II

106TH CONGRESS

1ST SESSION S. 1597

To amend the Internal Revenue Code of 1986 to provide enhanced tax

incentives for charitable giving, and for other purposes.

IN THE SENATE OF THE UNITED STATES

SEPTEMBER 16, 1999

Mr. KERREY 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 provide

enhanced tax incentives for charitable giving, and for

other purposes.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Enhanced Incentives

5 for Charitable Giving Act of 1999’’.

6 SEC. 2. CHARITABLE CONTRIBUTIONS TO CERTAIN LOW IN7 COME SCHOOLS MAY BE MADE IN NEXT TAX8 ABLE YEAR.

9 (a) IN GENERAL.—Section 170(f) of the Internal

10 Revenue Code of 1986 (relating to disallowance of deduc-
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1 tion in certain cases and special rules) is amended by add2 ing at the end the following new paragraph:

3 ‘‘(10) TIME WHEN CERTAIN CONTRIBUTIONS

4 DEEMED MADE.—

5 ‘‘(A) IN GENERAL.—At the election of the

6 taxpayer, a qualified low-income school con7 tribution shall be deemed to be made on the

8 last day of the preceding taxable year if the

9 contribution is made on account of such taxable

10 year and is made not later than the time pre11 scribed by law for filing the return for such tax12 able year (not including extensions thereof).

13 The election may be made at the time of the fil14 ing of the return for such table year, and shall

15 be made and substantiated in such manner as

16 the Secretary shall by regulations prescribe.

17 ‘‘(B) QUALIFIED LOW-INCOME SCHOOL

18 CONTRIBUTION.—For purposes of subpara19 graph (A), the term ‘qualified low-income school

20 contribution’ means a charitable contribution to

21 an educational organization described in sub22 section (b)(1)(A)(ii)—

23 ‘‘(i) which is a public, private, or sec24 tarian school which provides elementary or
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1 secondary education (through grade 12),

2 as determined under State law, and

3 ‘‘(ii) with respect to which at least 50

4 percent of the students attending such

5 school are eligible for free or reduced-cost

6 lunches under the school lunch program es7 tablished under the National School Lunch

8 Act.’’.

9 (b) EFFECTIVE DATE.—The amendment made by

10 this section shall apply to taxable years beginning after

11 December 31, 1999.

12 SEC. 3. DEDUCTION FOR PORTION OF CHARITABLE CON13 TRIBUTIONS TO BE ALLOWED TO INDIVID14 UALS WHO DO NOT ITEMIZE DEDUCTIONS.

15 (a) IN GENERAL.—Section 170 of the Internal Rev16 enue Code of 1986 (relating to charitable, etc., contribu17 tions and gifts) is amended by redesignating subsection

18 (m) as subsection (n) and by inserting after subsection

19 (l) the following new subsection:

20 ‘‘(m) DEDUCTION FOR INDIVIDUALS NOT ITEMIZING

21 DEDUCTIONS.—In the case of an individual who does not

22 itemize his deductions for the taxable year, there shall be

23 taken into account as a direct charitable deduction under

24 section 63 an amount equal to the lesser of—
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1 ‘‘(1) the amount allowable as a deduction under

2 subsection (a) for the taxable year, or

3 ‘‘(2) $50 ($100 in the case of a joint return).’’.

4 (b) DIRECT CHARITABLE DEDUCTION.—

5 (1) IN GENERAL.—Subsection (b) of section 63

6 of the Internal Revenue Code of 1986 is amended by

7 striking ‘‘and’’ at the end of paragraph (1), by strik8 ing the period at the end of paragraph (2) and in9 serting ‘‘, and’’, and by adding at the end the fol10 lowing new paragraph:

11 ‘‘(3) the direct charitable deduction.’’.

12 (2) DEFINITION.—Section 63 of such Code is

13 amended by redesignating subsection (g) as sub14 section (h) and by inserting after subsection (f) the

15 following new subsection:

16 ‘‘(g) DIRECT CHARITABLE DEDUCTION.—For pur17 poses of this section, the term ‘direct charitable deduction’

18 means that portion of the amount allowable under section

19 170(a) which is taken as a direct charitable deduction for

20 the taxable year under section 170(m).’’.

21 (3) CONFORMING AMENDMENT.—Subsection (d)

22 of section 63 of such Code is amended by striking

23 ‘‘and’’ at the end of paragraph (1), by striking the

24 period at the end of paragraph (2) and inserting ‘‘,
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1 and’’, and by adding at the end the following new

2 paragraph:

3 ‘‘(3) the direct charitable deduction.’’.

