49–006 

114TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 1st Session 114–64 

FAIR TREATMENT FOR ALL GIFTS ACT 

APRIL 13, 2015.—Committed to the Committee of the Whole House on the State of 

the Union and ordered to be printed 

Mr. RYAN of Wisconsin, from the Committee on Ways and Means, 

submitted the following 

R E P O R T 

[To accompany H.R. 1104] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Ways and Means, to whom was referred the 

bill (H.R. 1104) to amend the Internal Revenue Code of 1986 to 

provide a deduction from the gift tax for gifts made to certain exempt organizations, having considered the same, report favorably 

thereon with an amendment and recommend that the bill as 

amended do pass. 

CONTENTS 

Page 

I. SUMMARY AND BACKGROUND ................................................................. 2 

A. Purpose and Summary ......................................................................... 2 

B. Background and Need for Legislation ................................................ 2 

C. Legislative History ............................................................................... 3 

II. EXPLANATION OF THE BILL ...................................................................... 3 

A. Deduction from Gift Tax for Gifts Made to Certain Exempt Organizations (sec. 2 of the bill and sec. 2522(a) of the Code) ............... 3 

III. VOTES OF THE COMMITTEE ...................................................................... 6 

IV. BUDGET EFFECTS OF THE BILL ............................................................... 6 

A. Committee Estimate of Budgetary Effects ......................................... 6 

B. Statement Regarding New Budget Authority and Tax Expenditures Budget Authority ...................................................................... 6 

C. Cost Estimate Prepared by the Congressional Budget Office ........... 7 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE 

HOUSE .......................................................................................................... 7 

A. Committee Oversight Findings and Recommendations .................... 7 

B. Statement of General Performance Goals and Objectives ................ 8 

C. Information Relating to Unfunded Mandates .................................... 8 

D. Applicability of House Rule XXI 5(b) .................................................. 8 

E. Tax Complexity Analysis ..................................................................... 8 

F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 

Benefits ............................................................................................... 8 


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G. Duplication of Federal Programs ........................................................ 9 

H. Disclosure of Directed Rule Makings ................................................. 9 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED 9 

A. Text of Existing Law Amended or Repealed by the Bill, as Reported .................................................................................................. 9 

B. Changes in Existing Law Proposed by the Bill, as Reported ........... 13 

The amendment is as follows: 

Strike all after the enacting clause and insert the following: 

SECTION 1. SHORT TITLE. 

This Act may be cited as the ‘‘Fair Treatment for All Gifts Act’’. 

SEC. 2. DEDUCTION FROM GIFT TAX FOR GIFTS MADE TO CERTAIN EXEMPT ORGANIZATIONS. 

(a) IN GENERAL.—Section 2522(a) of the Internal Revenue Code of 1986 is amended by striking the period at the end of paragraph (4) and inserting a semicolon and 

by inserting after paragraph (4) the following new paragraph: 

‘‘(5) an organization described in paragraph (4), (5), or (6) of section 501(c) 

and exempt from tax under section 501(a).’’. 

(b) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply to gifts 

made after the date of the enactment of this Act. 

(c) NO INFERENCE.—Nothing in the amendments made by subsection (a) shall be 

construed to create any inference with respect to whether any transfer of property 

(whether made before, on, or after the date of the enactment of this Act) to an organization described in paragraph (4), (5), or (6) of section 501(c) of the Internal Revenue Code of 1986 is a transfer of property by gift for purposes of chapter 12 of such 

Code. 

I. SUMMARY AND BACKGROUND 

A. PURPOSE AND SUMMARY

H.R. 1104, reported by the Committee on Ways and Means, provides that donations to organizations exempt from tax under sections 501(c)(4), (c)(5), and (c)(6) of the Internal Revenue Code (the 

‘‘Code’’) are treated as gifts for Federal tax purposes. However, 

such gifts are deductible from total gifts made and not included as 

taxable gifts for the calendar year. Thus, donations are effectively 

exempt from the Federal gift tax. The legislation applies to gifts 

made after the date of enactment. The bill further provides that no 

inference is to be made with regard to any transfer of property 

made before, on or after the date of enactment. 

B. BACKGROUND AND NEED FOR LEGISLATION

The Committee believes that it is important to clarify the treatment of donations to organizations exempt from tax under Code 

section 501(c)(4) (social welfare organizations), (c)(5) (unions), or 

(c)(6) (trade associations). While these donations are not eligible for 

a charitable deduction, it has been unclear under current law 

whether such transfers should be treated as gifts, which would 

make the donor liable for the gift tax. In 2011, the IRS began to 

audit taxpayers for failure to file a gift tax return on transfers to 

section 501(c)(4) organizations, although it later abandoned such 

audits. The Committee believes that transfers to organizations exempt from tax under Code section 501(c)(4) (social welfare organizations), (c)(5) (unions), or (c)(6) (trade associations) should be 

treated as gifts. However, such transfers should be deducted from 

total gifts made for the year when determining the amount of taxable gifts. Thus, such transfers would not be subject to the gift tax. 

