[Congressional Record Volume 145, Number 20 (Thursday, February 4, 1999)]
[Extensions of Remarks]
[Page E152]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                THE CHARITABLE INTEGRITY RESTORATION ACT

                                 ______
                                 

                         HON. GERALD D. KLECZKA

                              of wisconsin

                    in the house of representatives

                       Thursday, February 4, 1999

  Mr. KLECZKA. Mr. Speaker, today I am introducing the Charitable 
Integrity Restoration Act. This legislation addresses most of the 
sophisticated and shameful tax schemes that I have seen. Recently, The 
Wall Street Journal has run a series of articles on the so-called 
charitable split-dollar insurance plans where wealthy individuals are 
taking improper tax deductions in an effort to avoid paying their fair 
share of taxes.
  The legislation would prohibit the use of charitable split-dollar 
insurance plans where wealthy individuals give a substantial ``gift'' 
to the charity and subsequently take a tax deduction for that 
contribution. The charity, in turn, invests a portion of that money in 
a life insurance policy for the heirs of the donor or in an annuity 
contract in the name of the donor. The charity retains the right to a 
small portion of the policy's proceeds. In other words, the donors get 
the benefit of purchasing a life insurance or annuity policy using the 
charitable contribution deduction--something all other taxpayers would 
pay for directly out of their own pocket.
  I would like to point out there is no provision in the Tax Code that 
gives investors even the remote impression that charitable split-dollar 
investment policies are legal. Instead, this is a mythical creation of 
those who are trying to find ways for their clients to avoid paying 
their fair share of taxes.
  This scheme also violates the principle of charitable giving. 
Charitable contributions are tax deductible because they are supposed 
to benefit an organization dedicated to a worthy cause. Under this 
abuse, the charities simply become a conduit for a tax avoidance 
scheme.
  The Charitable Integrity Restoration Act would end the abuse of 
charitable split-dollar investment policies. The donors face the 
prospect of having their investment returned to them and losing their 
tax deduction for the so-called charitable contribution.
  Furthermore, any charitable organization engaging in split-dollar 
insurance plans would lose their tax-exempt status. Anticipating such 
action, the National Committee on Planned Giving, a professional 
association based in Indianapolis, has called the scheme ``a high-risk 
venture'' exposing participating charities to considerable financial 
risk, which ``may endanger the tax-exempt status of charities that 
participate.''
  Mr. Speaker, it is my hope that the House will pass the Charitable 
Integrity Restoration Act and put an end to this abusive tax practice 
and restore charitable contributions to their original intent--helping 
people in need