[Congressional Record Volume 149, Number 12 (Thursday, January 23, 2003)]
[Senate]
[Pages S1484-S1485]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. HUTCHISON (for herself, Mr. Durbin, Mr. Cornyn, Mr. 
        Levin, Mr. DeWine, Mr. Cochran, Mr. Fitzgerald, and Mr. Allen):
  S. 209. A bill to amend the Internal Revenue Code of 1986 to waive 
the income inclusion on a distribution from an individual retirement 
account to the extent that the distribution is contributed for 
charitable purposes; to the Committee on Finance.
  Mrs. HUTCHISON. Mr. President, I am pleased to introduce legislation 
today that will enhance and encourage charitable giving in the United 
States. The Charitable IRA Rollover Act will allow individuals to 
rollover assets from an Individual Retirement Account, or ``IRA,'' to a 
charity without incurring income tax consequences.
  One of my priorities has been to promote charitable giving and expand 
the role charities and faith-based institutions play in addressing 
social problems in the United States. I hope this legislation moves us 
further in that direction.
  Government alone cannot solve society's most serious problems. In 
fact, government social programs often fail in their missions. The old 
welfare system is a perfect example of what often goes wrong when 
government tends to throw money at a problem.
  Under the old system, while trying to help people, government 
actually encouraged them to stay on welfare. It encouraged out-of-
wedlock births and discouraged fathers from living at home. Many of 
these unintended consequences were addressed with the welfare reform 
bill, which will be reauthorized this year. The success of these 
reforms are evident in welfare rolls, which have now dropped by half 
across the United States.
  But government is not the solution. Charities change hearts and lives 
and have a superior track record to the government in tackling social 
ills.
  America's top charities address a broad range of problems. From the 
Salvation Army to the Boys and Girls Clubs, and the American Cancer 
Society to the Red Cross, each plays a role in improving America's 
health, education and welfare. Their success has been documented. It 
has been demonstrated that mentors in the Big Brothers/Big Sisters 
program can cut drug abuse by 50 percent.
  Charitable giving is an American tradition. Americans appreciate the 
role of charities and are actively involved in many philanthropic 
causes. Nearly half of all Americans volunteer in some capacity on a 
regular basis, including nearly 25 percent of Americans who are active 
volunteers in religious affiliated organizations. That is why it is 
logical to use faith-based organizations as a means of accomplishing 
objectives which can be more personal and tailored to the individual in 
need.
  The legislation I am introducing today helps these organizations by 
making it easier for people to make charitable contributions. 
Individuals age 59\1/2\ and older will be able to move assets without 
penalty from an IRA directly to a charity or into a qualifying deferred 
charitable gift plan, such as a charitable remainder trust, pooled 
income fund or gift annuity. Current law requires taxpayers to first 
withdraw the IRA proceeds and pay taxes on them before contributing the 
remaining funds to a charity. While current law allows taxes on the 
withdrawal to be offset somewhat by the current charitable deduction, 
this ability is limited.
  Americans currently hold more than $2 trillion in assets in IRAs, and 
nearly 40 percent of American households have IRAs. This bill would 
allow senior citizens who have provided well for their retirement to 
transfer IRA funds to charities without the government taking a slice. 
This will cut bureaucratic obstacles and disincentives to charitable 
giving and unlock a substantial amount of new funds that could flow to 
America's charitable organizations.
  The time for promoting charitable giving has come.
  This proposal benefits everyone involved. Individuals will be able to 
give more of their savings to charities of importance to them. 
Charities will benefit from increased philanthropy, enabling them to 
continue their important work. Those needing help will have increased 
access to services from these charities. And the government will have 
to take care of fewer of those in need as charities are better able to 
assume that burden.
  This is not a partisan proposal. It is a common sense way to remove 
obstacles to charitable giving. Senators Durbin and Levin are original 
co-sponsors of this legislation. I look forward to working with them, 
the White House and many other colleagues to pass this bill. I hope the 
Senate will join in this effort to provide a valuable source of 
philanthropy for our nation's charities.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

       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 ``Charitable IRA Rollover Act 
     of 2003.''.

     SEC. 2. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT 
                   ACCOUNTS FOR CHARITABLE PURPOSES.

       (a) In General.--Subsection (d) of section 408 of the 
     Internal Revenue Code of 1986 (relating to individual 
     retirement accounts) is amended by adding at the end the 
     following new paragraph:
       ``(8) Distributions for charitable purposes.--
       ``(A) In general.--No amount shall be includible in gross 
     income by reason of a qualified charitable distribution from 
     an individual retirement account to an organization described 
     in section 170(c).
       ``(B) Special rules relating to charitable remainder 
     trusts, pooled income funds, and charitable gift annuities.--
       ``(i) In general.--No amount shall be includible in gross 
     income by reason of a qualified charitable distribution from 
     an individual retirement account--

       ``(I) to a charitable remainder annuity trust or a 
     charitable remainder unitrust (as such terms are defined in 
     section 664(d)),
       ``(II) to a pooled income fund (as defined in section 
     642(c)(5)), or
       ``(III) for the issuance of a charitable gift annuity (as 
     defined in section 501(m)(5)).