The bill clarifies this area of tax law and provides certainty to taxpayers. 


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1Sec. 2501(a). 

2Sec. 2010. 

C. LEGISLATIVE HISTORY

Background 

H.R. 1104 was introduced on February 26, 2015, and was referred to the Committee on Ways and Means. 

Committee action 

The Committee on Ways and Means marked up H.R. 1104, the 

‘‘Fair Treatment for All Gifts Act,’’ on March 25, 2015, and ordered 

the bill, as amended, favorably reported (with a quorum being 

present). 

Committee hearings 

The need for clarification of the treatment of non-deductible donations to certain tax-exempt organizations was discussed during 

multiple Committee hearings during the 113th Congress: 

• Full Committee Hearing on IRS Targeting Conservative 

Groups (May 17, 2013). 

• Full Committee Hearing Organizations Targeted by Internal 

Revenue Service for Their Personal Beliefs (June 4, 2013). 

• Full Committee Hearing on the Status of Internal Revenue 

Service’s Review of Taxpayer Targeting Practices (June 27, 2013). 

II. EXPLANATION OF THE BILL 

A. DEDUCTION FROM GIFT TAX FOR GIFTS MADE TO CERTAIN EXEMPT ORGANIZATIONS (SEC. 2 OF THE BILL AND SEC. 2522(a) OF

THE CODE) 

PRESENT LAW

Overview 

The Code imposes a tax for each calendar year on the transfer 

of property by gift during such year by any individual, whether a 

resident or nonresident of the United States.1 The amount of taxable gifts for a calendar year is determined by subtracting from the 

total amount of gifts made during the year: (1) the gift tax annual 

exclusion (described below); and (2) allowable deductions. 

Gift tax for the current taxable year is determined by: (1) computing a tentative tax on the combined amount of all taxable gifts 

for the current and all prior calendar years using the common gift 

tax and estate tax rate table; (2) computing a tentative tax only on 

all prior-year gifts; (3) subtracting the tentative tax on prior-year 

gifts from the tentative tax computed for all years to arrive at the 

portion of the total tentative tax attributable to current-year gifts; 

and, finally, (4) subtracting the amount of unified credit not consumed by prior-year gifts. 

Unified credit (exemption) and tax rates 

Unified credit 

A unified credit is available with respect to taxable transfers by 

gift and at death.2 The unified credit offsets tax, computed using 


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3For 2011 and later years, the gift and estate taxes were reunified, meaning that the gift tax 

exemption amount was increased to equal the estate tax exemption amount. 4For 2015, the $5.43 exemption amount results in a unified credit of $2,117,800, after applying the applicable rates set forth in section 2001(c). 5Sec. 2511(a). 

6Sec. 2512(a). 

7Sec. 2512(b). 

8Sec. 2503(e). 

9Sec. 2501(a)(4). 

the applicable estate and gift tax rates, on a specified amount of 

transfers, referred to as the applicable exclusion amount, or exemption amount. The exemption amount was set at $5 million for 2011 

and is indexed for inflation for later years.3 For 2015, the inflationindexed exemption amount is $5.43 million.4 Exemption used during life to offset taxable gifts reduces the amount of exemption that 

remains at death to offset the value of a decedent’s estate. An election is available under which exemption that is not used by a decedent may be used by the decedent’s surviving spouse (exemption 

portability). 

Common tax rate table 

A common tax-rate table with a top marginal tax rate of 40 percent is used to compute gift tax and estate tax. The 40 percent rate 

applies to transfers in excess of $1 million (to the extent not exempt). Because the exemption amount currently shields the first 

$5.43 million in gifts and bequests from tax, transfers in excess of 

the exemption amount generally are subject to tax at the highest 

marginal 40-percent rate. 

Transfers by gift 

The gift tax applies to a transfer by gift regardless of whether: 

(1) the transfer is made outright or in trust; (2) the gift is direct 

or indirect; or (3) the property is real or personal, tangible or intangible.5 For gift tax purposes, the value of a gift of property is the 

fair market value of the property at the time of the gift.6 Where 

property is transferred for less than full consideration, the amount 

by which the value of the property exceeds the value of the consideration is considered a gift and is included in computing the total 

amount of a taxpayer’s gifts for a calendar year.7

For a gift to occur, a donor generally must relinquish dominion 

and control over donated property. For example, if a taxpayer 

transfers assets to a trust established for the benefit of his or her 

children, but retains the right to revoke the trust, the taxpayer 

may not have made a completed gift, because the taxpayer has retained dominion and control over the transferred assets. A completed gift made in trust, on the other hand, often is treated as a 

gift to the trust beneficiaries. 

