To amend the Internal Revenue Code of 1986 to encourage private philanthropy.

Summary: Personal Philanthropy Account Act of 2005 - Amends the Internal Revenue Code to allow a tax deduction (whether or not the taxpayer itemizes deductions) for cash contributions to a personal philanthropy account. Defines "personal philanthropy account" as a tax-exempt trust created to make distributions for charitable purposes. Sets forth rules providing for default charitable distributions in the event of an account holder's death and minimum annual distribution requirements.

Allows an exclusion from the gross income of an employee for contributions made by an employer to the employee's personal philanthropy account.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Personal Philanthropy Account Act of 
2005''.

SEC. 2. PERSONAL PHILANTHROPY ACCOUNTS.

    (a) In General.--Part VII of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to additional itemized 
deductions for individuals) is amended by redesignating section 224 as 
section 225 and by inserting after section 223 the following new 
section:

``SEC. 224. PERSONAL PHILANTHROPY ACCOUNTS.

    ``(a) Allowance of Deduction.--In the case of an individual, there 
shall be allowed as a deduction for the taxable year an amount equal to 
the aggregate amount paid in cash during such taxable year by or on 
behalf of such individual to a personal philanthropy account of such 
individual.
    ``(b) Personal Philanthropy Account.--For purposes of this section, 
the term `personal philanthropy account' means a trust created or 
organized in the United States exclusively for the purpose of making 
distributions for the charitable purposes designated by an individual 
who is the account holder of the trust (and designated as an personal 
philanthropy account at the time created or organized), but only if the 
written governing instrument creating the trust meets the following 
requirements:
            ``(1) No contribution will be accepted unless it is in 
        cash.
            ``(2) The trustee is a bank (as defined in section 408(n)), 
        community foundation, or another person who demonstrates to the 
        satisfaction of the Secretary that the manner in which that 
        person will administer the trust will be consistent with the 
        requirements of this section or who has so demonstrated with 
        respect to any personal philanthropy account and who is not 
        disqualified under subsection (f).
            ``(3) No part of the trust assets will be invested in life 
        insurance contracts.
            ``(4) The assets of the trust shall not be commingled with 
        other property except in a common trust fund or common 
        investment fund.
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Default distribution rules.--
                    ``(A) In general.--No account shall be treated as a 
                personal philanthropy account unless at all times there 
                are in effect qualified default charitable organization 
                designations under subparagraphs (B) and (C).
                    ``(B) Qualified default charitable organization 
                designation.--For purposes of subparagraph (A), a 
                qualified default charitable organization designation 
                in effect under this subparagraph is the designation by 
                the account holder of an organization to which the 
                remainder of such account may be made in the form of a 
                qualified philanthropy payment upon the death of the 
                account holder in any case in which the account holder 
                fails to provide by will or other suitable estate 
                document for the distribution of the assets of such 
                account.
                    ``(C) Trustee designation.--For purposes of 
                subparagraph (A), a qualified default charitable 
                organization designation in effect under this 
                subparagraph is the designation by the trustee of the 
                personal philanthropy account of an organization to 
                which a payment under subparagraph (B) will be made if 
                the organization designated under subparagraph (B) is 
                not qualified to receive a qualified philanthropy 
                payment at the time of such payment.
            ``(2) Minimum distribution requirements.--
                    ``(A) In general.--No account shall be treated as a 
                personal philanthropy account for a taxable year unless 
                such account meets the minimum distribution 
                requirements for such taxable year.
                    ``(B) Minimum distribution requirement.--An account 
                meets the minimum distribution requirements for a 
                taxable year if the aggregate distributions from the 
                account for the taxable year are not less than 5 
                percent of the balance of such account as of the last 
                day of the preceding taxable year.
                    ``(C) Exception for accounts with a balance of less 
                than $10,000.--Subparagraph (A) shall not apply to any 
                account for a taxable year if the balance of such 
                account as of the last day of the preceding taxable 
                year is less than $10,000.
            ``(3) Denial of deduction to dependents.--No deduction 
        shall be allowed under this section to any individual with 
        respect to whom a deduction under section 151 is allowable to 
        another taxpayer for a taxable year beginning in the calendar 
        year in which such individual's taxable year begins.
            ``(4) Community foundation.--For purposes of this section, 
        the term `community foundation' means a non-sectarian 
        organization--
                    ``(A) whose long-term goal is to build permanent, 
                named component funds established by many separate 
                donors for the broad-based charitable benefit of the 
                residents of a defined geographic area, and
                    ``(B) which--
                            ``(i) is described in section 501(c)(3) and 
                        exempt from tax under section 501(a),
                            ``(ii) is not a private foundation, and