4 (c) EFFECTIVE DATE.—The amendments made by

5 this section shall apply to taxable years beginning after

6 December 31, 1999.

7 SEC. 4. INCREASE IN LIMIT ON CHARITABLE CONTRIBU8 TIONS AS PERCENTAGE OF AGI.

9 (a) IN GENERAL.—

10 (1) INDIVIDUAL LIMIT.—Section 170(b)(1) of

11 the Internal Revenue Code of 1986 (relating to per12 centage limitations) is amended—

13 (A) by striking ‘‘50 percent’’ in subpara14 graph (A) and inserting ‘‘the 75 percent’’, and

15 (B) by striking ‘‘30 percent’’ each place it

16 appears in subparagraph (C) and inserting ‘‘50

17 percent’’.

18 (2) CORPORATE LIMIT.—Section 170(b)(2) of

19 such Code is amended by striking ‘‘10 percent’’ and

20 inserting ‘‘20 percent’’.

21 (b) CONFORMING AMENDMENTS.—Section

22 170(d)(1)(A) of the Internal Revenue Code of 1986 is

23 amended by striking ‘‘50 percent’’ each place it appears

24 and inserting ‘‘75 percent’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 1999.

4 SEC. 5. LIMITED EXCEPTION TO EXCESS BUSINESS HOLD5 INGS RULE.

6 (a) IN GENERAL.—Section 4943(c)(2) of the Internal

7 Revenue Code of 1986 (relating to permitted holdings in

8 a corporation) is amended by adding at the end the fol9 lowing new subparagraph:

10 ‘‘(D) RULE WHERE VOTING STOCK IS PUB11 LICLY TRADED.—

12 ‘‘(i) IN GENERAL.—If—

13 ‘‘(I) the private foundation and

14 all disqualified persons together do

15 not own more than the 49 percent of

16 the voting stock and not more than

17 the 49 percent in value of all out18 standing shares of all classes of stock

19 of an incorporated business enter20 prise,

21 ‘‘(II) the voting stock owned by

22 the private foundation and all dis23 qualified persons together is stock for

24 which market quotations are readily
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1 available on an established securities

2 market, and

3 ‘‘(III) the requirements of clause

4 (ii) are met,

5 then subparagraph (A) shall be applied by

6 substituting ‘49 percent’ for ‘20 percent’.

7 ‘‘(ii) REQUIREMENTS TO BE MET.—

8 The requirements of this clause are met

9 during any taxable year—

10 ‘‘(I) in which disqualified persons

11 with respect to the private foundation

12 do not receive compensation (as an

13 employee or otherwise) from the cor14 poration or engage in any act with

15 such corporation which would con16 stitute self-dealing within the meaning

17 of section 4941(d) if such corporation

18 were a private foundation and if each

19 such disqualified person were a dis20 qualified person with respect to such

21 corporation,

22 ‘‘(II) in which disqualified per23 sons with respect to such private

24 foundation do not own in the aggre25 gate more than 2 percent of the vot-
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1 ing stock and not more than 2 percent

2 in value of all outstanding shares of

3 all classes of stock in such corpora4 tion, and

5 ‘‘(III) for which there is sub6 mitted with the annual return of the

7 private foundation for such year (filed

8 within the time prescribed by law, in9 cluding extensions, for filing such re10 turn) a certification which is signed

11 by all the members of an audit com12 mittee of the Board of Directors of

13 such corporation consisting of a ma14 jority of persons who are not disquali15 fied persons with respect to such pri16 vate foundation and which certifies

17 that such members, after due inquiry,

18 are not aware that any disqualified

19 person has received compensation

20 from such corporation or has engaged

21 in any act with such corporation that

22 would constitute self-dealing within

23 the meaning of section 4941(d) if

24 such corporation were a private foun25 dation and if each such disqualified
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1 person were a disqualified person with

2 respect to such corporation.

3 For purposes of this clause, the fact that

4 a disqualified person has received com5 pensation from such corporation or has en6 gaged in any act with such corporation

7 which would constitute self-dealing within

8 the meaning of section 4941(d) shall be

9 disregarded if such receipt or act is cor10 rected not later than the due date (not in11 cluding extensions thereof) for the filing of

12 the private foundation’s annual return for

13 the year in which the receipt or act occurs

14 and on the terms that would be necessary

15 to correct such receipt or act and thereby

16 avoid imposition of tax under section

17 4941(b).’’.

18 (b) EFFECTIVE DATE.—The amendment made by

19 this section shall apply to foundations established by be20 quest of decedents dying after December 31, 1999.

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