By reason of statute, certain transfers are not treated as transfers by gift for gift tax purposes. These include, for example, certain transfers for educational and medical purposes 8 and transfers 

to section 527 political organizations.9

Under present law, there is no explicit exception from the gift tax 

for a transfer to a tax-exempt organization described in section 

501(c)(4) (generally, social welfare organizations), 501(c)(5) (generally, labor and certain other organizations), or section 501(c)(6) 

(generally, trade associations and business leagues). 


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10Sec. 2503(b). 11Sec. 529(c)(2). 12Sec. 2523. 13Sec. 2522. 14Sec. 2522(c)(2). 

Taxable gifts 

As stated above, the amount of a taxpayer’s taxable gifts for the 

year is determined by subtracting from the total amount of the taxpayer’s gifts for the year the gift tax annual exclusion and any 

available deductions. 

Gift tax annual exclusion 

Under present law, donors of lifetime gifts are provided an annual exclusion of $14,000 per donee in 2015 (indexed for inflation 

from the 1997 annual exclusion amount of $10,000) for gifts of 

present interests in property during the taxable year.10 If the nondonor spouse consents to split the gift with the donor spouse, then 

the annual exclusion is $28,000 per donee in 2015. In general, unlimited transfers between spouses are permitted without imposition 

of a gift tax. Special rules apply to the contributions to a qualified 

tuition program (‘‘529 Plan’’) including an election to treat a contribution that exceeds the annual exclusion as a contribution made 

ratably over a five-year period beginning with the year of the contribution.11

Transfers between spouses 

A 100-percent marital deduction generally is permitted for the 

value of property transferred between spouses.12

Transfers to charity 

Contributions to section 501(c)(3) charitable organizations and 

certain other organizations may be deducted from the value of a 

gift for Federal gift tax purposes.13 The effect of the deduction generally is to remove the full fair market value of assets transferred 

to charity from the gift tax base; unlike the income tax charitable 

deduction, there are no percentage limits on the deductible amount. 

A charitable contribution of a partial interest in property, such as 

a remainder or future interest, generally is not deductible for gift 

tax purposes.14

REASONS FOR CHANGE

Until recently, the IRS had not attempt to impose gift tax on 

transfers to organizations that are exempt from tax under section 

501(c)(4), (5), or (6) of the Code. In 2011, the Committee found that 

certain donors to section 501(c)(4) organizations had received notices from the IRS that they would be audited for potential gift tax 

liability. After the Committee commenced oversight of this action, 

the IRS announced that it was suspending this practice. The Committee is concerned that the threat of an audit or imposition of gift 

tax could have a chilling effect on the making of contributions that 

are used to support legitimate exempt purposes. The Committee 

therefore believes it is necessary to clarify that payments to section 

501(c)(4), (5), and (6) organizations are not subject to gift tax. 


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EXPLANATION OF PROVISION

Under the provision, a transfer to a tax-exempt organization described in section 501(c)(4), 501(c)(5), or 501(c)(6) is deductible in 

computing taxable gifts for a calendar year. 

EFFECTIVE DATE

The provision is effective for gifts made after the date of enactment. The provision shall not be construed to create an inference 

with respect to whether any transfer of property to such an organization, whether made before, on or after the date of enactment, is 

a transfer by gift for gift tax purposes. 

III. VOTES OF THE COMMITTEE 

In compliance with clause 3(b) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the vote of the Committee on Ways and Means in its consideration of H.R. 1104, the ‘‘Fair Treatment for All Gifts Act’’ on 

March 25, 2015. 

The Chairman’s amendment in the nature of a substitute was 

adopted by a voice vote (with a quorum being present). 

The bill, H.R. 1104, as amended, was ordered favorably reported 

to the House of Representatives by a voice vote (with a quorum 

being present). 

IV. BUDGET EFFECTS OF THE BILL 

A. COMMITTEE ESTIMATE OF BUDGETARY EFFECTS

In compliance with clause 3(d) of rule XIII of the Rules of the 

House of Representatives, the following statement is made concerning the effects on the budget of the bill, H.R. 1104, as reported. 

The bill, as reported, is estimated to have no effect on Federal 

budget receipts for fiscal years 2015–2025. 

Pursuant to clause 8 of rule XIII of the Rules of the House of 

Representatives, the following statement is made by the Joint Committee on Taxation with respect to the provisions of the bill amending the Internal Revenue Code of 1986: the gross budgetary effect 

(before incorporating macroeconomic effects) in any fiscal year is 

less than 0.25 percent of the current projected gross domestic product of the United States for that fiscal year; therefore, the bill is 

not ‘‘major legislation’’ for purposes of requiring that the estimate 

include the budgetary effects of changes in economic output, employment, capital stock and other macroeconomic variables. 

B. STATEMENT REGARDING NEW BUDGET AUTHORITY AND TAX

EXPENDITURES BUDGET AUTHORITY

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee states that the bill involves no new or increased budget authority. The Committee further states that there are no new or increased tax expenditures. 


