[Congressional Record Volume 147, Number 25 (Wednesday, February 28, 2001)]
[Extensions of Remarks]
[Page E246]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 INTRODUCTION OF A BILL TO REPEAL THE 2-PERCENT EXCISE TAX ON PRIVATE 
                              FOUNDATIONS

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                           HON. CLIFF STEARNS

                               of florida

                    in the house of representatives

                      Wednesday, February 28, 2001

  Mr. STEARNS. Mr. Speaker, the United States is blessed with a deep 
spirit of philanthropy. Charitable organizations serve the interests of 
both the individual and the community. Private foundations, in 
particular, have made a measurable difference in the lives of 
Americans. From access to public libraries, developing the polio 
vaccine, and even leading in the creation of Emergency 911, each and 
every American has experienced the benefits of the tireless efforts of 
these foundations.
  Currently, there are approximately 47,000 foundations in the United 
States. In 1998, foundations gave away an estimated $22 billion in 
grants. These foundations were also forced to give the Federal 
Government a grant of $500 million in 1999.
  Under current law, nonprofit private foundations generally must pay a 
2-percent excise tax on their net investment income. This requirement 
was originally enacted in the Tax Reform Act of 1969 as a way to offset 
the cost of Government audits of these organizations. However, since 
1990, the number of IRS audits on private foundations has decreased 
from 1200 to 191. Yet, excise collections have grown from $204.3 
million in 1990 to $499.6 million in 1999.
  In addition, private foundations are bound by a 5-percent 
distribution rule. Foundations must make annual qualifying 
distributions for charitable purposes equal to roughly 5-percent of the 
fair market value of the foundation's net investment assets. The 
required 2-percent excise tax--payable to the IRS--actually counts as a 
credit to the 5-percent distribution rule.
  So, what we have is a private foundation making a charitable grant to 
the Federal Government every year. Now, the last time I looked, the 
Federal Government was not in any dire need of charitable 
contributions. In fact, in the next 10 years, the Federal budget 
surplus is projected to be $5.7 trillion. In 2002 alone, we are 
projected to have a $231 billion surplus. Therefore, I believe that 
Americans have been more than ``charitable'' in giving the Government 
their hard-earned dollars. It is time that we begin the process of 
returning that money to the people.
  President Bush is working to accomplish that goal with his reduction 
in tax rates, and allowing for the increased use of charitable 
deductions and credits. My bill goes one step further, it gives those 
charitable organizations relief from wasting $500 million on the 
Federal Government and, instead, giving the money to those who truly 
need it.
  I would also like to emphasize that former President Clinton proposed 
a reduction in the excise tax in his fiscal year 2001 budget. The 
Treasury Department noted, ``Lowering the excise tax rate for all 
foundations would make additional funds available for charitable 
purposes.'' Common sense dictates that the elimination of this tax 
would spur additional charitable giving.
  I want to thank Congressman Crane for his support on this bill and 
ask our colleagues to lend their support as well.

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