                            ``(iii) is not controlled directly or 
                        indirectly by one or more disqualified persons 
                        (as defined in section 4946, determined without 
                        regard to subsection (a)(1)(B) thereof).
    ``(d) Tax Treatment of Distributions.--
            ``(1) In general.--Any distribution from a personal 
        philanthropy account shall be includible in the gross income of 
        the account holder in the manner as provided in section 72.
            ``(2) Qualified philanthropy payments.--
                    ``(A) In general.--No amount shall be includible in 
                gross income under paragraph (1) to the extent that 
                such distribution is a qualified philanthropy payment.
                    ``(B) Qualified philanthropy payment defined.--For 
                purposes of this section, the term `qualified 
                philanthropy payment' means a distribution from a 
                personal philanthropy account--
                            ``(i) which is made, pursuant to a request 
                        by the account holder, by the trustee of the 
                        account within 30 days after receipt by the 
                        trustee of a certification under subparagraph 
                        (C), and
                            ``(ii) which is paid for a purpose 
                        specified in section 170(c).
                A trustee who fails to meet the 30-day requirement of 
                clause (i) shall be subject to disqualification as a 
                trustee.
                    ``(C) Organization certification.--For purposes of 
                subparagraph (B)(i), a certification under this 
                subparagraph is a certification by an organization 
                pursuant to a written request by the trustee of a 
                personal philanthropy account that the organization is 
                an organization which--
                            ``(i) is described in section 501(c)(3) and 
                        exempt from tax under section 501(a), and
                            ``(ii) is not a personal philanthropy 
                        account.
                    ``(D) Coordination with charitable contributions.--
                            ``(i) No deduction shall be allowed under 
                        sections 170, 642(c), 2055, 2106(a)(2), or 2522 
                        for any amount excluded from gross income under 
                        subparagraph (A),
                            ``(ii) under regulations, the amount 
                        allowable as a deduction under sections 170, 
                        642(c), 2055, 2106(a)(2), or 2522 (as 
                        appropriate) for the taxable year (without 
                        regard to this clause) shall be reduced by the 
                        amount excluded from gross income for the 
                        taxable year under subparagraph (A), and
                            ``(iii) section 170(d) shall not apply to 
                        any amount excluded from gross income under 
                        subparagraph (A).
            ``(3) Rollover contributions.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any amount paid or distributed from a personal 
                philanthropy account to the extent that the amount 
                received is paid, not later than the 60th day after the 
                date of such payment or distribution, into another 
                personal philanthropy account of the same account 
                holder. The preceding sentence shall not apply to any 
                payment or distribution if it applied to any prior 
                payment or distribution during the 12-month period 
                ending on the date of the payment or distribution.
                    ``(B) Heir.--Paragraph (1) shall not apply to any 
                amount paid or distributed from a personal philanthropy 
                account of a decedent to the extent that the amount 
                received is paid, not later than the 60th day after the 
                date of such payment or distribution, into the personal 
                philanthropy account of an heir of the decedent, as 
                designated by the will of the decedent.
    ``(e) Tax Treatment of Account.--
            ``(1) In general.--A personal philanthropy account shall be 
        exempt from taxation under this subtitle. Notwithstanding the 
        preceding sentence, the personal philanthropy account shall be 
        subject to the taxes imposed by section 511 (relating to 
        imposition of tax on unrelated business income of charitable 
        organizations).
            ``(2) Account terminations.--Rules similar to the rules of 
        paragraphs (2) and (4) of section 408(e) shall apply to any 
        personal philanthropy account.
    ``(f) Disqualification of Trustee.--The trustee of a personal 
philanthropy account shall not be qualified to be a trustee of such 
account after a final determination by the Secretary that the trustee 
has disbursed more than 10 percent of its payments from personal 
philanthropy accounts to non-qualifying organizations in a calendar 
year.
    ``(g) Reports.--The trustee of a personal philanthropy account 
shall make such reports regarding such account to the Secretary and to 
the holder the account with respect to contributions, distributions, 
and such other matters as the Secretary may require. The reports 
required by this subsection shall be filed at such time and in such 
manner and furnished to such individuals at such time and in such 
manner as may be required.''.
    (b) Deduction Allowed Whether or not Individual Itemizes Other 
Deductions.--Subsection (a) of section 62 of such Code is amended by 
inserting before the flush sentence at the end the following new 
paragraph:
            ``(21) Personal philanthropy accounts.--The deduction 
        allowed under section 224.''.
    (c) Exclusion for Employer Contributions to Personal Philanthropy 
Accounts.--
            (1) In general.--Part III of subchapter B of chapter 1 of 
        such Code is amended by inserting after section 139A the 
        following new section:

``SEC. 139B. CONTRIBUTIONS BY EMPLOYER TO PERSONAL PHILANTHROPY 
              ACCOUNTS.