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C. COST ESTIMATE PREPARED BY THE CONGRESSIONAL BUDGET

OFFICE

In compliance with clause 3(c)(3) of rule XIII of the Rules of the 

House of Representatives, requiring a cost estimate prepared by 

the CBO, the following statement by CBO is provided. 

U.S. CONGRESS, CONGRESSIONAL BUDGET OFFICE, Washington, DC, April 2, 2015. 

Hon. PAUL RYAN, Chairman, Committee on Ways and Means, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 1104, the Fair Treatment 

for All Gifts Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Logan Timmerhoff. 

Sincerely, 

KEITH HALL, 

Director. 

Enclosure. 

H.R. 1104—Fair Treatment for All Gifts Act 

H.R. 1104 would amend the Internal Revenue Code to explicitly 

provide that donations to certain tax-exempt organizations would 

be deductible in computing taxable gifts for purposes of estate and 

gift taxation. The tax-exempt organizations include social welfare 

and other organizations described in the Internal Revenue Code 

under section 501(c)(4), labor and other organizations described 

under section 501(c)(5), and trade associations and similar organizations described under section 501(c)(6). The bill would codify the 

existing practices of the Internal Revenue Service in administering 

the tax law applicable to such donations. 

The staff of the Joint Committee on Taxation (JCT) estimates 

that enacting H.R. 1104 would have no budgetary effect. Because 

enacting H.R. 1104 would not affect direct spending or revenues, 

pay-as-you-go procedures do not apply. 

JCT has determined that the bill contains no intergovernmental 

or private-sector mandates as defined in the Unfunded Mandates 

Reform Act. 

The CBO staff contact for this estimate is Logan Timmerhoff. 

The estimate was approved by David Weiner, Assistant Director for 

Tax Analysis. 

V. OTHER MATTERS TO BE DISCUSSED UNDER THE 

RULES OF THE HOUSE 

A. COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

With respect to clause 3(c)(1) of rule XIII of the Rules of the 

House of Representatives (relating to oversight findings), the Committee advises that it was as a result of the Committee’s review of 

the provisions of H.R. 1104 that the Committee concluded that it 

is appropriate to report the bill, as amended, favorably to the 


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House of Representatives with the recommendation that the bill do 

pass. 

B. STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

With respect to clause 3(c)(4) of rule XIII of the Rules of the 

House of Representatives, the Committee advises that the bill contains no measure that authorizes funding, so no statement of general performance goals and objectives for which any measure authorizes funding is required. 

C. INFORMATION RELATING TO UNFUNDED MANDATES

This information is provided in accordance with section 423 of 

the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104–4). 

The Committee has determined that the bill does not contain Federal mandates on the private sector. The Committee has determined that the bill does not impose a Federal intergovernmental 

mandate on State, local, or tribal governments. 

D. APPLICABILITY OF HOUSE RULE XXI 5(b) 

Rule XXI 5(b) of the Rules of the House of Representatives provides, in part, that ‘‘A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not 

be considered as passed or agreed to unless so determined by a 

vote of not less than three-fifths of the Members voting, a quorum 

being present.’’ The Committee has carefully reviewed the bill, and 

states that the bill does not involve any Federal income tax rate 

increases within the meaning of the rule. 

E. TAX COMPLEXITY ANALYSIS

The following statement is made pursuant to clause 3(h)(1) of 

rule XIII of the Rules of the House of Representatives. Section 

4022(b) of the Internal Revenue Service Restructuring and Reform 

Act of 1998 requires the staff of the Joint Committee on Taxation 

(in consultation with the Internal Revenue Service and the Treasury Department) to provide a tax complexity analysis. The complexity analysis is required for all legislation reported by the Senate Committee on Finance, the House Committee on Ways and 

Means, or any committee of conference if the legislation includes a 

provision that directly or indirectly amends the Internal Revenue 

Code and has widespread applicability to individuals or small businesses. 

Pursuant to clause 3(h)(1) of rule XIII of the Rules of the House 

of Representatives, the staff of the Joint Committee on Taxation 

has determined that a complexity analysis is not required under 

section 4022(b) of the IRS Reform Act because the bill contains no 

provisions that amend the Internal Revenue Code and that have 

‘‘widespread applicability’’ to individuals or small businesses, within the meaning of the rule. 

F. CONGRESSIONAL EARMARKS, LIMITED TAX BENEFITS, AND

LIMITED TARIFF BENEFITS

With respect to clause 9 of rule XXI of the Rules of the House 

of Representatives, the Committee has carefully reviewed the proVerDate Sep 11 2014 08:09 Apr 15, 2015 Jkt 049006 PO 00000 Frm 00008 Fmt 6659 Sfmt 6602 E:\HR\OC\HR064.XXX HR064

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visions of the bill, and states that the provisions of the bill do not 

contain any congressional earmarks, limited tax benefits, or limited 

tariff benefits within the meaning of the rule. 

