percent of 
their gross annual income.
  This bill is needed to address a problem that originated with the 
Supreme Court's decision in 1990 in Employment Division versus Smith, 
which said that the government may impose substantial burdens on an 
individual's free exercise rights so long as the government does so in 
a manner that is facially neutral toward religion.
  Congress attempted to correct this decision in 1993 by enacting the 
Religious Freedom Restoration Act, RFRA. The Court of Appeals in the 
Eighth Circuit ruled in 1996 that RFRA protected tithed donations to a 
charitable organization from creditors in bankruptcy proceedings.
  The following year, last year, the Supreme Court unfortunately struck 
down RFRA in City of Boerne versus Florez, and later, in accordance 
with its decision in Boerne that RFRA was unconstitutional, vacated and 
remanded the Eighth Circuit decision.
  Since the Supreme Court decision struck down RFRA only with respect 
to State laws, however, it is uncertain today whether RFRA remains good 
law as applied to Federal statutes such as the Bankruptcy Code. While 
the Supreme Court may ultimately decide this question, I see no reason 
to wait for a decision when a simple and straightforward remedy is at 
hand as to the tithing problem.
  This legislation would protect religious and charitable donations in 
bankruptcy proceedings by clarifying that they are not ``fraudulent 
transfers" within the meaning of the statute. As modified by the Senate 
language, the legislation also deals with the problem of State fraud 
statutes which might otherwise, under some circumstances, be used to 
undercut the Federal protection which I trust we will institute today. 
So this legislation takes care of that potential problem.
  Mr. Speaker, I would like at this time to engage the gentleman from 
Pennsylvania (Mr. Gekas) in a colloquy to confirm my understanding of 
the legislative intent with respect to section 3(a) of this bill which 
adds a new section 548(a)(2)(A) to title 11 of the U.S. Code. This 
section provides a safe harbor for qualified contributions of up to 15 
percent of the debtor's gross annual income for the year in which such 
contributions were made. Under the new section 548(a)(2)(B), if the 
debtor's aggregate donations exceed 15 percent, the debtor would have 
to establish that the transfer was consistent with his or her prior 
pattern of charitable giving in order for that donation to be 
protected.
  Mr. Speaker, I would ask the gentleman from Pennsylvania (Mr. Gekas) 
to confirm my understanding as set forth in the committee report that 
the intent of this provision is to protect qualified contributions of 
up to 15 percent of the debtor's gross annual income in the aggregate 
for the year in which the contribution was made, and that we do not 
intend this language to allow multiple contributions to a given 
organization or to more than one organization which in the aggregate 
exceed 15 percent of the debtor's gross annual income to be protected. 
Would the gentleman confirm whether this is his understanding as well?
  Mr. GEKAS. Mr. Speaker, will the gentleman yield?
  Mr. NADLER. I yield to the gentleman from Pennsylvania.
  Mr. GEKAS. Mr. Speaker, I appreciate the opportunity at this juncture 
to explain in response to the gentleman's question that this 
legislation is not intended to diminish any of the protections against 
pre-petition, fraudulent transfers available under section 548 of the 
Bankruptcy Code.
  First, it applies to transfers that a debtor makes, and I emphasize 
this, on

[[Page H4001]]

