[Congressional Record Volume 145, Number 121 (Thursday, September 16, 1999)]
[Senate]
[Pages S11057-S11058]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERREY:
  S. 1597. A bill to amend the Internal Revenue Code of 1986 to provide 
enhanced tax incentives for charitable giving, and for other purposes; 
to the Committee on Finance.


         enhanced incentives for charitable giving act of 1999

 Mr. KERREY. Mr. President, I am introducing legislation today 
to provide enhanced incentives for charitable giving.
  I very much believe that we ought to do what we can to encourage 
those who are doing so well in this economy to give generously to 
organizations who serve those who have been left behind in these 
prosperous times. I worked to have a number of charitable giving 
provisions included in the Senate version of the tax bill we passed 
earlier this year and was delighted that those provisions were included 
in that bill. Regrettably these provisions were deleted from the final 
version of the tax bill, something which contributed to my decision to 
vote against the conference report on that bill. The bill I am 
introducing today is a stand-alone version of the charitable giving 
provisions that I was proud to have worked to include in the Senate 
version of the tax bill.
  The purpose of this bill is simple: to provide powerful incentives 
for those who have more to give to those who have less.
  The first provision in this bill would allow taxpayers some extra 
time to decide to make donations to low-income schools in a given tax 
year. Under current law individuals can already take charitable 
deductions for contributions to public and private schools. Clearly, 
wealthier schools, where parents have the resources to make these 
contributions, benefit most from this tax treatment.
  What this provision attempts to do is highlight the fact that a 
charitable deduction can be taken for these types of donations 
generally while providing an incentive for giving to low-income private 
and public schools in particular. Since the parents in these schools 
are low-income, this provision is not aimed at getting them to give--it 
is aimed at getting taxpayers outside of these low-income schools to 
help the children in those schools. Wealthier public and private 
schools already get these contributions, this provision attempts to get 
some contributions going to schools where more than half of the 
children are economically disadvantaged.
  This provision tracks the way we allow contributions to Individual 
Retirement Accounts, IRAs, to be made. Under current law, taxpayers can 
make contributions to an IRA up until the date their taxes are due--
April 15--and still have those contributions qualify for the previous 
taxable year. This provision would simply allow contributions to low 
income elementary and secondary schools to be made up until April 15--
thereby highlighting and encouraging taxpayers to make these 
contributions.
  The second provision in this bill allows taxpayers who do not itemize 
their deductions, to take a small deduction for charitable 
contributions. Across the country, seventy-three percent of all 
taxpayers do not itemize and therefore are not able to take a 
charitable deduction. In Nebraska, that number is even higher, a full 
seventy-eight percent of Nebraska's taxpayers do not itemize. This bill 
would allow a single taxpayer who does not itemize a $50 deduction and 
taxpayers filing jointly a $100 charitable deduction. While this 
provision may not cover all of the charitable giving that these 
individuals and families make, it recognizes and encourages 
charitable giving by people who may not give a million dollars, but 
give donations that are meaningful nonetheless to good causes like 
their church or synagogue, or their children's PTA, or the Girl Scouts 
or the Salvation Army. We ought to encourage that giving and provide a 
small incentive to do so. That is the purpose behind this provision.

  The legislation I am introducing today also raises the percentage 
amount of income that an individual may deduct in a given year from 50 
percent of their adjusted gross income to 75 percent. It also raises 
the limits on gifts of capital gain property to charities from 30 
percent to 50 percent. In

