[Congressional Record Volume 147, Number 72 (Wednesday, May 23, 2001)]
[Senate]
[Pages S5533-S5535]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       THE SAVINGS OPPORTUNITY AND CHARITABLE GIVING ACT OF 2001

  Mr. SANTORUM. Mr. President, today, I rise on behalf of legislation 
which I have introduced with Senator Joe Lieberman, S. 592, The Savings 
Opportunity and Charitable Giving Act of 2001. Other bipartisan 
cosponsors of the underlying bill include Senators Hutchinson, Durbin, 
Brownback, Landrieu, Lugar, Bayh, DeWine, Miller, Kyl, Johnson, Bob 
Smith, Sessions, and Cochran. The amendment number is 655.
  I am disappointed that we have not included in H.R. 1836 the key tax 
relief provisions of the President's Faith-Based Initiatives to expand 
charitable giving opportunities and incentives for all Americans and 
expansion of savings opportunities through Individual Development 
Accounts (IDAs) which President Bush also endorsed in his campaign and 
included in his budget. Just yesterday, in a speech at Notre Dame 
University, President Bush reaffirmed his vision and support for these 
initiatives in the effort to enable the community renewal and poverty 
alleviation efforts throughout this country. I will continue to work 
with the President and my colleagues to create additional opportunities 
to advance this initiative this year.
  Representatives J.C. Watts, Jr. and Tony Hall have introduced a 
similar measure in the House of Representatives along with Speaker 
Hastert, H.R. 7, the ``Community Solutions Act of 2001.'' Charitable or 
Beneficiary Choice expansion, charitable donations liability reform, 
and other provisions will be introduced in the Senate, but on a 
separate track from the tax provisions which have already been 
introduced in S. 592 and reflect two-thirds of the President's initial 
faith-based proposals.
  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.
  Statistics: 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. 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

[[Page S5534]]

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.
  What are IDAs? 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).
  Supporters: President Bush has expressed support for IDAs in his 
campaign and included them in his budget and we are working with the 
Administration to coordinate efforts. 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 charitable giving incentives 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 shelters 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 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

[[Page S5535]]

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:
  Expand Deduction to All Business Taxpayers: 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.
  Enhance Deduction for Food Donations: This legislation will increase 
the tax deduction for donated food from basis plus \1/2\ markup to the 
fair market value of the product, not to exceed twice the product's 
basis.
  Codify Lucky Stores Decision: 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 encourage my colleagues to join me in this important bipartisan 
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 like to thank President Bush for his 
leadership in this critical area.

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