[Congressional Record Volume 147, Number 38 (Wednesday, March 21, 2001)]
[Senate]
[Pages S2672-S2674]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SANTORUM (for himself, Mr. Lieberman, Mr. Hutchinson, Mr. 
        Durbin, Mr. Brownback, Ms. Landrieu, Mr. Lugar, Mr. Bayh, and 
        Mr. DeWine):
  S. 592. A bill to amend the Internal Revenue Code of 1986 to create 
Individual Development Accounts, and for other purposes; to the 
Committee on Finance.
  Mr. SANTORUM. Mr. President, today, I am introducing with Senator Joe 
Lieberman ``the Savings Opportunity and Charitable Giving Act of 
2001.'' Other bipartisan cosponsors include Senators Hutchinson, 
Durbin, Brownback, Landrieu, Lugar, and Bayh. Within a month of the 
White House's formation of the Office of Faith-Based and Community 
Initiatives, we are moving the process forward in Congress by the 
bipartisan introduction of the key tax relief provisions of the 
President's Faith-Based Initiatives including Individual Development 
Accounts, IDAs, which President Bush endorsed in his campaign as part 
of the New Prosperity Initiative. Representatives J.C. Watts, Jr. and 
Tony Hall will be introducing a similar measure in the House of 
Representatives within the coming weeks. Beneficiary Choice expansion 
and other provisions will be pursued in a thoughtful manner but on a 
separate track from the tax provisions in the Senate.
  Success in today's new economy is defined less and less by how much 
you earn and more and more by how much you own, your asset base. This 
is great news for the millions of middle-class homeowners who are 
tapped into America's economic success, but it is bad news for those 
who are simply tapped out, those with no assets and little hope of 
accumulating the means for upward mobility and real financial security. 
This widening asset gap was underscored in a report issued earlier this 
year by the Federal Reserve. The Fed found that while the net worth of 
the typical family has risen substantially in recent years, it has 
actually dropped substantially for low-income families.
  For families with annual incomes of less than $10,000, the median net 
worth dipped from $4,800 in 1995 to $3,600 in 1998. For families with 
incomes between $10,000 and $25,000, the median net worth fell from 
$31,000 to $24,800 over the same period. The rate of home ownership 
among low-income families has dropped as well. For families making less 
than $10,000, it went from 36.1 percent to 34.5 percent from 1995 to 
1998; for those making between $10,000 and $25,000, it fell from 54.9 
percent to 51.7 percent.
  How do we reverse this troubling trend? IDAs are the unfinished 
business of the Community Renewal and New Markets Empowerment 
initiatives which became law in December of 2000 and will increase job 
opportunities and renew hope in what have been hopeless places. But to 
sustain this hope, we must provide opportunities for individuals and 
families to build tangible assets and acquire stable wealth.
  Our legislation is aimed at fixing our nation's growing gap in asset 
ownership, which keeps millions of low-income workers from achieving 
the American dream. Most public attention focuses on our growing income 
gap.

[[Page S2673]]