G. DUPLICATION OF FEDERAL PROGRAMS

In compliance with Sec. 3(g)(2) of H. Res. 5 (114th Congress), the 

Committee states that no provision of the bill establishes or reauthorizes: (1) a program of the Federal Government known to be duplicative of another Federal program, (2) a program included in any 

report from the Government Accountability Office to Congress pursuant to section 21 of Public Law 111–139, or (3) a program related 

to a program identified in the most recent Catalog of Federal Domestic Assistance, published pursuant to the Federal Program Information Act (Public Law 95–220, as amended by Public Law 98– 

169). 

H. DISCLOSURE OF DIRECTED RULE MAKINGS

In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), the 

following statement is made concerning directed rule makings: The 

Committee estimates that the bill requires no directed rule makings within the meaning of such section. 

VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS 

REPORTED 

A. TEXT OF EXISTING LAW AMENDED OR REPEALED BY THE BILL, AS

REPORTED

In compliance with clause 3(e)(1)(A) of rule XIII of the Rules of 

the House of Representatives, the text of each section proposed to 

be amended or repealed by the bill, as reported, is shown below: 

TEXT OF EXISTING LAW AMENDED OR REPEALED BY THE BILL, AS

REPORTED

In compliance with clause 3(e)(1)(A) of rule XIII of the Rules of 

the House of Representatives, the text of each section proposed to 

be amended or repealed by the bill, as reported, is shown below: 

INTERNAL REVENUE CODE OF 1986 

* * * * * * * 

Subtitle B—Estate and Gift Taxes 

* * * * * * * 

CHAPTER 12—GIFT TAX 

* * * * * * * 

Subchapter C—Deductions 

* * * * * * * 


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SEC. 2522. CHARITABLE AND SIMILAR GIFTS. 

(a) CITIZENS OR RESIDENTS.—In computing taxable gifts for the 

calendar year, there shall be allowed as a deduction in the case of 

a citizen or resident the amount of all gifts made during such year 

to or for the use of— 

(1) the United States, any State, or any political subdivision 

thereof, or the District of Columbia, for exclusively public purposes; 

(2) a corporation, or trust, or community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or to foster 

national or international amateur sports competition (but only 

if no part of its activities involve the provision of athletic facilities or equipment), including the encouragement of art and the 

prevention of cruelty to children or animals, no part of the net 

earnings of which inures to the benefit of any private shareholder or individual, which is not disqualified for tax exemption under section 501(c)(3) by reason of attempting to influence legislation, and which does not participate in, or intervene 

in (including the publishing or distributing of statements), any 

political campaign on behalf of (or in opposition to) any candidate for public office; 

(3) a fraternal society, order, or association, operating under 

the lodge system, but only if such gifts are to be used exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the 

prevention of cruelty to children or animals; 

(4) posts or organizations of war veterans, or auxiliary units 

or societies of any such posts or organizations, if such posts, organizations, units, or societies are organized in the United 

States or any of its possessions, and if no part of their net 

earnings insures to the benefit of any private shareholder or 

individual. 

Rules similar to the rules of section 501(j) shall apply for purposes 

of paragraph (2). 

(b) NONRESIDENTS.—In the case of a nonresident not a citizen of 

the United States, there shall be allowed as a deduction the 

amount of all gifts made during such year to or for the use of— 

(1) the United States, any State, or any political subdivision 

thereof, or the District of Columbia, for exclusively public purposes; 

(2) a domestic corporation organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the 

prevention of cruelty to children or animals, no part of the net 

earnings of which inures to the benefit of any private shareholder or individual, which is not disqualified for tax exemption under section 501(c)(3) by reason of attempting to influence legislation, and which does not participate in, or intervene 

in (including the publishing or distributing of statements), any 

political campaign on behalf of (or in opposition to) any candidate for public office; 

(3) a trust, or community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including the encourVerDate Sep 11 2014 08:09 Apr 15, 2015 Jkt 049006 PO 00000 Frm 00010 Fmt 6659 Sfmt 6602 E:\HR\OC\HR064.XXX HR064

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agement of art and the prevention of cruelty to children or animals, no substantial part of the activities of which is carrying 

on propaganda, or otherwise attempting, to influence legislation, and which does not participate in, or intervene in (including the publishing or distributing of statements), any political 

campaign on behalf of (or in opposition to) any candidate for 

public office; but only if such gifts are to be used within the 

United States exclusively for such purposes; 

(4) a fraternal society, order, or association, operating under 

the lodge system, but only if such gifts are to be used within 

the United States exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals; 

(5) posts or organizations of war veterans, or auxiliary units 

or societies of any such posts or organizations, if such posts, organizations, units, or societies are organized in the United 

States or any of its possessions, and if no part of their net 

earnings inures to the benefit of any private shareholder or individual. 

(c) DISALLOWANCE OF DEDUCTIONS IN CERTAIN CASES.— 

(1) No deduction shall be allowed under this section for a gift 

to of for the use of an organization or trust described in section 

508(d) or 4948(c)(4) subject to the conditions specified in such 

sections. 

