[Congressional Record (Bound Edition), Volume 147 (2001), Part 2]
[House]
[Pages 2792-2793]
[From the U.S. 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 
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requirement was originally enacted in the Tax Reform Act of 1969 as a 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.

[[Page 2793]]

  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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