an aggregate basis during the one year reach-back period to which the 
gentleman has referred proceeding the filing of the debtor's bankruptcy 
case.
  Second, if the debtor on the eve of filing for bankruptcy relief 
suddenly donates 15 percent of his or her gross income to a religious 
organization, the debtor's fraudulent intent, if any, would be subject 
to scrutiny under section 548(a)(1) of the Bankruptcy Code. This 15 
percent safe harbor merely shifts the burden of proof and limits 
litigation to where there is evidence of a change in pattern large 
enough to establish fraudulent intent. We hope this satisfies the 
inquiry that the gentleman has posed.
  Mr. NADLER. Mr. Speaker, reclaiming my time, I thank the gentleman 
very much for his response. Yes, indeed it does satisfy the inquiry. I 
thank the gentleman for his assistance in clarifying the intent of the 
legislation and of the Congress in regard to this matter. Mr. Speaker, 
I urge my colleagues to adopt this legislation.
  Mr. Speaker, I reserve the balance of my time.
  Mr. GEKAS. Mr. Speaker, I yield 5 minutes to the gentleman from 
California (Mr. Packard).
  (Mr. PACKARD asked and was given permission to revise and extend his 
remarks.)
  Mr. PACKARD. Mr. Speaker, I thank the gentleman from Pennsylvania 
(Mr. Gekas) for yielding me this time. I would like to take this moment 
to heartily thank the gentleman from Illinois (Mr. Hyde), chairman of 
the full Committee on the Judiciary, the gentleman from Pennsylvania 
(Mr. Gekas), the chairman of the subcommittee, and the gentleman from 
New York (Mr. Nadler), the ranking Democrat on the subcommittee, for 
bringing this bill to the floor today and for their support of the 
Religious Liberty and Charitable Donations Protection Act which is 
before us.
  Mr. Speaker, in the Old Testament it says, ``Will a man rob God? Yet 
ye have robbed me. But ye say, Wherein have we robbed thee? In tithes 
and offerings. Bring ye all the tithes into the storehouse, that there 
may be meat in mine house, and prove me now herewith, sayeth the Lord 
of Hosts, if I will not open you the windows of heaven, and pour you 
out a blessing, that there shall not be room enough to receive it.''
  To many Christians this is a sacred commandment, and they cannot 
practice their religions unless they can obey this commandment that 
says they need to bring their tithes to Him.
  A person often in times of financial and other problems turns to God 
and their church for strength and for blessings. To close those windows 
of heaven and prevent God from pouring out a blessing at the very time 
that bankrupt families need His blessings would be unconscionable, for 
the law of the land to prevent a person from being able to practice 
that part of their religion.
  Mr. Speaker, many churches and charitable organizations across this 
country live from hand to mouth, when what comes into the collection 
plate on one day is usually spent the next. When a creditor is allowed 
to sue a church or a charity in order to recover a donation made 
possibly months or even years earlier, the church or charity is usually 
put in a position of hardship. What is more, they rarely have the 
ability or the resources to fight the suit in court. In some cases, 
that can lead to financial ruin for the church or for the charitable 
organization.
  I do not believe that a church or a charity that receives a tithe or 
a donation ought to have to check the financial background of the donor 
before they donate. They certainly should not be penalized for 
receiving a donation from anybody, but that is exactly what current law 
requires.
  My bill, along with Senator Grassley's bill, S. 1244, would correct 
this problem. In addition to protecting churches and charities, our 
bill also assists the individual donor himself. Currently, a person who 
files for bankruptcy under chapter 13 is not allowed to make charitable 
contributions or tithes to a church. Amazingly, the court has said that 
in making this type of contribution, the donor receives nothing of 
value in return. Mr. Speaker, I cannot accept this. I contribute to my 
church and I am here to say that I do receive something of significant 
value, and it is tangible to me, in return.
  Under chapter 13, a person can go to a bar, to a beer hall. They can 
get advice on a 1-900 psychic advice line. They can gamble their money 
away. They can fill their basement full of alcohol. But they cannot 
contribute to their church or to a charity. That is unconscionable and 
ought to be corrected, and this bill will correct that.
  I hope and pray that every Member of this House will follow the lead 
of the Senate. The Senate, when this was called for on a rollcall vote 
on the floor of the Senate, 100 Senators voted for it. Not a single one 
voted against it. We hope the House will follow that example.
  Again, I thank the gentlemen from Pennsylvania (Mr. Gekas), the 
chairman of the subcommittee, and the gentleman from New York (Mr. 
Nadler), ranking member, for bringing this to the floor of the House 
today.
  Mr. Speaker, I submit the following three letters that deal with this 
bill for inclusion in the Record:


                                      Christian Legal Society,

                                      Annandale, VA, May 13, 1998.
     Re support for H.R. 2604.

     Hon. Ron Packard,
     U.S. House of Representatives,
     Washington, DC.
       Dear Representative Packard: The 4,000 member attorneys and 
     law students of the Christian Legal Society unequivocally 
     endorse your ``Religious Liberty And Charitable Donation 
     Protection Act,'' for a number of reasons.
       First, your bill would prevent bankruptcy trustees or 
     creditors under section 544 from using state fraudulent 
     transfer laws that allow confiscation of donations going back 
     as far as six years prior to bankruptcy filing. H.R. 2611 
     does not.
       Second, H.R. 2604 ensures the right of Americans to 
     continue to give to their church or charity while they are 
     paying off their debts pursuant to a Chapter 13 plan. 
     Otherwise, religious believers will be barred for years from 
     exercising this form of worship. H.R. 2611 does not address 
     Chapter 13.
       Third, H.R. 2604 would protect tithes and offerings 
     received by churches and charities from donors who gave 
     either from a sense of religious obligation or motivation. 
     Some judges will inevitably conclude that the clause in H.R. 
     2611 that limits protection to gifts made ``from a sense of 
     religious obligation'' does not extend to the millions of 
     Americans who give not because of a commandment but out of 
     gratitude to God.
       Fourth, H.R. 2604 is constitutionally sound. It extends 
     protection to donations given to religious as well as non-
     religious donees. H.R. 2611 only protects gifts to ``a 
     religious group or entity''; consequently, it is likely to be 
     challenged as violative of the First Amendment's prohibition 
     on an establishment of religion.
       With the Senate's near unanimous approval today of the 
     identical Grassley language (S. 1244), it is apparent that 
     H.R. 2604 enjoys broad bipartisan support. The Packard-
     Grassley bill can pass this Congress, providing immediate 
     relief for churches and ministries that are otherwise bound 
     to continue losing in the courts. Unlike H.R. 2611, it would 
     protect debtors in Chapter 13 who wish to continue their 
     donations. Unlike H.R. 2611, H.R. 2604 would prevent the 
     misuse of state laws to confiscate multiple years of giving. 
     And H.R. 2604 would protect far more churches (not just those 
     that require tithing) and would not likely be a target of a 
     lawsuit challenging its constitutionality.
       For any and all of these reasons, Christian Legal Society 
     will work for the earlier passage in the House of H.R. 2604.
           Respectfully,
     Steven T. McFarland,
       Director, Center For Law and Religious Freedom.
       P.S. We understand that some may question whether the 15% 
     figure in section 3 of H.R. 2604 is a cap. We believe the 
     answer is clearly ``no.'' Rather than inviting trustees 
     across the country to litigate over whether the tithe was a 
     consistent practice of the donor, H.R. 2604 creates a bright-
     line test, a ``safe harbor'' that defuses this issue. 
     Churches would not have to waste precious funds on legal fees 
     defending their offerings in court. It would be clear; if the 
     donations are no more than 15%, then trustee cannot challenge 
     them, unless he has evidence of actual fraud (section 548a(1) 
     would remain available). With the 15% shield, Congress would 
     be clarifying what creditors cannot challenge, not 
     prescribing how much a donor should give. A donor can give 
     more than 15% of his income to charity, but will have to 
     prove that this has been his consistent practice over several 
     years.
                                  ____

