II 

108TH CONGRESS 

2D SESSION S. 2103

To amend the Internal Revenue Code of 1986 to limit the deduction for 

charitable contributions of patents and similar property. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 24, 2004

Mr. ROBERTS (for himself and Mr. BROWNBACK) 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 limit the 

deduction for charitable contributions of patents and 

similar 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. LIMITATION OF DEDUCTION FOR CHARITABLE 

4 CONTRIBUTIONS OF PATENTS AND SIMILAR 

5 PROPERTY. 

6 (a) IN GENERAL.—Subparagraph (B) of section 

7 170(e)(1) of the Internal Revenue Code of 1986 (relating 

8 to certain contributions of capital gain property) is amend9 ed by striking ‘‘or’’ at the end of clause (i), by inserting 
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•S 2103 IS 

1 ‘‘or’’ at the end of clause (ii), and by inserting after clause 

2 (ii) the following new clause: 

3 ‘‘(iii) except as provided in paragraph 

4 (7), of any patent, copyright, trademark, 

5 trade name, trade secret, know-how, soft6 ware, or similar property,’’. 

7 (b) SPECIAL RULE.—Section 170(e) of such Code is 

8 amended by adding at the end the following new para9 graph: 

10 ‘‘(7) SPECIAL RULE FOR CERTAIN CONTRIBU11 TIONS OF PATENTS, COPYRIGHTS, ETC.— 

12 ‘‘(A) EXCEPTION FOR CONTRIBUTIONS TO

13 QUALIFIED RESEARCH ORGANIZATIONS.—Sub14 paragraph (B) of paragraph (1) shall not apply 

15 to any qualified contribution to a qualified re16 search organization. 

17 ‘‘(B) QUALIFIED RESEARCH ORGANIZA18 TION DEFINED.—For purposes of this para19 graph, the term ‘qualified research organiza20 tion’ means an organization that applies its ex21 pertise to the scientific and commercial develop22 ment of qualified contributions and is described 

23 in clause (iii), (iv), or (vi) of subsection 

24 (b)(1)(A) or subparagraph (A), (B), or (C) of 

25 section 41(e)(6). 
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•S 2103 IS 

1 ‘‘(C) QUALIFIED CONTRIBUTION DE2 FINED.—For purposes of this paragraph, a con3 tribution of property described in paragraph 

4 (1)(B)(iii) shall be treated as a qualified con5 tribution only if— 

6 ‘‘(i) such contribution is a gift of all 

7 right, title, and interest in and to property 

8 described in clause (iii) of paragraph 

9 (1)(B), 

10 ‘‘(ii) the donor and donee of any cash 

11 or cash equivalent in connection with such 

12 contribution agree to limit the use of such 

13 cash or cash equivalent to costs of patent 

14 prosecution or maintenance and the sci15 entific and commercial development of 

16 qualified donations in general, and 

17 ‘‘(iii) under regulations prescribed by 

18 the Secretary, the donor of the qualified 

19 contribution discloses both the contribution 

20 described in clause (i) and a complete de21 scription of the terms of any restricted 

22 cash or cash equivalents grant described in 

23 clause (ii) on its income tax return for the 

24 taxable year during which such contribu25 tion is made.’’. 
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•S 2103 IS 

1 (c) QUALIFIED APPRAISAL REQUIRED.— 

2 (1) IN GENERAL.—The Secretary of the Treas3 ury shall prescribe regulations or other guidance 

4 under section 170(a)(1) of the Internal Revenue 

5 Code of 1986 requiring the donor of property de6 scribed in section 170(e)(1)(B)(iii) of such Code to 

7 obtain one or more qualified appraisals of the fair 

8 market value of such property by a qualified ap9 praiser or appraisers. 

10 (2) QUALIFIED APPRAISER.—For purposes of 

11 paragraph (1), the term ‘‘qualified appraiser’’ means 

12 an appraiser who has valuation credentials and expe13 rience in appraising such property, who is not an 

14 employee of the donor or donee, and who satisfies 

15 any professional valuation education and qualifica16 tion requirements that are prescribed by the Sec17 retary. 

18 (3) QUALIFIED APPRAISAL.—For purposes of 

19 paragraph (1), the term ‘‘qualified appraisal’’ means 

20 an appraisal that satisfies the requirements (without 

21 regard to any value limitation) for a qualified ap22 praisal under section 170(a)(1) of such Code (as in 

23 effect on the date of the enactment of this Act), with 

24 the following modifications: 
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1 (A) The valuation methodologies to be 

2 used shall be those prescribed by the Secretary. 

3 (B) The appraisal shall take into account 

4 the competitive patent environment and remain5 ing life of a donated patent. 

6 (C) The valuation of property described in 

7 section 170(e)(7) of such Code shall take into 

8 account the potential use of such property by 

9 any qualified donee, including the value to be 

10 generated through further technology develop11 ment and commercialization by the donee and 

12 potential licensees of the property. 

13 (D) If the value of the property exceeds 

14 $5,000,000, a second appraisal prepared by a 

15 qualified appraiser independently selected by a 

16 professional organization designated by the Sec17 retary shall be required. 

18 (E) The donee shall acknowledge receipt of 

19 the appraisal summary required to be filed by 

20 the donor. 

21 (F) The amount of any cash or cash equiv22 alent grant described in section 170(e)(7)(C)(ii) 

23 of such Code and a complete description of the 

24 terms of any such grant shall be fully described 

25 in the information returns of the donee organi-
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1 zation for the taxable year of receipt and subse2 quent taxable years, as required by the Sec3 retary. 

4 (d) ANTI-ABUSE RULES.—The Secretary may pre5 scribe such regulations or other guidance as may be nec6 essary or appropriate to prevent the avoidance of the pur7 poses of paragraphs (1)(B)(iii) and (7) of section 170(e) 

8 of such Code (as added by this section), including pre9 venting— 

10 (1) the circumvention of the reduction of the 

11 deduction under such section by embedding or bun12 dling the patent or similar property as part of a 

13 charitable contribution of property that includes the 

14 patent or similar property, 

15 (2) the manipulation of the basis of the prop16 erty to increase the amount of the charitable deduc17 tion through the use of related persons, pass-thru 

18 entities, or other intermediaries, or through the use 

19 of any provision of law or regulation (including the 

20 consolidated return regulations), and 

21 (3) a donor from changing the form of the pat22 ent or similar property to property of a form for 

23 which different deduction rules would apply. 

24 (e) EFFECTIVE DATE.— 
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1 (1) IN GENERAL.—Except as provided by para2 graph (2), the amendments made by this section 

3 shall apply to contributions made after the date of 

4 the enactment of this Act. 

5 (2) APPRAISALS.—Subsection (c) shall apply to 

6 contributions made after the date of adoption of reg7 ulations, or date of issuance of guidance, required by 

8 subsection (c), whichever is earlier.

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