II 

111TH CONGRESS 

1ST SESSION S. 1605 

To amend the Internal Revenue Code of 1986 to reform the rules relating 

to fractional charitable donations of tangible personal property. 

IN THE SENATE OF THE UNITED STATES 

AUGUST 6, 2009 

Mr. SCHUMER (for himself, Mr. ISAKSON, Mr. KERRY, and Mr. UDALL of New 

Mexico) introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to reform 

the rules relating to fractional charitable donations of 

tangible personal property. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. MODIFICATIONS TO RULES FOR FRACTIONAL 

4 GIFTS. 

5 (a) INCOME TAX.— 

6 (1) ADDITIONAL REQUIREMENTS FOR DEDUC7 TION.—Paragraph (1) of section 170(o) of the Inter8 nal Revenue Code of 1986 is amended to read as fol9 lows: 


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1 ‘‘(1) DENIAL OF DEDUCTION IN CERTAIN

2 CASES.— 

3 ‘‘(A) IN GENERAL.—No deduction shall be 

4 allowed for a contribution of an undivided por5 tion of a taxpayer’s entire interest in tangible 

6 personal property unless— 

7 ‘‘(i) all interests in the property are 

8 held immediately before such contribution 

9 by— 

10 ‘‘(I) the taxpayer, or 

11 ‘‘(II) the taxpayer and the donee, 

12 ‘‘(ii) in the case of an initial fractional 

13 contribution, such contribution is an undi14 vided portion of not less than 10 percent 

15 of all interests in the property, 

16 ‘‘(iii) in the case of an initial frac17 tional contribution, the contribution is 

18 made pursuant to a written binding con19 tract which requires the donor— 

20 ‘‘(I) to contribute not less than 

21 20 percent of all interests in the prop22 erty on or before the date that is 11 

23 years after the date of the initial frac24 tional contribution, and 


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1 ‘‘(II) to contribute all of the in2 terests in such property to the donee 

3 (or if such donee is no longer in exist4 ence, to any person described in sub5 section (c)) on or before the earlier of 

6 the date of the death of the donor or 

7 the date which is 20 years after the 

8 date of the initial fractional contribu9 tion, and 

10 ‘‘(iv) if the value of the tangible per11 sonal property with respect to which the 

12 undivided portion of the taxpayer’s entire 

13 interest relates is greater than $1,000,000 

14 (or such greater amount as determined by 

15 the Secretary), the taxpayer attaches to 

16 the return for the taxable year in which 

17 such contribution is made a statement of 

18 value obtained from the Internal Revenue 

19 Service. 

20 ‘‘(B) EXCEPTIONS.—The Secretary may, 

21 by regulation, provide for exceptions to sub22 paragraph (A)(i) in cases where all persons who 

23 hold an interest in the property make propor24 tional contributions of an undivided portion of 

25 the entire interest held by such persons. Such 


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1 regulations may modify the requirements of 

2 clauses (ii) and (iii) of subparagraph (A) to the 

3 extent necessary to carry out the purposes of 

4 this subparagraph.’’. 

5 (2) VALUATION OF SUBSEQUENT GIFTS.—Para6 graph (2) of section 170(o) of such Code is amended 

7 to read as follows: 

8 ‘‘(2) VALUATION OF SUBSEQUENT GIFTS.—In 

9 the case of any additional contribution, the fair mar10 ket value of such contribution shall be determined by 

11 multiplying— 

12 ‘‘(A) the fair market value of all of the do13 nor’s interest in the property immediately be14 fore the additional contribution, and 

15 ‘‘(B) the interest in the property (ex16 pressed as a percentage) contributed in such 

17 additional contribution.’’. 

18 (3) RECAPTURE OF DEDUCTION.—Paragraph 

19 (3) of section 170(o) of such Code is amended— 

20 (A) by redesignating subparagraph (B) as 

21 subparagraph (C), and 

22 (B) by striking subparagraph (A) and in23 serting the following: 

24 ‘‘(A) RECAPTURE.—The Secretary shall 

25 provide for the recapture of the amount of any 


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1 deduction allowed under this section (plus inter2 est) with respect to any contribution of an undi3 vided portion of a taxpayer’s entire interest in 

4 tangible personal property— 

5 ‘‘(i) in any case in which the donor 

6 fails to meet the requirements described in 

7 paragraph (1)(A)(iii), and 

8 ‘‘(ii) in any case where such property 

9 is not in the physical possession of the 

10 donee and used in a use which is related 

11 to a purpose or function constituting the 

12 basis for the donee organization’s exemp13 tion under section 501 during any applica14 ble period for a period of time which bears 

15 substantially the same ratio to 5 years 

16 as— 

17 ‘‘(I) the percentage of the undi18 vided interest of the donee in the 

19 property (determined on the day after 

20 such contribution was made), bears to 

21 ‘‘(II) 100 percent. 