                                                    School of Law,


                            The University of Texas at Austin,

                                          Austin, TX, May 6, 1998.
     Hon. Ron Packard,
     Rayburn House Office Building,
     Washington, DC.
       Dear Rep. Packard: The question has arisen whether S. 1244 
     and H.R. 2604 would protect unincorporated churches. The 
     answer is yes; unincorporated churches would be protected.
       These bills protect organizations defined in Sec. 170(c)(2) 
     of the Internal Revenue Code,

[[Page H4002]]

     which includes any ``corporation, trust, or community chest, 
     fund, or foundation'' organized and operated exclusively for 
     charitable, religious, or other listed purposes. The Internal 
     Revenue Code defines ``corporation'' to include an 
     ``association.'' 26 U.S.C. Sec. 7701(a)(3). An unincorporated 
     association may also be a ``fund.''
       The language of Sec. 170(c)(2) dates to shortly after World 
     War I. Related sections drafted more recently use the word 
     ``organization,'' which more obviously includes 
     unincorporated associations. See, e.g., Sec. 170b and 
     Sec. Sec. 502-511. The implementing regulations under 
     Sec. 170 and Sec. 501(c)(3) also used the word 
     ``organization.'' 26 C.F.R. Sec. Sec. 1.170 and 1.501. 
     ``Organization'' does not appear to be a defined term. But 
     Treasury Regulations define ``articles of organization'' in 
     inclusive terms: ``The term `articles of organization' or 
     `articles' includes the trust instrument, the corporate 
     charter, the articles of association, or any other written 
     instrument by which an organization is created.'' 26 C.F.R. 
     Sec. 1.501(c)(3)(b)(2) (emphasis added). ``Articles of 
     association'' clearly seems designed to include 
     unincorporated associations.
       The clearest statement from the Internal Revenue Service 
     appears to be Revenue Procedure 82-2 (attached), which sets 
     out certain rules for different categories of tax exempt 
     organizations. Section 3.04 provides a rule for 
     ``Unincorporated Nonprofit Associations.'' This Procedure 
     treats the question as utterly settled and noncontroversial.
       Tax scholars agree that Sec. 170 includes unincorporated 
     associations. The conclusion appears to be so universally 
     accepted that there has been no litigation and no need to 
     elaborate the explanation. The leading treatise on tax-exempt 
     organizations states: ``An `unincorporated association' or 
     `trust' can qualify under this provision, presumably as a 
     `fund' or `foundation' or perhaps, as noted, as a 
     `corporation.' '' Bruce R. Hopkins, The Law of Tax-Exempt 
     Organizations Sec. 4.1 at 52 (7th ed. 1997).
       Borris Bittker of Yale and Lawrence Lokken of NYU say: 
     ``Since the term `corporation' includes associations and 
     `fund or foundation' as used in IRC Sec. 501(c)(3) is 
     construed to include trusts, the technical form in which a 
     charitable organization is clothed rarely results in 
     disqualification.'' Boris I. Bittker & Lawrence Lokken, 4 
     Federal Taxation of Income, Estates and Gifts para.100.1.2 at 
     100-6 (2d ed. 1989).
       Closely related provisions of the Code expressly cover 
     churches. I.R.C. Sec. 170(b)(1) states special rules for a 
     subset of organizations defined in Sec. 170(c), including ``a 
     church, or a convention or association of churches.'' I.R.C. 
     Sec. 508(c)(1) provides that ``churches, their integrated 
     auxiliaries, and conventions or associations of churches'' do 
     not have to apply for tax exemption. These provisions plainly 
     contemplate that churches are covered; they also prevent the 
     accumulation of IRS decisions granting tax exempt status to 
     unincorporated churches. These churches are simply presumed 
     to be exempt.
       There are tens of thousands of unincorporated churches in 
     America. I am not aware that any of these churches has ever 
     had difficulty with tax exemption or tax deductibility of 
     contributions because of their unincorporated status. I work 
     with many church lawyers and religious leaders, and none of 
     them has ever mentioned such a problem. There are no reported 
     cases indicating litigation over such a problem. If 
     unincorporated churches were having this problem, Congress 
     would have heard demands for constituent help or corrective 
     legislation.
       The fact is that legitimate unincorporated churches that 
     otherwise qualify for tax deductibility under Sec. 170 and 
     for tax exemption under Sec. 501(c)(3) are not rendered 
     ineligible by their failure to incorporate. There is so 
     little doubt about that that neither Congress, the IRS, nor 
     the courts has ever had to expressly elaborate on the rule 
     that everyone knows. This is a question that can be safely 
     dealt with in legislative history affirming Congress's 
     understanding that unincorporated associations are included 
     in Sec. 170(c)(2) and Congress's intention that they be 
     protected by these bills.
       I consulted informally with Deirdre Halloran, the expert on 
     tax exempt organizations at the United States Catholic 
     Conference, and with tax professors here and elsewhere, who 
     confirmed these conclusions. Ms. Halloran would be happy to 
     respond to inquiries from your office if you need a second 
     opinion.
           Very truly yours,
     Douglas Laycock.
                                  ____


