[Congressional Record Volume 150, Number 21 (Wednesday, February 25, 2004)]
[Extensions of Remarks]
[Page E232]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




LIMIT ON DEDUCTION FOR CHARITABLE CONTRIBUTIONS OF PATENTS AND SIMILAR 
                                PROPERTY

                                 ______
                                 

                           HON. AMO HOUGHTON

                              of new york

                    in the house of representatives

                      Wednesday, February 25, 2004

  Mr. HOUGHTON. Mr. Speaker, today I am introducing legislation that 
would tighten the tax rules for technology donations. The proposal 
would prevent the abusive transactions, but would allow the fair market 
value of legitimate gifts of technology to be deducted when the 
technology is transferred to universities, teaching hospitals, or 
nonprofit research institutions. My good friend and former House 
colleague, Pat Roberts, has introduced a companion bill in the Senate.
  Taxpayers are permitted to deduct the fair market value of patents 
and related technology that are donated to tax exempt charities. The 
benefit from the tax savings generated by patent and technology 
donations encourages the private owners of technology to transfer the 
patent to credentialed institutions that can develop it, creating new 
markets, improving people's lives, creating jobs, and strengthening the 
educational capabilities and innovative skills of our universities, 
teaching hospitals and research institutions.
  In recent years the Internal Revenue Service and the Treasury 
Department have identified serious problems that have allowed 
unscrupulous taxpayers to abuse the law. In some cases, technology of 
questionable value is donated to tax exempt entities that are either 
incapable or unwilling to develop it. Any ``value'' deducted in these 
cases is clearly exaggerated. In some cases, donor appraisals of 
otherwise valuable technology to a credentialed donee may have stated 
values that are inflated.
  The Treasury Department has proposed a solution to these problems 
that would effectively eliminate any current deduction for donors of 
technology. While I strongly support measures to clean up the current 
law and tighten the rules for deductible gifts of technology, I believe 
Treasury's proposal goes too far.
  My proposal would limit the incentive to very specific circumstances. 
Deductions would be limited to technology gifts in cases when all 
rights, title and interest in technology are transferred to either a 
university, teaching hospital, or non-profit research institute that is 
able to apply its credentialed expertise to the development of the 
technology. Under the proposal, the donor and donee of any cash 
included with a qualified gift must agree to limit its use to the 
development of the technology gift.
  The bill adds a number of measures to avoid abuse in this area. 
Qualified appraisals and qualified appraisers are required and defined. 
One or more appraisals (second appraisal if value is over $5 million) 
would be required without regard to any value limitation. The Secretary 
of the Treasury shall prescribe regulations or guidance regarding the 
qualified appraisals and qualified appraisers. In addition, other anti-
abuse measures to prevent the bundling of patents or similar property 
and/or manipulation of the tax basis in order to increase the amount of 
the contribution are included.
  I encourage my colleagues to support this important measure.

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