(2) Where a donor transfers an interest in property (other 

than an interest described in section 170(f)(3)(B)) to a person, 

or for a use, described in subsection (a) or (b) and an interest 

in the same property is retained by the donor, or is transferred 

or has been transferred (for less than an adequate and full consideration in money or money’s worth) from the donor to a person, or for a use, not described in subsection (a) or (b), no deduction shall be allowed under this section for the interest 

which is, or has been transferred to the person, or for the use, 

described in subsection (a) or (b), unless— 

(A) in the case of a remainder interest, such interest is 

in a trust which is a charitable remainder annuity trust or 

a charitable remainder unitrust (described in section 664) 

or a pooled income fund (described in section 642(c)(5)), or 

(B) in the case of any other interest, such interest is in 

the form of a guaranteed annuity or is a fixed percentage 

distributed yearly of the fair market value of the property 

(to be determined yearly). 

(3) Rules similar to the rules of section 2055(e)(4) shall apply 

for purposes of paragraph (2). 

(4) Reformations to comply with paragraph (2) 

(A) IN GENERAL.—A deduction shall be allowed under 

subsection (a) in respect of any qualified reformation 

(within the meaning of section 2055(e)(3)(B)). 

(B) RULES SIMILAR TO SECTION 2055(E)(3) TO APPLY.—For 

purposes of this paragraph, rules similar to the rules of 

section 2055(e)(3) shall apply. 

(5) CONTRIBUTIONS TO DONOR ADVISED FUNDS.—A deduction 

otherwise allowed under subsection (a) for any contribution to 


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a donor advised fund (as defined in section 4966(d)(2)) shall 

only be allowed if— 

(A) the sponsoring organization (as defined in section 

4966(d)(1)) with respect to such donor advised fund is 

not— 

(i) described in paragraph (3) or (4) of subsection (a), 

or 

(ii) a type III supporting organization (as defined in 

section 4943(f)(5)(A)) which is not a functionally integrated type III supporting organization (as defined in 

section 4943(f)(5)(B)), and 

(B) the taxpayer obtains a contemporaneous written acknowledgment (determined under rules similar to the 

rules of section 170(f)(8)(C)) from the sponsoring organization (as so defined) of such donor advised fund that such 

organization has exclusive legal control over the assets 

contributed. 

(d) SPECIAL RULE FOR IRREVOCABLE TRANSFERS OF EASEMENTS IN

REAL PROPERTY.—A deduction shall be allowed under subsection 

(a) in respect of any transfer of a qualified real property interest 

(as defined in section 170(h)(2)(C)) which meets the requirements 

of section 170(h) (without regard to paragraph (4)(A) thereof). 

(e) SPECIAL RULES FOR FRACTIONAL GIFTS.— (1) DENIAL OF DEDUCTION IN CERTAIN CASES.— (A) IN GENERAL.—No deduction shall be allowed for a 

contribution of an undivided portion of a taxpayer’s entire 

interest in tangible personal property unless all interests 

in the property are held immediately before such contribution by— 

(i) the taxpayer, or 

(ii) the taxpayer and the donee. 

(B) EXCEPTIONS.—The Secretary may, by regulation, provide for exceptions to subparagraph (A) in cases where all 

persons who hold an interest in the property make proportional contributions of an undivided portion of the entire 

interest held by such persons. 

(2) RECAPTURE OF DEDUCTION IN CERTAIN CASES; ADDITION TO

TAX.— (A) IN GENERAL.—The Secretary shall provide for the recapture of an amount equal to any deduction allowed 

under this section (plus interest) with respect to any contribution of an undivided portion of a taxpayer’s entire interest in tangible personal property— 

(i) in any case in which the donor does not contribute all of the remaining interests in such property 

to the donee (or, if such donee is no longer in existence, to any person described in section 170(c)) on or 

before the earlier of— 

(I) the date that is 10 years after the date of the 

initial fractional contribution, or 

(II) the date of the death of the donor, and (ii) 

in any case in which the donee has not, during the 

period beginning on the date of the initial fractional contribution and ending on the date described in clause (i)— 


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13 

(I) had substantial physical possession of the 

property, and 

(II) used the property in a use which is related 

to a purpose or function constituting the basis for 

the organizations’ exemption under section 501. 

(B) ADDITION TO TAX.—The tax imposed under this chapter for any taxable year for which there is a recapture 

under subparagraph (A) shall be increased by 10 percent 

of the amount so recaptured. 

(C) INITIAL FRACTIONAL CONTRIBUTION.—For purposes of 

this paragraph, the term ‘‘initial fractional contribution’’ 

means, with respect to any donor, the first gift of an undivided portion of the donor’s entire interest in any tangible 

personal property for which a deduction is allowed under 

subsection (a) or (b). 