                            Rev. Proc. 82-2


                           section 1. purpose

       The purpose of this revenue procedure is to identify the 
     states and circumstances in which the Service will not 
     require an express provision for the distribution of assets 
     upon dissolution in an exempt organization's articles of 
     incorporation, trust instrument, or other organizing document 
     to satisfy the ``organizational'' test in section 
     1.501(c)(3)-1(b)(4) of the Income Tax Regulations. Also, this 
     procedure provides a sample of an acceptable dissolution 
     provision for organizations that are required to have an 
     express provision for the distribution of assets upon 
     dissolution.


                           sec. 2. background

       .01 Section 1.501(c)(3)-1(b)(4) of the regulations provides 
     that:
       ``(4) Distribution of assets on dissolution. An 
     organization is not organized exclusively for one or more 
     exempt purposes unless its assets are dedicated to an exempt 
     purpose. An organization's assets will be considered 
     dedicated to an exempt purpose, for example, if, upon 
     dissolution, such assets would, by reason of a provision in 
     the organization's articles or by operation of law, be 
     distributed for one or more exempt purposes, or to the 
     Federal government, or to a State or local government, for a 
     public purpose, or would be distributed by a court to another 
     organization to be used in such manner as in the judgment of 
     the court will best accomplish the general purposes for which 
     the dissolved organization was organized. However, an 
     organization does not meet the organizational test if its 
     articles or the law of the State in which it was created 
     provide that its assets would, upon dissolution, be 
     distributed to its members or shareholders. [Emphasis added.]
       .02 The issue of the applicability of state law in relation 
     to section 1.501(c)(3)-1(b)(4) of the regulations as to a 
     particular organization arises only where the organization 
     itself has not provided for the distribution of its assets 
     upon dissolution in its articles of incorporation, organizing 
     document, or trust instrument. When state law satisfies the 
     provisions of section 1.501(c)(3)-1(b)(4), it is not 
     necessary to require an organization to amend its articles of 
     incorporation or organizing document, or to require a trust 
     to obtain a judicial decree amending its trust instrument, in 
     order to satisfy the organizational test for qualification as 
     an exempt organization described in section 501(c)(3) of the 
     Code, where all the other requirements for exemption are met.
       .03 The issue of whether section 1.501(c)(3)-1(b)(4) of the 
     regulations is satisfied under state law can be broken down 
     into four areas according to the type of entity involved:
       (1) the cy pres doctrine as to inter vivos charitable 
     trusts;
       (2) the cy pres doctrine as to testamentary charitable 
     trusts, which can exist in a particular state by case law 
     and/or by statute;
       (3) state corporate law containing statutes that provide 
     for the distribution of assets upon the dissolution of 
     nonprofit corporations; and
       (4) state law by court decision or statute relating to 
     unincorporated associations.

     Each of these four areas will be treated separately in this 
     revenue procedure.


                           sec. 3. guidelines

       .01 Inter Vivos Charitable Trusts.
       1. Because there is no guarantee under the law of any 
     jurisdiction, except Delaware, that cy pres would be used to 
     keep an inter vivos charitable trust from failing, any inter 
     vivos charitable trust, except in Delaware, should be 
     required to have an adequate dissolution provision in its 
     trust instrument to satisfy the requirements of section 
     1.501(c)(3)-1(b)(4) of the regulations.
       .02 Testamentary Charitable Trusts.
       1. The courts in the following states always apply the cy 
     pres doctrine or the doctrine of equitable approximation to 
     keep a charitable testamentary trust from failing, and thus 
     section 1.501(c)(3)-1(b)(4) of the regulations with respect 
     to charitable testamentary truss is satisfied:
       Alabama.
       Delaware.
       Louisiana.
       Pennsylvania.
       South Dakota.
       Virginia.
       West Virginia (However, a state court decision has held 
     that the cy pres doctrine does not apply to a scientific 
     organization in West Virginia.)
       2. The courts in the jurisdictions listed below will apply 
     the cy pres doctrine to keep a charitable testamentary trust 
     from failing when the language of the trust instrument 
     demonstrates that the settlor had a general intent to benefit 
     charity, and not merely a specific intent to benefit a 
     particular institution. In such jurisdiction the cy pres 
     doctrine may be relied upon by a charitable testamentary 
     trust to satisfy section 1.501(c)(3)-(b)(4) of the 
     regulations only when the settlor has demonstrated a general 
     charitable intent in the language of the trust instrument. 
     Unless the testator manifests a general intent to benefit 
     charity, the Service will require the testamentary charitable 
     trust to provide an express dissolution provision in the 
     trust instrument to satisfy section 1.501(c)(3)-1(b)(4).
       Arkansas.
       California.
       Colorado.
       Connecticut.
       District of Columbia.
       Florida.
       Georgia.
       Illinois.
       Indiana.
       Iowa.
       Kansas.
       Kentucky.
       Maine.
       Maryland.
       Massachusetts.
       Michigan.
       Minnesota.
       Mississippi.
       Missouri--MO. ANN. STAT. Sec. 352.210.3 satisfies the 
     provisions of section 1.501(c)(3)-1(b)(4) of the regulations 
     while MO. ANN. STAT. Sec. 355.230.(3) does not satisfy the 
     requirements.
       Nebraska.
       New Hampshire.
       New Jersey.
       New York.
       North Carolina.
       Ohio.
       Oklahoma.
       Oregon.