    ``(a) In General.--Gross income of an employee does not include 
contributions by the employer to the personal philanthropy account of 
the employee.
    ``(b) Personal Philanthropy Account.--For purposes of this section, 
the term `personal philanthropy account' shall have the meaning given 
to such term by section 224.
    ``(c) Exclusion not to Exceed Compensation.--
            ``(1) Employees.--The amount excluded from gross income by 
        subsection (a) with respect to an employee shall not exceed 
        such employee's wages, salaries, tips, and other employee 
        compensation which are attributable to such employee's 
        employment by the employer referred to in such subsection.
            ``(2) Self-employed individuals.--The amount excluded from 
        gross income by subsection (a) for contributions with respect 
        to an individual who is self employed shall not exceed such 
        individual's earned income (as defined in section 401(c)(2)) 
        derived by the taxpayer from the trade or business with respect 
        to which the individual is self-employed.
            ``(3) Community property laws not to apply.--The 
        limitations under this subsection shall be determined without 
        regard to community property laws.''.
            (2) Conforming amendments.--
                    (A) Section 3121(a) of such Code is amended by 
                striking ``or'' at the end of paragraph (21), by 
                striking the period at the end of paragraph (22) and 
                inserting ``; or '', and by inserting after paragraph 
                (22) the following new paragraph:
            ``(23) any payment made to a personal philanthropy account 
        (as defined in section 224) of an employee.''.
                    (B) Section 3231(e) of such Code is amended by 
                adding at the end the following new paragraph:
            ``(13) Personal philanthropy account contributions.--The 
        term `compensation' shall not include any payment made to a 
        personal philanthropy account (as defined in section 224) of an 
        employee.''.
                    (C) Section 3306(b) of such Code is amended by 
                striking ``or'' at the end of paragraph (18), by 
                striking the period at the end of paragraph (19) and 
                inserting ``; or'', and by inserting after paragraph 
                (19) the following new paragraph:
            ``(20) any payment made to a personal philanthropy account 
        (as defined in section 224) of an employee.''.
                    (D) Section 3401(a) of such Code is amended by 
                striking ``or'' at the end of paragraph (21), by 
                striking the period at the end of paragraph (22) and 
                inserting ``; or'', and by inserting after paragraph 
                (22) the following new paragraph:
            ``(23) any payment made to a personal philanthropy account 
        (as defined in section 224) of an employee.''.
                    (E) Section 6051(a) of such Code is amended by 
                striking ``and'' at the end of paragraph (12), by 
                striking the period at the end of paragraph (13) and 
                inserting ``, and'', and by inserting after paragraph 
                (13) the following new paragraph:
            ``(14) the amount contributed to any personal philanthropy 
        account (as defined in section 224) of such employee or such 
        employee's spouse.''.
    (d) Prohibited Transactions.--
            (1) Exception for taxable distributions from personal 
        philanthropy accounts.--Subsection (c) of section 4975 of such 
        Code (defining to prohibited transaction) is amended by adding 
        at the end the following new paragraph:
            ``(7) Special rule for personal philanthropy accounts.--An 
        individual for whose benefit a personal philanthropy account is 
        established and any contributor to such account shall be exempt 
        from the tax imposed by this section with respect to any 
        transaction concerning such account (which would otherwise be 
        taxable under this section) if section 224(d) applies with 
        respect to such transaction.''.
            (2) Plan defined.--Paragraph (1) of section 4975(e) of such 
        Code is amended by striking ``or'' at the end of subparagraph 
        (F), by striking the period at the end of subparagraph (G) and 
        inserting ``, or'', and by inserting after subparagraph (G) the 
        following new subparagraph:
                    ``(H) a personal philanthropy account described in 
                section 224.''.
    (e) Penalty on Failure to Report.--Paragraph (2) of section 6693(a) 
of such Code (relating to provisions) is amended by striking ``and'' at 
the end of subparagraph (D), by striking the period at the end of 
subparagraph (E) and inserting ``, and'', and by inserting after 
subparagraph (E) the following new subparagraph:
                    ``(F) section 224(f) (relating to personal 
                philanthropy accounts).''.
    (f) Conforming Amendment.--Paragraph (2) of section 26(b) of such 
Code is amended by striking ``and'' at the end of subparagraph (R), by 
striking the period at the end of subparagraph (S) and inserting ``, 
and'', and by adding at the end the following new subparagraph:
                    ``(T) section 224(d)(3) relating to (relating to 
                additional tax with respect to distributions not used 
                for charitable contribution purposes).''.
    (g) Clerical Amendments.--
            (1) The table of sections for part VII of subchapter B of 
        chapter 1 of such Code is amended by redesignating the item 
        relating to section 224 as an item relating to section 225 and 
        by inserting after the item relating to section 223 the 
        following new item:

``Sec. 224. Personal philanthropy accounts.''.
            (2) The table of sections for part III of subchapter B of 
        chapter 1 of such Code is amended by inserting after the item 
        relating to section 139A the following new item:

``Sec. 139B. Contributions by employer to personal philanthropy 
                            accounts.''.
    (h) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2004.