(f) CROSS REFERENCES.— 

(1) For treatment of certain organizations providing child 

care, see section 501(k). 

(2) For exemption of certain gifts to or for the benefit of the 

United States and for rules of construction with respect to certain bequests, see section 2055(f). 

(3) For treatment of gifts to or for the use of Indian tribal 

governments (or their subdivisions), see section 7871. 

* * * * * * * 

B. CHANGES IN EXISTING LAW PROPOSED BY THE BILL, AS REPORTED

In compliance with clause 3(e)(1)(B) of rule XIII of the Rules of 

the House of Representatives, changes in existing law proposed by 

the bill, as reported, are shown as follows (existing law proposed 

to be omitted is enclosed in black brackets, new matter is printed 

in italic, existing law in which no change is proposed is shown in 

roman): 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e)(1)(B) of rule XIII of the Rules of 

the House of Representatives, changes in existing law proposed by 

the bill, as reported, are shown as follows (existing law proposed 

to be omitted is enclosed in black brackets, new matter is printed 

in italic, and existing law in which no change is proposed is shown 

in roman): 

INTERNAL REVENUE CODE OF 1986 

* * * * * * * 

Subtitle B—Estate and Gift Taxes 

* * * * * * * 

CHAPTER 12—GIFT TAX 

* * * * * * * 


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14 

Subchapter C—Deductions 

* * * * * * * 

SEC. 2522. CHARITABLE AND SIMILAR GIFTS. 

(a) CITIZENS OR RESIDENTS.—In computing taxable gifts for the 

calendar year, there shall be allowed as a deduction in the case of 

a citizen or resident the amount of all gifts made during such year 

to or for the use of— 

(1) the United States, any State, or any political subdivision 

thereof, or the District of Columbia, for exclusively public purposes; 

(2) a corporation, or trust, or community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or to foster 

national or international amateur sports competition (but only 

if no part of its activities involve the provision of athletic facilities or equipment), including the encouragement of art and the 

prevention of cruelty to children or animals, no part of the net 

earnings of which inures to the benefit of any private shareholder or individual, which is not disqualified for tax exemption under section 501(c)(3) by reason of attempting to influence legislation, and which does not participate in, or intervene 

in (including the publishing or distributing of statements), any 

political campaign on behalf of (or in opposition to) any candidate for public office; 

(3) a fraternal society, order, or association, operating under 

the lodge system, but only if such gifts are to be used exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the 

prevention of cruelty to children or animals; 

(4) posts or organizations of war veterans, or auxiliary units 

or societies of any such posts or organizations, if such posts, organizations, units, or societies are organized in the United 

States or any of its possessions, and if no part of their net 

earnings insures to the benefit of any private shareholder or 

individualø.¿; 

(5) an organization described in paragraph (4), (5), or (6) of 

section 501(c) and exempt from tax under section 501(a). 

Rules similar to the rules of section 501(j) shall apply for purposes 

of paragraph (2). 

(b) NONRESIDENTS.—In the case of a nonresident not a citizen of 

the United States, there shall be allowed as a deduction the 

amount of all gifts made during such year to or for the use of— 

(1) the United States, any State, or any political subdivision 

thereof, or the District of Columbia, for exclusively public purposes; 

(2) a domestic corporation organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the 

prevention of cruelty to children or animals, no part of the net 

earnings of which inures to the benefit of any private shareholder or individual, which is not disqualified for tax exemption under section 501(c)(3) by reason of attempting to influence legislation, and which does not participate in, or intervene 

in (including the publishing or distributing of statements), any 


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15 

political campaign on behalf of (or in opposition to) any candidate for public office; 

(3) a trust, or community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals, no substantial part of the activities of which is carrying 

on propaganda, or otherwise attempting, to influence legislation, and which does not participate in, or intervene in (including the publishing or distributing of statements), any political 

campaign on behalf of (or in opposition to) any candidate for 

public office; but only if such gifts are to be used within the 

United States exclusively for such purposes; 

(4) a fraternal society, order, or association, operating under 

the lodge system, but only if such gifts are to be used within 

the United States exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals; 

(5) posts or organizations of war veterans, or auxiliary units 

or societies of any such posts or organizations, if such posts, organizations, units, or societies are organized in the United 

States or any of its possessions, and if no part of their net 

earnings inures to the benefit of any private shareholder or individual. 

(c) DISALLOWANCE OF DEDUCTIONS IN CERTAIN CASES.— 

(1) No deduction shall be allowed under this section for a gift 

to of for the use of an organization or trust described in section 

508(d) or 4948(c)(4) subject to the conditions specified in such 

sections. 