[[Page H4003]]

       Rhode Island.
       Tennessee.
       Texas.
       Vermont.
       Washington.
       Wisconsin.
       3. Charitable testamentary trusts in the following states 
     need a dissolution provision in the trust instrument to 
     satisfy section 1.501(c)(3)-1(b)(4) of the regulations 
     because these states have either expressly rejected or have 
     never applied the cy pres doctrine:
       Alaska.
       Arizona.
       Hawaii.
       Idaho.
       Montana.
       Nevada.
       New Mexico.
       North Dakota.
       South Carolina.
       Utah.
       Wyoming.
       .03 Nonprofit Charitable Corporations.
       1. The statutes applicable to nonprofit charitable 
     corporations in the states listed below will satisfy the 
     provisions of section 1.501(c)(3)-1(b)(4) of the Regulations:
       Arkansas.
       California.
       Louisiana.
       Massachusetts.
       Minnesota.
       Missouri.
       Ohio.
       Oklahoma.
     All other states, and the District of Columbia do not have 
     statutes applicable to nonprofit charitable corporations that 
     will satisfy the provisions of section 1.501(c)(3)-
     1(b)(4). Thus, nonprofit corporations in the eight named 
     states do not need a dissolution provision to satisfy 
     section 1.501(c)(3)-1(b)(4). A nonprofit corporation in a 
     jurisdiction not listed needs an adequate dissolution 
     provision in its organizing document to satisfy section 
     1.501(c)(3)-1(b)(4).
       .04 Unincorporated Nonprofit Associations.
       None of the fifty-one jurisdictions provides certainty by 
     statute or case law, for the distribution of assets upon the 
     dissolution of an unincorporated nonprofit association. 
     Therefore, any unincorporated nonprofit association needs an 
     adequate dissolution provision in its organizing document to 
     satisfy the requirements of section 1.501(c)(3)-1(b)(4) of 
     the regulations.
       .05 Sample Dissolution Provision.
       1 For any organization that needs a dissolution provision 
     in its organizing instrument to satisfy the provisions of 
     section 1.501(c)(3)-1(b)(4) of the regulations, the following 
     language is illustrative of what may be used:
       (a) Upon the dissolution of [this organization] assets 
     shall be distributed for one or more exempt purposes within 
     the meaning of section 501(c)(3) of the Internal Revenue 
     Code, or corresponding section of any future Federal tax 
     code, or shall be distributed to the Federal government, or 
     to a state or local government, for a public purpose.
       .06 Periodic Update.
       This Revenue Procedure will be updated periodically as 
     changes in state laws come to the attention of the Service.
                                  ____

                                                       Home School


                                    Legal Defense Association,

                                    Purcellville, VA, May 8, 1998.
       Dear Senator Grassley and Representative Packard, I 
     received a copy of the letter from Professor Doug Laycock 
     concerning my question regarding the inclusion of 
     unincorporated associations in S. 1244 and H.R. 2604. His 
     letter more than answers my question.
       Although an attorney with substantial constitutional 
     practice, I am not a non-profit tax expert by any means. Doug 
     Laycock has outstanding credentials in all relevant areas and 
     his opinion is conclusive for me.
       I would note that the expert commentators he quotes appear 
     to point to different terms in the phrase ``corporation, 
     trust, or community chest, fund, or foundation'' to include 
     unincorporated churches. Taken literally, unincorporated 
     associations do not fall in any of these categories. Reading 
     laws literally is generally a good idea, but was my mistake 
     on this occasion.
       Despite the lack of statutory clarity, the practice of the 
     IRS appears clear. And if an appropriate legislative record 
     is made, this should settle the matter for all judges with 
     the possible exception of Justice Scalia.
       Thanks for getting an answer so quickly.
           Sincerely,
                                                   Michael Farris,
                                                        President.