 Though the booming American economy has delivered significant income 
gains to the nation's upper-income earners, lower-income workers have 
been left on the sidelines. This suggests to some that closing this 
divide between the have-mosts and the have-leasts is simply a matter of 
raising wages. But the reality is that the income gap is a symptom of a 
larger, more complicated problem.
  How do we do this? We believe that the marketplace can provide such 
opportunity. Non-profit groups around the country have launched 
innovative private programs that are achieving great success in 
transforming the ``unbanked,'' people who have never had a bank 
account, into unabashed capitalists. Through IDAs, banks and credit 
unions offer special savings accounts to low-income Americans and match 
their deposits dollar-for-dollar. In return, participants take an 
economic literacy course and commit to using their savings to buy a 
home, upgrade their education or to start a business.
  Thousands of people are actively saving today through IDA programs in 
about 250 neighborhoods nationwide. In one demonstration project 
undertaken by the Corporation for Enterprise Development, CFED, a 
leading IDA promoter, 1,300 families have already saved $329,000, which 
has leveraged an additional $742,000.
  While the growth of IDAs has been encouraging, access to IDA programs 
is still limited and scattered across the nation. The IDA provision of 
this legislation will expand IDA access nationwide by providing a 
significant tax credit to financial institutions and community groups 
that offer IDA accounts. This credit would reimburse banks for the 
first $500 of matching funds they contribute, thus significantly 
lowering the cost of offering IDAs. Other state and private funds can 
also be used to provide an additional match to savings. It also 
benefits our economy, the long-term stability of which is threatened by 
our pitiful national savings rate. In fact, according to some 
estimates, every $1 invested in an IDA returns $5 to the national 
economy.
  IDAs are matched savings accounts for working Americans restricted to 
three uses: 1. buying a first home; 2. receiving post-secondary 
education or training; or 3. starting or expanding a small business. 
Individual and matching deposits are not co-mingled; all matching 
dollars are kept in a separate, parallel account. When the account 
holder has accumulated enough savings and matching funds to purchase 
the asset, typically over two to four years, and has completed a 
financial education course, payments from the IDA will be made directly 
to the asset provider.
  Financial institutions, or their contractual affiliates, would be 
reimbursed for all matching funds provided plus a limited amount of the 
program and administrative costs incurred, whether directly or through 
collaborations with other entities. Specifically, the IDA Tax Credit 
would be the aggregate amount of all dollar-for-dollar matches 
provided, up to $500 per person per year, plus a one-time $100 per 
account credit for financial education, recruiting, marketing, 
administration, withdrawals, etc., plus an annual $30 per account 
credit for the administrative cost of maintaining the account. To be 
eligible for the match, adjusted gross income may not exceed $20,000, 
single, $25,000, head of household, or $40,000, married.

  President Bush has expressed support for IDAs in his campaign and we 
are working with the Administration to coordinate efforts to the 
fullest extent possible. Supporting groups include the Credit Union 
National Association, the Financial Services Roundtable, the 
Corporation for Enterprise Development, the National Association of 
Homebuilders, the National Center for Neighborhood Enterprise, the 
National Federation of Community Development Credit Unions, the 
National Council for La Raza, and others.
  Individual Development Accounts, combined with other community 
development and wealth creation opportunities, are a first step towards 
restoring faith in the longstanding American promise of equal 
opportunity. That faith has been shaken by stark divisions of income 
and wealth in our society. With the leadership of President Bush and 
Speaker Hastert, I am hopeful, along with our other cosponsors, that 
Congress will take this first step toward restoring the long-cherished 
American ideals of rewarding hard work, encouraging responsibility, and 
expanding savings opportunity this year.
  The Non-Itemizer Charitable Deduction provision will initially allow 
non-itemizers to deduct 50 percent of their charitable giving, after 
they exceed a cumulative total of $500 in annual donations, $1,000 for 
joint filers. The deduction will be phased into a 100 percent deduction 
over the course of 5 years in 10 percent increments. Under current law 
non-itemizers receive no additional tax benefit for their charitable 
contributions.
  More than 84 million Americans cannot deduct any of their charitable 
contributions because they do not itemize their tax returns. In 
contrast, there are 34 million Americans who itemize and receive this 
benefit. For example, in Pennsylvania, there are nearly 4 million 
taxpayers who do not itemize deductions while slightly more than 1.5 
million taxpayers do itemize.
  While Americans are already giving generously to charities making a 
significant positive impact in our communities, this provision provides 
an incentive for additional giving and allows non-itemizers who 
typically have middle to lower middle incomes to also benefit from 
additional tax relief. In fact, non-itemizers earning less than $30,000 
give the highest percentage of their household income to charity. It is 
estimated that restoring this tax relief provision to merely 50 percent 
which existed in the 1980's would encourage more than $3 billion of 
additional charitable giving a year. The phased in increase to 100 
percent will result in even more additional giving. The floor is 
included because the standard personal deduction encompasses initial 
contributions.
  One important dimension of promoting charitable efforts helping to 
revitalize our communities, empower individuals and families, and 
enhance educational opportunities is encouraging charitable giving. 
This legislation is a great opportunity to lower the tax burden on the 
many Americans who have not received any tax relief for their 
charitable contributions since 1986.
  The IRA Charitable Rollover allows individuals to roll assets from an 
IRA into a charity or a deferred charitable gift plan without incurring 
any income tax consequences. The donation would be made to charity 
directly without ever withdrawing it as income and paying taxes on it.
  The rollover can be made as an outright gift, for a charitable 
remainder annuity trust, charitable remainder unitrust or pooled income 
fund, or for the issuance of a charitable annuity. The donor would not 
receive a charitable deduction. This incentive should assist charitable 
giving in education, social service, and religious charitable efforts.
  Food banks are finding it increasingly difficult to meet the demand 
for food assistance. In the past, food banks have benefitted from the 
inefficiencies of manufacturing, including the over-production of 
merchandise and the manufacturing of cosmetically-flawed products. 
However, technology has made businesses and manufacturers significantly 
more efficient. Although beneficial to the company's bottom-line, 
donations have lessened as a result. The fact is that the demand on our 
nation's church pantries, soup kitchens and shelter continues to rise, 
despite our economy.
  According to an August 2000 report on Hunger Security by the U.S. 
Department of Agriculture, 31 million Americans, around 10 percent of 
our citizens, are living on the edge of hunger. Although this number 
has declined by 12 percent since 1995, everyone agrees that this figure 
remains too high.
  Unfortunately, many food banks cannot meet this increased demand for 
food. A December '99 study by the U.S. Conference of Mayors found that 
requests for emergency food assistance increased by an average of 18 
percent in American cities over the previous year and 21 percent of 
emergency food requests could not be met. Statistics by the United 
States Department of Agriculture show that up to 96 billion pounds of 
food goes to waste each year

