II 

109TH CONGRESS 

2D SESSION S. 3881 

To amend the Internal Revenue Code of 1986 to encourage private 

philanthropy. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 8, 2006 

Mr. ISAKSON (for himself and Mr. LAUTENBERG) 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 encourage 

private philanthropy. 

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 ‘‘Personal Philanthropy 

5 Account Act of 2006’’. 

6 SEC. 2. PERSONAL PHILANTHROPY ACCOUNTS. 

7 (a) IN GENERAL.—Part VII of subchapter B of chap8 ter 1 of the Internal Revenue Code of 1986 (relating to 

9 additional itemized deductions for individuals) is amended 


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1 by redesignating section 224 as section 225 and by insert2 ing after section 223 the following new section: 

3 ‘‘SEC. 224. PERSONAL PHILANTHROPY ACCOUNTS. 

4 ‘‘(a) ALLOWANCE OF DEDUCTION.— 

5 ‘‘(1) IN GENERAL.—In the case of an indi6 vidual, there shall be allowed as a deduction for the 

7 taxable year an amount equal to the aggregate 

8 amount paid in cash during such taxable year (and 

9 not described in subsection (d)(2)(A)(ii)) by or on 

10 behalf of such individual to a personal philanthropy 

11 account of such individual. 

12 ‘‘(2) COORDINATION WITH CHARITABLE CON13 TRIBUTIONS.— 

14 ‘‘(A) IN GENERAL.—With respect to any 

15 amount allowable as a deduction under para16 graph (1)— 

17 ‘‘(i) no other deduction shall be al18 lowed under any other provision of this 

19 title, and 

20 ‘‘(ii) such amount shall be considered 

21 a charitable contribution for purposes of 

22 section 170(b)(1). 

23 ‘‘(B) EMPLOYER CONTRIBUTIONS.—With 

24 respect to any amount contributed by an em25 ployer on behalf of the account holder— 


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1 ‘‘(i) except as provided in clause (ii), 

2 such amount shall be considered a chari3 table contribution for purposes of section 

4 170(b)(2), and 

5 ‘‘(ii) if the employer provides such 

6 amount pursuant to a program under 

7 which the employer matches employee con8 tributions at least dollar-for-dollar on con9 tributions up to 5 percent of all employees’ 

10 compensation— 

11 ‘‘(I) clause (i) shall not apply 

12 with respect to such amount, and 

13 ‘‘(II) such amount shall not be 

14 taken into account under subsection 

15 (b)(1). 

16 ‘‘(b) PERSONAL PHILANTHROPY ACCOUNT.—For 

17 purposes of this section, the term ‘personal philanthropy 

18 account’ means a trust created or organized in the United 

19 States exclusively for the purpose of making distributions 

20 for the charitable purposes designated by an individual 

21 who is the account holder of the trust (and designated as 

22 an personal philanthropy account at the time created or 

23 organized), but only if the written governing instrument 

24 creating the trust meets the following requirements: 


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1 ‘‘(1) Except in the case of a rollover contribu2 tion described in subsection (d)(3), no contribution 

3 will be accepted unless it is in cash, and contribu4 tions will not be accepted for the taxable year on be5 half of any individual in excess of $15,000. 

6 ‘‘(2) The trustee is a bank (as defined in sec7 tion 408(n)) or such other person who demonstrates 

8 to the satisfaction of the Secretary that the manner 

9 in which that person will administer the trust will be 

10 consistent with the requirements of this section or 

11 who has so demonstrated with respect to any per12 sonal philanthropy account and who is not disquali13 fied under subsection (f). 

14 ‘‘(3) No part of the trust assets will be invested 

15 in life insurance contracts. 

16 ‘‘(4) The assets of the trust shall not be com17 mingled with other property except in a common 

18 trust fund or common investment fund. 

19 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur20 poses of this section— 

21 ‘‘(1) DEFAULT DISTRIBUTION RULES.— 

22 ‘‘(A) IN GENERAL.—No account shall be 

23 treated as a personal philanthropy account un24 less at all times there are in effect qualified deVerDate Aug 31 2005 23:23 Sep 13, 2006 Jkt 049200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S3881.IS S3881

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1 fault charitable organization designations under 

2 subparagraphs (B) and (C). 