[[Page S11058]]

addition, this bill increases the corporate charitable deduction limit 
from 10 to 20 percent of taxable income.
  These provisions are designed to encourage those who give a lot, to 
give even more. While I recognize that those who receive these tax 
benefits are apt to be higher-income taxpayers, I also recognize that 
the charities that will receive these increased donations are apt to 
use these donations to help low-income individuals. In short, I'm not 
overly troubled by distributional tables on a policy which will induce 
those with more to give to those who need help the most.
  And finally, this bill contains an important reform of what is known 
as the excess business holdings rule. That rule limits the ability of a 
private foundation to hold more than twenty percent of a corporation's 
voting stock for more than five years. At present, I believe this rule 
discourages potential donors with major stockholdings in publicly-trade 
corporate stock from making significant contributions of these holdings 
to charitable foundations. This is just the opposite of what we should 
be doing, particularly at a time when we are expecting more, not less, 
from organizations with charitable purposes. The proposal I have 
included in this bill would allow private foundations to increase their 
holding in publicly traded stock of a corporation received by bequest 
from 20 percent to 49 percent.
  Taken together I believe these proposals do much to encourage people 
to give more. I urge my colleagues to support this legislation and hope 
that it will be included in any broad tax legislation that we consider.
  I ask that the text of the bill be printed in the Record.
  The bill follows:

                                S. 1597

       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 ``Enhanced Incentives for 
     Charitable Giving Act of 1999''.

     SEC. 2. CHARITABLE CONTRIBUTIONS TO CERTAIN LOW INCOME 
                   SCHOOLS MAY BE MADE IN NEXT TAXABLE YEAR.

       (a) In General.--Section 170(f) of the Internal Revenue 
     Code of 1986 (relating to disallowance of deduction in 
     certain cases and special rules) is amended by adding at the 
     end the following new paragraph:
       ``(10) Time when certain contributions deemed made.--
       ``(A) In general.--At the election of the taxpayer, a 
     qualified low-income school contribution shall be deemed to 
     be made on the last day of the preceding taxable year if the 
     contribution is made on account of such taxable year and is 
     made not later than the time prescribed by law for filing the 
     return for such taxable year (not including extensions 
     thereof). The election may be made at the time of the filing 
     of the return for such table year, and shall be made and 
     substantiated in such manner as the Secretary shall by 
     regulations prescribe.
       ``(B) Qualified low-income school contribution.--For 
     purposes of subparagraph (A), the term `qualified low-income 
     school contribution' means a charitable contribution to an 
     educational organization described in subsection 
     (b)(1)(A)(ii)--
       ``(i) which is a public, private, or sectarian school which 
     provides elementary or secondary education (through grade 
     12), as determined under State law, and
       ``(ii) with respect to which at least 50 percent of the 
     students attending such school are eligible for free or 
     reduced-cost lunches under the school lunch program 
     established under the National School Lunch Act.''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 3. DEDUCTION FOR PORTION OF CHARITABLE CONTRIBUTIONS TO 
                   BE ALLOWED TO INDIVIDUALS WHO DO NOT ITEMIZE 
                   DEDUCTIONS.

       (a) In General.--Section 170 of the Internal Revenue Code 
     of 1986 (relating to charitable, etc., contributions and 
     gifts) is amended by redesignating subsection (m) as 
     subsection (n) and by inserting after subsection (l) the 
     following new subsection:
       ``(m) Deduction for Individuals Not Itemizing Deductions.--
     In the case of an individual who does not itemize his 
     deductions for the taxable year, there shall be taken into 
     account as a direct charitable deduction under section 63 an 
     amount equal to the lesser of--
       ``(1) the amount allowable as a deduction under subsection 
     (a) for the taxable year, or
       ``(2) $50 ($100 in the case of a joint return).''.
       (b) Direct Charitable Deduction.--
       (1) In general.--Subsection (b) of section 63 of the 
     Internal Revenue Code of 1986 is amended by striking ``and'' 
     at the end of paragraph (1), by striking the period at the 
     end of paragraph (2) and inserting ``, and'', and by adding 
     at the end the following new paragraph:
       ``(3) the direct charitable deduction.''.
       (2) Definition.--Section 63 of such Code is amended by 
     redesignating subsection (g) as subsection (h) and by 
     inserting after subsection (f) the following new subsection:
       ``(g) Direct Charitable Deduction.--For purposes of this 
     section, the term `direct charitable deduction' means that 
     portion of the amount allowable under section 170(a) which is 
     taken as a direct charitable deduction for the taxable year 
     under section 170(m).''.
       (3) Conforming amendment.--Subsection (d) of section 63 of 
     such Code is amended by striking ``and'' at the end of 
     paragraph (1), by striking the period at the end of paragraph 
     (2) and inserting ``, and'', and by adding at the end the 
     following new paragraph:
       ``(3) the direct charitable deduction.''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 4. INCREASE IN LIMIT ON CHARITABLE CONTRIBUTIONS AS 
                   PERCENTAGE OF AGI.

