[Congressional Record Volume 147, Number 28 (Tuesday, March 6, 2001)]
[House]
[Pages H629-H630]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
REPEALING THE 2 PERCENT EXCISE TAX ON PRIVATE FOUNDATIONS
The SPEAKER pro tempore. Under the Speaker's announced policy of
January 3, 2001, the gentleman from Florida (Mr. Stearns) is recognized
during morning hour debates for 5 minutes.
Mr. STEARNS. Madam Speaker, last week the gentleman from Illinois
(Mr. Crane) and I introduced bill H.R. 804, a bill to repeal the 2
percent excise tax on private foundations.
The United States is blessed with a deep spirit of philanthropy.
Charitable organizations serve the interest of both the individual and
the community. Private foundations in particular have
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made measurable differences in the lives of Americans, from access to
public libraries, developing the polio vaccine, and even leading in the
creation of the emergency number 911. Each and every American has
experienced the benefits of the tireless efforts of these foundations.
Madam Speaker, currently there are 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, not-for-profit 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requirement was originally enacted in the Tax Reform Act of 1969 as a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 on these organizations. So
some 31 years ago, we instituted a tax on these foundations to cover
the audit expense. However, when you look at the number of audits that
have been performed, particularly since 1990, the IRS audits on private
foundations has decreased from 1,200 to just 191. Yet the excise
collection during these 31 years has grown from roughly $200 million in
1990 to $500 million in the year 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
their fair market value of the foundation's net investment assets. The
required 2 percent excise tax, which is payable to the IRS, actually
counts as a credit to the 5 percent distribution rule.
So in a nutshell, what we have here is a private foundation making a
charitable grant to the Federal Government every year, and since 1969
the number of audits have gone down; yet the number of charitable
foundations has gone up.
Madam Speaker, I do not believe that the Federal Government is in
dire need of this excise tax, and in fact in the next 10 years the
Federal Government will show a surplus of $5.7 trillion. In 2002 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
the money to the people.
President Bush is working to accomplish that goal with his reduction
in tax rates, allowing for the increased use of charitable deductions
and credits. My bill goes one step further. It gives those charitable
organizations relief from the $500 billion tax that the Federal
Government instituted 31 years ago so they can give more of their money
back to the people who need it.
I would like to also emphasize, Madam Speaker, that the former
President, Mr. Clinton, proposed a reduction in this same 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.''
So, Madam Speaker, common sense dictates that the elimination of this
tax would increase additional charitable giving. I would like to thank
my colleague, the gentleman from Illinois (Mr. Crane), for his support
on this bill. I ask my colleagues to take a look at this piece of
legislation. I would like their support. It is H.R. 804.
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