3 ‘‘(B) QUALIFIED DEFAULT CHARITABLE

4 ORGANIZATION DESIGNATION.—For purposes of 

5 subparagraph (A), a qualified default charitable 

6 organization designation in effect under this 

7 subparagraph is the designation by the account 

8 holder of an organization to which the remain9 der of such account may be made in the form 

10 of a qualified philanthropy payment upon the 

11 death of the account holder in any case in 

12 which the account holder fails to provide by will 

13 or other suitable estate document for the dis14 tribution of the assets of such account. 

15 ‘‘(C) TRUSTEE DESIGNATION.—For pur16 poses of subparagraph (A), a qualified default 

17 charitable organization designation in effect 

18 under this subparagraph is the designation by 

19 the trustee of the personal philanthropy account 

20 of an organization to which a payment under 

21 subparagraph (B) will be made if the organiza22 tion designated under subparagraph (B) is not 

23 qualified to receive a qualified philanthropy 

24 payment at the time of such payment. 


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1 ‘‘(2) MINIMUM DISTRIBUTION REQUIRE2 MENTS.— 

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

4 treated as a personal philanthropy account for 

5 a taxable year unless such account meets the 

6 minimum distribution requirements for such 

7 taxable year. 

8 ‘‘(B) MINIMUM DISTRIBUTION REQUIRE9 MENT.—An account meets the minimum dis10 tribution requirements for a taxable year if the 

11 aggregate distributions from the account for the 

12 taxable year are not less than 5 percent of the 

13 balance of such account as of the last day of 

14 the preceding taxable year. 

15 ‘‘(C) EXCEPTION FOR ACCOUNTS WITH A

16 BALANCE OF LESS THAN $10,000.—Subpara17 graph (A) shall not apply to any account for a 

18 taxable year if the balance of such account as 

19 of the last day of the preceding taxable year is 

20 less than $10,000. 

21 ‘‘(3) DENIAL OF DEDUCTION TO DEPEND22 ENTS.—No deduction shall be allowed under this 

23 section to any individual with respect to whom a de24 duction under section 151 is allowable to another 

25 taxpayer for a taxable year beginning in the calVerDate Aug 31 2005 23:23 Sep 13, 2006 Jkt 049200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S3881.IS S3881

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1 endar year in which such individual’s taxable year 

2 begins. 

3 ‘‘(4) INFLATION ADJUSTMENT.—In the case of 

4 any taxable year beginning in a calendar year after 

5 2008, the dollar amount contained in subsection 

6 (b)(1) shall be increased by an amount equal to— 

7 ‘‘(A) such dollar amount, multiplied by 

8 ‘‘(B) the cost-of-living adjustment deter9 mined under section 1(f)(3) for the calendar 

10 year in which the taxable year begins, deter11 mined by substituting ‘calendar year 2007’ for 

12 ‘calendar year 1992’ in subparagraph (B) 

13 thereof. 

14 Any increase determined under the preceding sen15 tence shall be rounded to the nearest multiple of 

16 $50. 

17 ‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.— 

18 ‘‘(1) IN GENERAL.—Any distribution from a 

19 personal philanthropy account shall be includible in 

20 the gross income of the account holder in the man21 ner as provided in section 72. 

22 ‘‘(2) QUALIFIED PHILANTHROPY PAYMENTS OR

23 IMMEDIATE RETURN OF CONTRIBUTIONS.— 


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1 ‘‘(A) IN GENERAL.—No amount shall be 

2 includible in gross income under paragraph (1) 

3 to the extent that such distribution— 

4 ‘‘(i) is a qualified philanthropy pay5 ment, or 

6 ‘‘(ii) is equal to the amount of con7 tributions made within 30 days before the 

8 date of such distribution. 

9 ‘‘(B) QUALIFIED PHILANTHROPY PAYMENT

10 DEFINED.—For purposes of this section, the 

11 term ‘qualified philanthropy payment’ means a 

12 distribution from a personal philanthropy ac13 count— 

14 ‘‘(i) which is made, pursuant to a re15 quest by the account holder, by the trustee 

16 of the account within 30 days after receipt 

17 by the trustee of a certification under sub18 paragraph (C), and 

19 ‘‘(ii) which is paid for a purpose speci20 fied in section 170(c). 

21 A trustee who fails to meet the 30-day require22 ment of clause (i) shall be subject to disquali23 fication as a trustee. 

24 ‘‘(C) ORGANIZATION CERTIFICATION.—For 

25 purposes of subparagraph (B)(i), a certification 


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1 under this subparagraph is a certification by an 

2 organization pursuant to a written request by 

3 the trustee of a personal philanthropy account 

4 that the organization is an organization 

5 which— 

6 ‘‘(i) is described in section 501(c)(3) 

7 and exempt from tax under section 501(a), 

8 and 

9 ‘‘(ii) is not a personal philanthropy 

10 account. 