(2) Where a donor transfers an interest in property (other 

than an interest described in section 170(f)(3)(B)) to a person, 

or for a use, described in subsection (a) or (b) and an interest 

in the same property is retained by the donor, or is transferred 

or has been transferred (for less than an adequate and full consideration in money or money’s worth) from the donor to a person, or for a use, not described in subsection (a) or (b), no deduction shall be allowed under this section for the interest 

which is, or has been transferred to the person, or for the use, 

described in subsection (a) or (b), unless— 

(A) in the case of a remainder interest, such interest is 

in a trust which is a charitable remainder annuity trust or 

a charitable remainder unitrust (described in section 664) 

or a pooled income fund (described in section 642(c)(5)), or 

(B) in the case of any other interest, such interest is in 

the form of a guaranteed annuity or is a fixed percentage 

distributed yearly of the fair market value of the property 

(to be determined yearly). 

(3) Rules similar to the rules of section 2055(e)(4) shall apply 

for purposes of paragraph (2). 

(4) Reformations to comply with paragraph (2) 

(A) IN GENERAL.—A deduction shall be allowed under 

subsection (a) in respect of any qualified reformation 

(within the meaning of section 2055(e)(3)(B)). 


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16 

(B) RULES SIMILAR TO SECTION 2055(E)(3) TO APPLY.—For 

purposes of this paragraph, rules similar to the rules of 

section 2055(e)(3) shall apply. 

(5) CONTRIBUTIONS TO DONOR ADVISED FUNDS.—A deduction 

otherwise allowed under subsection (a) for any contribution to 

a donor advised fund (as defined in section 4966(d)(2)) shall 

only be allowed if— 

(A) the sponsoring organization (as defined in section 

4966(d)(1)) with respect to such donor advised fund is 

not— 

(i) described in paragraph (3) or (4) of subsection (a), 

or 

(ii) a type III supporting organization (as defined in 

section 4943(f)(5)(A)) which is not a functionally integrated type III supporting organization (as defined in 

section 4943(f)(5)(B)), and 

(B) the taxpayer obtains a contemporaneous written acknowledgment (determined under rules similar to the 

rules of section 170(f)(8)(C)) from the sponsoring organization (as so defined) of such donor advised fund that such 

organization has exclusive legal control over the assets 

contributed. 

(d) SPECIAL RULE FOR IRREVOCABLE TRANSFERS OF EASEMENTS IN

REAL PROPERTY.—A deduction shall be allowed under subsection 

(a) in respect of any transfer of a qualified real property interest 

(as defined in section 170(h)(2)(C)) which meets the requirements 

of section 170(h) (without regard to paragraph (4)(A) thereof). 

(e) SPECIAL RULES FOR FRACTIONAL GIFTS.— (1) DENIAL OF DEDUCTION IN CERTAIN CASES.— 

(A) IN GENERAL.—No deduction shall be allowed for a 

contribution of an undivided portion of a taxpayer’s entire 

interest in tangible personal property unless all interests 

in the property are held immediately before such contribution by— 

(i) the taxpayer, or 

(ii) the taxpayer and the donee. 

(B) EXCEPTIONS.—The Secretary may, by regulation, provide for exceptions to subparagraph (A) in cases where all 

persons who hold an interest in the property make proportional contributions of an undivided portion of the entire 

interest held by such persons. 

(2) RECAPTURE OF DEDUCTION IN CERTAIN CASES; ADDITION TO

TAX.— 

(A) IN GENERAL.—The Secretary shall provide for the recapture of an amount equal to any deduction allowed 

under this section (plus interest) with respect to any contribution of an undivided portion of a taxpayer’s entire interest in tangible personal property— 

(i) in any case in which the donor does not contribute all of the remaining interests in such property 

to the donee (or, if such donee is no longer in existence, to any person described in section 170(c)) on or 

before the earlier of— 

(I) the date that is 10 years after the date of the 

initial fractional contribution, or 


SSpencer on DSK4SPTVN1PROD with REPORTS
17 

(II) the date of the death of the donor, and (ii) 

in any case in which the donee has not, during the 

period beginning on the date of the initial fractional contribution and ending on the date described in clause (i)— 

(I) had substantial physical possession of the 

property, and 

(II) used the property in a use which is related 

to a purpose or function constituting the basis for 

the organizations’ exemption under section 501. 

(B) ADDITION TO TAX.—The tax imposed under this chapter for any taxable year for which there is a recapture 

under subparagraph (A) shall be increased by 10 percent 

of the amount so recaptured. 

(C) INITIAL FRACTIONAL CONTRIBUTION.—For purposes of 

this paragraph, the term ‘‘initial fractional contribution’’ 

means, with respect to any donor, the first gift of an undivided portion of the donor’s entire interest in any tangible 

personal property for which a deduction is allowed under 

subsection (a) or (b). 

(f) CROSS REFERENCES.— (1) For treatment of certain organizations providing child 

care, see section 501(k). 

(2) For exemption of certain gifts to or for the benefit of the 

United States and for rules of construction with respect to certain bequests, see section 2055(f). 

(3) For treatment of gifts to or for the use of Indian tribal 

governments (or their subdivisions), see section 7871. 

* * * * * * * 

Æ 


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