[[Page S2674]]

in the United States. If a small percentage of this wasted food could 
be redirected to food banks, we could make important strides in our 
fight against hunger. In many ways, current law is a hindrance to food 
donations.
  The tax code provides corporations with a special deduction for 
donations to food banks, but it excludes farmers, ranchers and 
restaurant owners from donating food under the same tax incentive. For 
many of these businesses, it is actually more cost effective to throw 
away food than donate it to charity. The hunger relief community 
believes that these changes will markedly increase food donations-
whether it is a farmer donating his crop, a restaurant owner 
contributing excess meals, or a food manufacturer producing 
specifically for charity.
  This bipartisan legislation was introduced separately by Senators 
Lugar and Leahy with 13 additional cosponsors including myself. It has 
been endorsed by a diverse set of organizations, including America's 
Second Harvest Food Banks, the Salvation Army, the American Farm Bureau 
Federation, the National Farmers Union, the National Restaurant 
Association, and the Grocery Manufacturers of America.
  Under current law, when a corporation donates food to a food bank, it 
is eligible to receive a ``special rule'' tax deduction. Unfortunately, 
most companies have found that the ``special rule" deduction does not 
allow them to recoup their actual production costs. Moreover, current 
law limits the ``special rule'' deduction only to corporations, thus 
prohibiting farmers, ranchers, small businesses and restaurant owners 
from receiving the same tax benefits afforded to corporations.
  This provision would encourage additional food donations through 
three changes to our tax laws: This bill will extend the ``special 
rule'' tax deduction for food donations now afforded only to 
corporations to all business taxpayers, including farmers and 
restaurant owners. This legislation will increase the tax deduction for 
donated food from basis plus  deg. markup to the fair market value of 
the product, not to exceed twice the product's basis. This bill will 
codify the Tax Court ruling in Lucky Stores, Inc. v. IRS, in which the 
Court found that taxpayers should base the determination of fair market 
value of donated product on recent sales.
  I would like to thank my colleagues for joining me in this important 
effort to increase savings opportunities for lower income working 
Americans, to encourage the charitable giving of all Americans, to 
provide additional resources for the charitable organizations which 
serve their communities, and to encourage additional donations of food 
to alleviate hunger. I would also encourage my other colleagues to 
consider supporting this important initiative.

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