11 ‘‘(D) COORDINATION WITH CHARITABLE

12 CONTRIBUTIONS.— 

13 ‘‘(i) No deduction shall be allowed 

14 under sections 170, 642(c), 2055, 

15 2106(a)(2), or 2522 for any amount ex16 cluded from gross income under subpara17 graph (A). 

18 ‘‘(ii) Under regulations, the amount 

19 allowable as a deduction under sections 

20 170, 642(c), 2055, 2106(a)(2), or 2522 (as 

21 appropriate) for the taxable year (without 

22 regard to this clause) shall be reduced by 

23 the amount excluded from gross income for 

24 the taxable year under subparagraph (A). 


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1 ‘‘(iii) Section 170(d) shall not apply 

2 to any amount excluded from gross income 

3 under subparagraph (A). 

4 ‘‘(3) ROLLOVER CONTRIBUTIONS.— 

5 ‘‘(A) IN GENERAL.—Paragraph (1) shall 

6 not apply to any amount paid or distributed 

7 from a personal philanthropy account to the ex8 tent that the amount received is paid, not later 

9 than the 60th day after the date of such pay10 ment or distribution, into another personal phi11 lanthropy account of the same account holder. 

12 The preceding sentence shall not apply to any 

13 payment or distribution if it applied to any 

14 prior payment or distribution during the 12- 

15 month period ending on the date of the pay16 ment or distribution. 

17 ‘‘(B) HEIR.—Paragraph (1) shall not 

18 apply to any amount paid or distributed from 

19 a personal philanthropy account of a decedent 

20 to the extent that the amount received is paid, 

21 not later than the 60th day after the date of 

22 such payment or distribution, into the personal 

23 philanthropy account of an heir of the decedent, 

24 as designated by the will of the decedent. 


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1 ‘‘(4) ADDITIONAL TAX FOR DISTRIBUTIONS NOT

2 USED FOR CHARITABLE CONTRIBUTION PUR3 POSES.—The tax imposed by this chapter for any 

4 taxable year on any account holder with respect to 

5 any distribution from a personal philanthropy ac6 count which is includible in gross income shall be in7 creased by 100 percent of the amount which is so 

8 includible. 

9 ‘‘(e) TAX TREATMENT OF ACCOUNT.— 

10 ‘‘(1) IN GENERAL.—A personal philanthropy 

11 account shall be exempt from taxation under this 

12 subtitle. Notwithstanding the preceding sentence, 

13 the personal philanthropy account shall be subject to 

14 the taxes imposed by section 511 (relating to imposi15 tion of tax on unrelated business income of chari16 table organizations). 

17 ‘‘(2) ACCOUNT TERMINATIONS.—Rules similar 

18 to the rules of paragraphs (2) and (4) of section 

19 408(e) shall apply to any personal philanthropy ac20 count. 

21 ‘‘(f) DISQUALIFICATION OF TRUSTEE.—The trustee 

22 of a personal philanthropy account shall not be qualified 

23 to be a trustee of such account after a final determination 

24 by the Secretary that the trustee has disbursed more than 


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1 10 percent of its payments from personal philanthropy ac2 counts to non-qualifying organizations in a calendar year. 

3 ‘‘(g) FEES.—The Commissioner of the Securities and 

4 Exchange Commission (or the Commissioner’s designee) 

5 shall certify that fees charged by any trustee or asset man6 ager of a personal philanthropy account are fair and rea7 sonable. The failure to so certify shall result in the dis8 qualification of such person as a trustee or asset manager 

9 of personal philanthropy accounts. 

10 ‘‘(h) REPORTS.—The trustee of a personal philan11 thropy account shall make such reports regarding such ac12 count to the Secretary and to the holder the account with 

13 respect to contributions, distributions, and such other 

14 matters as the Secretary may require. The reports re15 quired by this subsection shall be filed at such time and 

16 in such manner and furnished to such individuals at such 

17 time and in such manner as may be required.’’. 