  Mr. GEKAS. Mr. Speaker, I yield 4 minutes to the gentlewoman from 
Idaho (Mrs. Chenoweth).
  Mrs. CHENOWETH. Mr. Speaker, I rise to engage in a colloquy with the 
gentleman from California (Mr. Packard), my friend and the author of 
this bill.
  As the gentleman knows, I have legislation that also addresses the 
issue of bankruptcy trustees disgorging from innocent churches the 
tithes of members who have filed for bankruptcy. I applaud the 
gentleman's efforts and thank him very much for his hard work.
  As we have discussed together numerous times, our primary concern is 
that anything that we do to address this issue will not lead to the 
future government regulation of the church and the interference in the 
free exercise of religion. We have had many discussions over that.
  Mr. Speaker, with the passage of H.R. 2064, we provide the Federal 
Government absolutely no opportunity to extend its reach to regulate 
churches in this country. I would ask, is that the intent of the 
gentleman's legislation?

                              {time}  1545

  Mr. PACKARD. Mr. Speaker, will the gentlewoman yield?
  Mrs. CHENOWETH. I yield to the gentleman from California.
  Mr. PACKARD. Absolutely, the gentlewoman is certainly right. I have 
no intentions in this bill or in any other way for the government to 
regulate churches.
  Mrs. CHENOWETH. Mr. Speaker, I thank the gentleman.
  With the passage of H.R. 2604, there is no opportunity to have the 
Federal Government define tithes or to place a floor or a limit on the 
amount of tithes that a parishioner can give to his or her church. Is 
that the gentleman's intent?
  Mr. PACKARD. Mr. Speaker, that is certainly my intent.
  Mrs. CHENOWETH. And, Mr. Speaker, it is my understanding of the 
intent of H.R. 2604 that we are not including churches in the same 
legal classifications as 501(c)(3)s, which are an artificial creation 
of the State, while the churches are a creation of God. Is this the 
intent of H.R. 2604?
  Mr. PACKARD. Mr. Speaker, the gentlewoman is correct.
  Mrs. CHENOWETH. Lastly, Mr. Speaker, in solving this problem between 
churches and the bankruptcy courts, we are not intending the Federal 
Government to be involved in any way in overriding scripture or taking 
away the autonomy and the free exercise of religion in America's 
churches. Is this the intent of H.R. 2604?
  Mr. PACKARD. Mr. Speaker, if the gentlewoman will continue to yield, 
it is certainly the intent of the bill.
  Mrs. CHENOWETH. Mr. Speaker, I want to thank the gentleman from 
California (Mr. Packard) for all of his hard work on this issue. I also 
want to thank his staff for their hard work. The gentleman is a true 
champion of religious freedom, and he has my deepest respect and 
admiration. I want to thank the gentleman and my friend from 
California.
  I also join with the gentleman from California (Mr. Packard) in 
thanking the gentleman from Illinois (Mr. Hyde), the gentleman from 
Pennsylvania (Mr. Gekas) and the ranking member, the gentleman from New 
York (Mr. Nadler).
  Mr. PACKARD. Mr. Speaker, if the gentlewoman will continue to yield, 
I want to personally thank her for her leadership on this issue. She 
wrote a bill that is very similar and I think it has the same basic 
goals. I applaud the gentlewoman for that. I have sponsored her bill. 
It is just that this was the bill that moved through the committee 
structure. I thank the gentlewoman very much.
  Mr. NADLER. Mr. Speaker, I yield myself such time as I may consume.
  I simply wanted to make a number of observations on this bill.
  One, this bill does afford to religious institutions and to 
nonreligious charitable institutions the same protection. If someone in 
good faith gives a charitable contribution, whether to a church or the 
American Cancer Society, the trustee in bankruptcy, if the person 
subsequently declares bankruptcy, should not go into the church or to 
the Cancer Society or the Lung Society, whatever it may be, and try to 
get them to repay the money. That is what this bill does. It sets up 
those protections.
  The second thing I want to say, in light of what I said earlier about 
the history of this bill, the religious liberty protections, is that 
some of us in this House are very strong advocates of separation of 
church and State. I will be opposing the so-called Istook amendment on 
the floor later in the week. We do believe very strongly in the 
separation of church and State, but we also believe that government 
should not be hostile to religion and government should be 
accommodating to people with religious beliefs and also to people with 
charitable intentions, and this legislation is very much in that 
direction.
  I think no matter what position someone may take on some of the

[[Page H4004]]