       (a) In General.--
       (1) Individual limit.--Section 170(b)(1) of the Internal 
     Revenue Code of 1986 (relating to percentage limitations) is 
     amended--
       (A) by striking ``50 percent'' in subparagraph (A) and 
     inserting ``the 75 percent'', and
       (B) by striking ``30 percent'' each place it appears in 
     subparagraph (C) and inserting ``50 percent''.
       (2) Corporate limit.--Section 170(b)(2) of such Code is 
     amended by striking ``10 percent'' and inserting ``20 
     percent''.
       (b) Conforming Amendments.--Section 170(d)(1)(A) of the 
     Internal Revenue Code of 1986 is amended by striking ``50 
     percent'' each place it appears and inserting ``75 percent''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     1999.

     SEC. 5. LIMITED EXCEPTION TO EXCESS BUSINESS HOLDINGS RULE.

       (a) In General.--Section 4943(c)(2) of the Internal Revenue 
     Code of 1986 (relating to permitted holdings in a 
     corporation) is amended by adding at the end the following 
     new subparagraph:
       ``(D) Rule where voting stock is publicly traded.--
       ``(i) In general.--If--

       ``(I) the private foundation and all disqualified persons 
     together do not own more than the 49 percent of the voting 
     stock and not more than the 49 percent in value of all 
     outstanding shares of all classes of stock of an incorporated 
     business enterprise,
       ``(II) the voting stock owned by the private foundation and 
     all disqualified persons together is stock for which market 
     quotations are readily available on an established securities 
     market, and
       ``(III) the requirements of clause (ii) are met,

     then subparagraph (A) shall be applied by substituting `49 
     percent' for `20 percent'.
       ``(ii) Requirements to be met.--The requirements of this 
     clause are met during any taxable year--

       ``(I) in which disqualified persons with respect to the 
     private foundation do not receive compensation (as an 
     employee or otherwise) from the corporation or engage in any 
     act with such corporation which would constitute self-dealing 
     within the meaning of section 4941(d) if such corporation 
     were a private foundation and if each such disqualified 
     person were a disqualified person with respect to such 
     corporation,
       ``(II) in which disqualified persons with respect to such 
     private foundation do not own in the aggregate more than 2 
     percent of the voting stock and not more than 2 percent in 
     value of all outstanding shares of all classes of stock in 
     such corporation, and
       ``(III) for which there is submitted with the annual return 
     of the private foundation for such year (filed within the 
     time prescribed by law, including extensions, for filing such 
     return) a certification which is signed by all the members of 
     an audit committee of the Board of Directors of such 
     corporation consisting of a majority of persons who are not 
     disqualified persons with respect to such private foundation 
     and which certifies that such members, after due inquiry, are 
     not aware that any disqualified person has received 
     compensation from such corporation or has engaged in any act 
     with such corporation that would constitute self-dealing 
     within the meaning of section 4941(d) if such corporation 
     were a private foundation and if each such disqualified 
     person were a disqualified person with respect to such 
     corporation.

     For purposes of this clause, the fact that a disqualified 
     person has received compensation from such corporation or has 
     engaged in any act with such corporation which would 
     constitute self-dealing within the meaning of section 4941(d) 
     shall be disregarded if such receipt or act is corrected not 
     later than the due date (not including extensions thereof) 
     for the filing of the private foundation's annual return for 
     the year in which the receipt or act occurs and on the terms 
     that would be necessary to correct such receipt or act and 
     thereby avoid imposition of tax under section 4941(b).''.
       (b) Effective Date.--The amendment made by this section 
     shall apply to foundations established by bequest of 
     decedents dying after December 31, 1999.
                                 ______