22 ‘‘(B) APPLICABLE PERIOD.—For purposes 

23 of subparagraph (A), the applicable period 

24 means— 


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1 ‘‘(i) the 5-year period beginning on 

2 the date of the later of the initial fractional 

3 contribution, and 

4 ‘‘(ii) each subsequent 5-year period 

5 occurring during the 20-year period de6 scribed in paragraph (1)(A)(iii)(II).’’. 

7 (b) ESTATE TAX.—Paragraph (1) of section 2055(g) 

8 of the Internal Revenue Code of 1986 is amended to read 

9 as follows: 

10 ‘‘(1) VALUATION OF SUBSEQUENT GIFTS.—In 

11 the case of any additional contribution, the fair mar12 ket value of such contribution shall be determined by 

13 multiplying— 

14 ‘‘(A) the fair market value of all of the do15 nor’s interest in the property immediately be16 fore the additional contribution, and 

17 ‘‘(B) the interest in the property (ex18 pressed as a percentage) contributed in such 

19 additional contribution.’’. 

20 (c) GIFT TAX.— 

21 (1) ADDITIONAL REQUIREMENTS FOR DEDUC22 TION.—Paragraph (1) of section 2522(e) of the In23 ternal Revenue Code of 1986 is amended to read as 

24 follows: 


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•S 1605 IS

1 ‘‘(1) DENIAL OF DEDUCTION IN CERTAIN

2 CASES.— 

3 ‘‘(A) IN GENERAL.—No deduction shall be 

4 allowed for a contribution of an undivided por5 tion of a taxpayer’s entire interest in tangible 

6 personal property unless— 

7 ‘‘(i) all interests in the property are 

8 held immediately before such contribution 

9 by— 

10 ‘‘(I) the taxpayer, or 

11 ‘‘(II) the taxpayer and the donee, 

12 ‘‘(ii) in the case of an initial fractional 

13 contribution, such contribution is an undi14 vided portion of not less than 10 percent 

15 of all interests in the property, 

16 ‘‘(iii) in the case of an initial frac17 tional contribution, the contribution is 

18 made pursuant to a written binding con19 tract which requires the donor— 

20 ‘‘(I) to contribute not less than 

21 20 percent of all interests in the prop22 erty on or before the date that is 11 

23 years after the date of the initial frac24 tional contribution, and 


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1 ‘‘(II) to contribute all of the in2 terests in such property to the donee 

3 (or if such donee is no longer in exist4 ence, to any person described in sec5 tion 170(c)) on or before the earlier of 

6 the date of the death of the donor or 

7 the date which is 20 years after the 

8 date of the initial fractional contribu9 tion, and 

10 ‘‘(iv) if the value of the tangible per11 sonal property with respect to which the 

12 undivided portion of the taxpayer’s entire 

13 interest relates is greater than $1,000,000 

14 (or such greater amount as determined by 

15 the Secretary), the taxpayer attaches to 

16 the return for the taxable year in which 

17 such contribution is made a statement of 

18 value obtained from the Internal Revenue 

19 Service. 

20 ‘‘(B) EXCEPTIONS.—The Secretary may, 

21 by regulation, provide for exceptions to sub22 paragraph (A)(i) in cases where all persons who 

23 hold an interest in the property make propor24 tional contributions of an undivided portion of 

25 the entire interest held by such persons. Such 


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1 regulations may modify the requirements of 

2 clauses (ii) and (iii) of subparagraph (A) to the 

3 extent necessary to carry out the purposes of 

4 this subparagraph.’’. 