other legislation such as the Istook amendment, we can all unite in 
supporting this type of legislation which does not breach the will of 
separation of church and State but says that the freedom to contribute 
money to the church or to the synagogue or the mosque or to the 
nonreligious charitable institution should not be violated and that 
government should not be hostile to these institutions.
  Again, I thank my colleague from Pennsylvania and my colleague from 
California for their leadership in bringing this bill to the floor. I 
urge all my colleagues to vote for it.
  Mr. Speaker, I reserve the balance of my time.
  Mr. GEKAS. Mr. Speaker, I yield 2 minutes to the gentleman from 
Indiana (Mr. Souder).
  Mr. SOUDER. Mr. Speaker, I thank the chairman for yielding me this 
time and commend the gentleman from California (Mr. Packard) for his 
leadership in this important area of religious liberty and charitable 
contributions. There is nothing more important to our society than 
trying to strengthen the voluntary time and money commitments as an 
alternative, as a supplement to the efforts that government and other 
organizations make in their communities.
  As has been pointed out, I am sure, this legislation is particularly 
needed to protect religious freedom in this country because of the 
Crystal Evangelical Free Church in Minneapolis, Minnesota, which has 
had a prolonged legal fight for over 6 years in an effort to prevent 
the church from being forced to return money which had been regularly 
tithed by a parishioner who subsequently filed for bankruptcy.
  At the lower court, a Federal bankruptcy trustee recaptured $13,500 
in past tithes from the Minnesota congregation. The church appealed the 
ruling and the Eighth Circuit Court vacated the decision, ruling that 
the Religious Freedom Restoration Act, RFRA, passed by this Congress, 
prevented bankruptcy trustees from voiding debtor's tithes to their 
church as fraudulent transfers.
  Unfortunately, as a result of the Supreme Court's decision on June 
25, 1997, that RFRA was unconstitutional as applied to the States. The 
Eighth Circuit was required to vacate its earlier decision on behalf of 
the church and reconsider its ruling in light of the Supreme Court.
  The tragic result is that churches and charities around this country 
are now vulnerable to aggressive bankruptcy lawyers and other creditors 
while, at the same time, we are allowing people to take cruises, 
gamble, even call psychic hotlines, but denying them the right to 
exercise their faith through contributing to charities and/or other, as 
the gentleman from New York (Mr. Nadler) pointed out, other charities, 
not just religious based.
  I believe that this situation is intolerable. It violates the first 
amendment religious clauses of the Constitution, while encouraging an 
outbreak of bankruptcy litigation against churches and other charities. 
This bill provides an excellent resolution to a serious threat to 
religious freedom and charities across the board.
  The full text is also included in the community renewal legislation 
which I support along with members of the Renewal Alliance.
  I once again congratulate the chairman on his leadership.
  Mr. GEKAS. Mr. Speaker, I yield 2 minutes to the gentleman from Utah 
(Mr. Cannon), a member of the Committee on the Judiciary.
  Mr. CANNON. Mr. Speaker, one of the common threads throughout the 
American experience is the strong yearning for religious liberty. It is 
what brought the Puritans to Plymouth Rock, the Mennonites to Lancaster 
County and the Mormons to Utah. It is part of what we are as Americans.
  Protection of religious expression is a bedrock principle of the 
Constitution enshrined in the very first amendment to the Bill of 
Rights. The freedom to fully participate in religion includes the right 
to make offerings.
  Sometimes those who make contributions will fall into financial 
problems and end up before the local bankruptcy court. Over the past 
few years bankruptcy courts with neither divine guidance nor the 
direction of Congress have struggled with reconciling competing 
interests of creditors and churches. In my view, it is inappropriate 
for the bankruptcy court system to force religious denominations to 
disgorge good-faith offerings or tithes in order to comply with rigid 
formulas.
  S. 1244 seeks to resolve this by establishing a simple formula: 
Religious contributions by a debtor, if consistent with past practice 
or if totaling less than 15 percent of gross income, shall not be 
reachable by a creditor in the context of bankruptcy.
  In a sense, this measure follows Christ's admonition to render 
therefore unto Caesar the things that are Caesar's and unto God the 
things which are God's. It avoids the effect of our current course that 
puts Federal bankruptcy court judges in the position of knocking on the 
doors of our churches wearing the hat of the repo man and demanding the 
return of tithes, offerings and other contributions.
  I compliment the gentleman from California (Mr. Packard) and the 
gentleman from Pennsylvania (Mr. Gekas) for their hard work and 
encourage a yes vote.
  Mr. GEKAS. Mr. Speaker, I yield back the balance of my time.
  Mr. NADLER. Mr. Speaker, I yield 1 minute to the gentleman from 
Texas, Mr. Bentsen.
  (Mr. BENTSEN asked and was given permission to revise and extend his 
remarks.)
  Mr. BENTSEN. Mr. Speaker, I rise in strong support of the bill. I 
appreciate the sponsors for doing this.
  I had a church in Baytown, Texas, in my district which has 
experienced a problem with the current law. I appreciate the sponsors 
of the bill for correcting this situation. I hope the other body takes 
it up, and it is passed and signed and corrected.
  Mr. BENTSEN. Mr. Speaker, I rise as a co-sponsor and strong supporter 
of H.R. 2604, the Religious Liberty and Charitable Donation Protection 
Act.
  This legislation provides much-needed protection to churches and 
other charitable organizations by preventing creditors from attempting 
to seize tithes and other donations made by individuals who later file 
for bankruptcy. Business and individuals should have the right to 
vigorously pursue the repayment of bad debts. But they should not have 
the right to reach into church offering plates and the limited budgets 
of charities providing invaluable services.
  I know from the experience of a church in my district, the Cedar 
Bayou Baptist Church in Baytown, how harmful current law can be. Cedar 
Bayou was sued by creditors in 1995 and in September of 1997, the 
church was ordered to return $23,000 in tithes given by a member who 
later declared bankruptcy. The church has run up more than $7,000 in 
legal bills defending itself in court and expects the costs to rise 
even higher as it proceeds with an appeal of its case. Other churches 
across the country have incurred even higher costs, with one church in 
Minnesota spending $280,000 on legal fees in a case that reached the 
U.S. Supreme Court.
  Unfortunately, the courts have ruled that tithes and donations are 
not protected from bankruptcy proceedings and instead are considered 
fraudulent transfers under current bankruptcy law. So there is an 
urgent need for this legislation.
  This legislation provides much needed protection for houses of 
worship and charities. Our churches, synagogues, and charities often 
operate on small budgets and depend on donations for basic operations 
and services. They should not have to pay the price for someone else's 
financial problems.
  In addition, this legislation also would allow debtors to make a 
charitable contribution of up to 15 percent under their Chapter 13 
bankruptcy protection budget plans. I believe it is appropriate that we 
give people the peace of mind that, in the event of personal financial 
difficulties, they can continue to contribute to their favorite church 
or charity.
  I urge approval of this important legislation to protect our 
charities and houses of worship.
  Ms. JACKSON-LEE of Texas. Mr. Speaker, I rise today in support of 
H.R. 2604, the Religious Liberty and Charitable Donation Protection Act 
of 1997. First of all, I am glad that we are considering this bill that 
I think, in some part, affects all of us. The important question that 
rests before us today is not simply whether our bankruptcy laws, as 
they stand, are effectively negating the protections for religious 
freedom afforded by the 1st Amendment of our Constitution, but whether 
this Congress will continue to be a strong defender of civil and 
Constitutional rights.
  Although we often do so, the Constitution and the rights it extends 
to the citizens of this country is something that we must not take for 
granted. According to Judge Alphonzo Taft, father of President and 
Chief Justice William