     The preceding sentence shall apply only if no person holds an 
     income interest in the amounts in the trust, fund, or annuity 
     attributable to such distribution other than one or more of 
     the following: the individual for whose benefit such account 
     is maintained, the spouse of such individual, or any 
     organization described in section 170(c).
       ``(ii) Determination of inclusion of amounts distributed.--
     In determining the amount includible in the gross income of 
     any person by reason of a payment or distribution from a 
     trust referred to in clause (i)(I) or a charitable gift 
     annuity (as so defined), the portion of any qualified 
     charitable distribution to such trust or for such annuity 
     which would (but for this subparagraph) have been includible 
     in gross income--

       ``(I) shall be treated as income described in section 
     664(b)(1), and
       ``(II) shall not be treated as an investment in the 
     contract.

       ``(iii) No inclusion for distribution to pooled income 
     fund.--No amount shall be includible in the gross income of a 
     pooled income fund (as so defined) by reason of a qualified 
     charitable distribution to such fund.
       ``(C) Qualified charitable distribution.--For purposes of 
     this paragraph, the term `qualified charitable distribution' 
     means any distribution from an individual retirement 
     account--
       ``(i) which is made on or after the date that the 
     individual for whose benefit the account is maintained has 
     attained age 59\1/2\, and
       ``(ii) which is made directly from the account to--

       ``(I) an organization described in section 170(c), or
       ``(II) a trust, fund, or annuity referred to in 
     subparagraph (B).

       ``(D) Denial of deduction.--The amount allowable as a 
     deduction under section 170 to the taxpayer for the taxable 
     year shall be reduced (but not below zero) by the sum of the 
     amounts of the qualified charitable distributions during such 
     year which would be includible in the gross income of the 
     taxpayer for such year but for this paragraph.''.
       (b) Effective Date.--The amendment made by subsection (a) 
     shall apply to taxable years beginning after the date of the 
     enactment of this Act.

  Mr. DURBIN. Mr. President, I am pleased to introduce, along with 
Senator Kay Bailey Hutchison, the charitable IRA Rollover Act of 2003. 
We have introduced this legislation in the last two Congresses. Senator 
Hutchison and I sincerely hope that this legislation will finally 
become law this year.
  The IRA Charitable Rollover Act has the support of numerous 
charitable organizations across the United States. The effect of this 
bill would be to unlock billions of dollars in savings Americans hold 
and make them available to charities. Our legislation will allow 
individuals to roll assets from an Individual Retirement Account into a 
charity or a deferred charitable gift plan without incurring any income 
tax consequences. Thus, the donation

[[Page S1485]]

would be made to charity without ever withdrawing it as income and 
paying tax on it.
  Americans currently hold about $2 trillion in assets in IRAs. This 
represents over one-fifth of Americans' total retirement market assets 
and will likely grow due to the increased contribution limits enacted 
as part of the Economic Growth and Tax Relief Reconciliation Act of 
2001. Recent studies show that assets of qualified retirement plans, 
such as IRAs, comprise a substantial part of peoples' net worth. Many 
of these individuals would like to give a portion of these assets to 
charity, but are reluctant to do so because of the tax consequences.
  Under our current law, if money from an IRA is transferred to a 
charitable organization or into a charitable remainder trust, donors 
are required to recognize that as income. Therefore, absent the changes 
called for in the legislation, the donor will have taxable income in 
the year the gift is funded. This is a huge disincentive contained in 
our complicated and burdensome tax code. This legislation will unleash 
a critical source of funding for our Nation's charities. This 
legislation will provide millions of Americans with a commonsense way 
to remove obstacles to private charitable giving.
  Under the Hutchison-Durbin plan, an individual, upon reaching age 
59\1/2\, could move assets penalty- and tax-free from an IRA directly 
to charity or into a qualifying deferred charitable gift plan--e.g. 
charitable remainder trusts, pooled income funds and gift annuities. In 
the latter case the donor would be able to receive an income stream 
from the retirement plan assets, which would be taxed according to 
normal rules. Upon the death of the individual, the remainder would be 
transferred to charity tax free.
  There are numerous supporters of this legislation including the Art 
Institute of Chicago, the University of Chicago, the Field Museum, the 
Catholic Diocese of Peoria, Northwestern University, the Chicago 
Symphony Orchestra, Georgetown University, and others. There are over 
100 groups in Illinois alone that support this sensible legislation.
  I hope the Senate will join in this bipartisan effort to provide a 
valuable new source of philanthropy for our Nation's charities. I hope 
that our colleagues will cosponsor this important piece of legislation 
and that it will be enacted into law this year. I thank the Senator 
from Texas, Senator Hutchison, for working with me and my staff in this 
effort.
                                 ______