5 (2) VALUATION OF SUBSEQUENT GIFTS.—Para6 graph (2) of section 2522(e) of such Code is amend7 ed to read as follows: 

8 ‘‘(2) VALUATION OF SUBSEQUENT GIFTS.—In 

9 the case of any additional contribution, the fair mar10 ket value of such contribution shall be determined by 

11 multiplying— 

12 ‘‘(A) the fair market value of all of the do13 nor’s interest in the property immediately be14 fore the additional contribution, and 

15 ‘‘(B) the interest in the property (ex16 pressed as a percentage) contributed in such 

17 additional contribution.’’. 

18 (3) RECAPTURE OF DEDUCTION.—Paragraph 

19 (3) of section 2522(e) of such Code is amended— 

20 (A) by redesignating subparagraph (B) as 

21 subparagraph (C), and 

22 (B) by striking subparagraph (A) and in23 serting the following: 

24 ‘‘(A) RECAPTURE.—The Secretary shall 

25 provide for the recapture of the amount of any 


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1 deduction allowed under this section (plus inter2 est) with respect to any contribution of an undi3 vided portion of a taxpayer’s entire interest in 

4 tangible personal property— 

5 ‘‘(i) in any case in which the donor 

6 fails to meet the requirements described in 

7 paragraph (1)(A)(iii), and 

8 ‘‘(ii) in any case where such property 

9 is not in the physical possession of the 

10 donee and used in a use which is related 

11 to a purpose or function constituting the 

12 basis for the donee organization’s exemp13 tion under section 501 during any applica14 ble period for a period of time which bears 

15 substantially the same ratio to 5 years 

16 as— 

17 ‘‘(I) the percentage of the undi18 vided interest of the donee in the 

19 property (determined on the day after 

20 such contribution was made), bears to 

21 ‘‘(II) 100 percent. 

22 ‘‘(B) APPLICABLE PERIOD.—For purposes 

23 of subparagraph (A), the applicable period 

24 means— 


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1 ‘‘(i) the 5-year period beginning on 

2 the date of the later of the initial fractional 

3 contribution, and 

4 ‘‘(ii) each subsequent 5-year period 

5 occurring during the 20-year period de6 scribed in paragraph (1)(A)(iii)(II).’’. 

7 (d) RETURN REQUIREMENT.—Section 6033 of the 

8 Internal Revenue Code of 1986 is amended by redesig9 nating subsection (m) as subsection (n) and by inserting 

10 after subsection (l) the following new subsection: 

11 ‘‘(m) ADDITIONAL PROVISIONS RELATING TO ORGA12 NIZATIONS DESCRIBED IN SECTION 170(c).—Every orga13 nization described in section 170(c) shall, on any return 

14 required under subsection (a), list each charitable con15 tribution received by the organization during the period 

16 covered by the return which represents a contribution of 

17 an undivided portion of a taxpayer’s entire interest in tan18 gible personal property and provide such other information 

19 with respect to such contribution as required by the Sec20 retary.’’. 

21 (e) EFFECTIVE DATE.— 

22 (1) IN GENERAL.—Except as provided in para23 graph (2), the amendments made by this section 

24 shall apply to contributions, bequests, and gifts 

25 made after the date of the enactment of this Act. 


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1 (2) RETURN REQUIREMENT.—The amendments 

2 made by subsection (d) shall apply to returns for 

3 taxable years ending after the date of the enactment 

4 of this Act. 

5 (f) TRANSITION RULE.—In the case of any additional 

6 contribution (as defined in section 170(o)(4) of the Inter7 nal Revenue Code of 1986) with respect to an initial frac8 tional contribution (as defined in such section) made after 

9 August 17, 2006, and before the date of the enactment 

10 of this Act— 

11 (1) except for purposes of determining the fair 

12 market value of such contribution under sections 

13 170(o)(2), 2055(g)(1), and 2522(e)(2) of the Inter14 nal Revenue Code of 1986 (as such sections were 

15 amended by this Act), such contribution shall be 

16 treated as an initial fractional contribution (as so 

17 defined) subject to the amendments made by this 

18 section, and 

19 (2) sections 170(o)(3)(A)(i) and 

20 2522(e)(3)(A)(i) of such Code (as in effect before 

21 the date of the enactment of this Act) shall not 

22 apply with respect to any prior contribution of an 

23 undivided portion of the taxpayer’s interest in the 

24 property. 

Æ 


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