[[Page H4005]]

Howard Taft, ``The ideal of our people as to religious freedom is 
absolute equality under the law of all religious opinions and sects * * 
* the government is neutral and while protecting all, it prefers none 
and disparages none.''
  The right to express one's religious beliefs freely, as long as their 
expression does not harm others, is a fundamental part of the American 
experience. Those who came to this country found the early American 
colonies nearly four centuries ago, did so in order to escape the 
bitter sting of religious persecution. So it is no surprise that the 
first Amendment to the Constitution crafted by the descendants of these 
brave trailblazers was an attempt to ensure free religious expression. 
Although at times it is difficult to see, as Americans, we are the 
products of a great legacy of freedom. A legacy that we, as Members of 
the United States Congress, have been duly empowered to continue on the 
people's behalf.
  However, in large part, the lasting impact of the 105th Congress, on 
the people that we have been elected to serve, still remains to be 
determined. One thing is for sure, whether we are Democrat or 
Republican, liberal or conservative, male or female, is the fact that 
the Members of this Congress have a sacred duty to be vigilant 
defenders of the public good. I believe that a vote of confidence, at 
least, for the civil libertarian spirit of H.R. 2604, the Religious 
Liberty and Charitable Donation Protection Act is a necessary step in 
the right direction. As a proponent of freedom, I can say without 
reservation that this bill cuts to the heart of what our Constitution 
and country are really all about.
  However, at another level, this bill reminds us of the challenge 
before us to be at the forefront of the many sorely-needed reforms to 
our consumer and commercial bankruptcy laws. H.R. 2604, of which I am a 
co-sponsor, seeks to protect any religious and charitable contribution 
of a debtor made within one year of their filing for bankruptcy from 
possible recovery by a Trustee or creditor. Essentially, a Chapter 13 
participant can be barred from tithing to their local church if their 
creditors object to the addition of this gift to their debt 
restructuring plan. Additionally, in Chapter 7 cases, religious 
contributions can be used as suitable basis to dismiss a debtor's case 
on the grounds that they are substantially abusing the Chapter's many 
favorable bankruptcy provisions. At some point, this subtle form of 
religious persecution must stop.
  Especially at this time when several other sections of Title 11 of 
our Federal Code are under serious legislative review by this Congress, 
efforts to provide protection for the charitable and religious 
donations of debtors are particularly important. If any of the current 
legislative initiatives that encourage debtors to enter into Chapter 13 
recommitment plans are passed, without first enacting these necessary 
protections for the religious contributions of debtors, then this 
growing deficiency in our bankruptcy laws will surely be exacerbated. 
For all of these reasons, I urge all of my colleagues to please support 
H.R. 2604.
  Mr. NADLER. Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Pease). The question is on the motion 
offered by the gentleman from Pennsylvania (Mr. Gekas) that the House 
suspend the rules and pass the bill, H.R. 2604, as amended.
  The question was taken; and (two-thirds having voted in favor 
thereof) the rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.
  Mr. GEKAS. Mr. Speaker, I ask unanimous consent to take from the 
Speaker's table the Senate bill (S. 1244) to amend title 11, United 
States Code, to protect certain charitable contributions, and for other 
purposes, and ask for its immediate consideration.
  The Clerk read the title of the Senate bill.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Pennsylvania?
  There was no objection.
  The Clerk read the Senate bill, 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 1998''.

     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). Any claim by any person to 
     recover a transferred contribution described in the preceding 
     sentence under Federal or State law in a Federal or State 
     court shall be preempted by the commencement of the case.''.
       (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.).

  The Senate bill was ordered to be read a third time, was read the 
third time, and passed, and a motion to reconsider was laid on the 
table.
  A similar House bill (H.R. 2604) was laid on the table.

                          ____________________