18 (b) DEDUCTION ALLOWED WHETHER OR NOT INDI19 VIDUAL ITEMIZES OTHER DEDUCTIONS.—Subsection (a) 

20 of section 62 of such Code is amended by inserting before 

21 the flush sentence at the end the following new paragraph: 

22 ‘‘(21) PERSONAL PHILANTHROPY ACCOUNTS.— 

23 The deduction allowed under section 224.’’. 

24 (c) EXCLUSION FOR EMPLOYER CONTRIBUTIONS TO

25 PERSONAL PHILANTHROPY ACCOUNTS.— 


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1 (1) IN GENERAL.—Part III of subchapter B of 

2 chapter 1 of such Code is amended by inserting 

3 after section 139A the following new section: 

4 ‘‘SEC. 139B. CONTRIBUTIONS BY EMPLOYER TO PERSONAL 

5 PHILANTHROPY ACCOUNTS. 

6 ‘‘(a) IN GENERAL.—Gross income of an employee 

7 does not include contributions by the employer to the per8 sonal philanthropy account of the employee. 

9 ‘‘(b) PERSONAL PHILANTHROPY ACCOUNT.—For 

10 purposes of this section, the term ‘personal philanthropy 

11 account’ shall have the meaning given to such term by 

12 section 224. 

13 ‘‘(c) EXCLUSION NOT TO EXCEED COMPENSA14 TION.— 

15 ‘‘(1) EMPLOYEES.—The amount excluded from 

16 gross income by subsection (a) with respect to an 

17 employee shall not exceed such employee’s wages, 

18 salaries, tips, and other employee compensation 

19 which are attributable to such employee’s employ20 ment by the employer referred to in such subsection. 

21 ‘‘(2) SELF-EMPLOYED INDIVIDUALS.—The 

22 amount excluded from gross income by subsection 

23 (a) for contributions with respect to an individual 

24 who is self employed shall not exceed such individ25 ual’s earned income (as defined in section 401(c)(2)) 


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1 derived by the taxpayer from the trade or business 

2 with respect to which the individual is self-employed. 

3 ‘‘(3) COMMUNITY PROPERTY LAWS NOT TO

4 APPLY.—The limitations under this subsection shall 

5 be determined without regard to community prop6 erty laws.’’. 

7 (2) CONFORMING AMENDMENTS.— 

8 (A) Section 3121(a) of such Code is 

9 amended by striking ‘‘or’’ at the end of para10 graph (21), by striking the period at the end of 

11 paragraph (22) and inserting ‘‘; or’’, and by in12 serting after paragraph (22) the following new 

13 paragraph: 

14 ‘‘(23) any payment made to a personal philan15 thropy account (as defined in section 224) of an em16 ployee.’’. 

17 (B) Section 3231(e) of such Code is 

18 amended by adding at the end the following 

19 new paragraph: 

20 ‘‘(13) PERSONAL PHILANTHROPY ACCOUNT

21 CONTRIBUTIONS.—The term ‘compensation’ shall 

22 not include any payment made to a personal philan23 thropy account (as defined in section 224) of an em24 ployee.’’. 


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1 (C) Section 3306(b) of such Code is 

2 amended by striking ‘‘or’’ at the end of para3 graph (18), by striking the period at the end of 

4 paragraph (19) and inserting ‘‘; or’’, and by in5 serting after paragraph (19) the following new 

6 paragraph: 

7 ‘‘(20) any payment made to a personal philan8 thropy account (as defined in section 224) of an em9 ployee.’’. 

10 (D) Section 3401(a) of such Code is 

11 amended by striking ‘‘or’’ at the end of para12 graph (21), by striking the period at the end of 

13 paragraph (22) and inserting ‘‘; or’’, and by in14 serting after paragraph (22) the following new 

15 paragraph: 

16 ‘‘(23) any payment made to a personal philan17 thropy account (as defined in section 224) of an em18 ployee.’’. 

19 (E) Section 6051(a) of such Code is 

20 amended by striking ‘‘and’’ at the end of para21 graph (12), by striking the period at the end of 

22 paragraph (13) and inserting ‘‘, and’’, and by 

23 inserting after paragraph (13) the following 

24 new paragraph: 


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1 ‘‘(14) the amount contributed to any personal 

2 philanthropy account (as defined in section 224) of 

3 such employee or such employee’s spouse.’’. 

4 (d) PROHIBITED TRANSACTIONS.— 

5 (1) EXCEPTION FOR TAXABLE DISTRIBUTIONS

6 FROM PERSONAL PHILANTHROPY ACCOUNTS.—Sub7 section (c) of section 4975 of such Code (defining to 

8 prohibited transaction) is amended by adding at the 

9 end the following new paragraph: 

10 ‘‘(7) SPECIAL RULE FOR PERSONAL PHILAN11 THROPY ACCOUNTS.—An individual for whose ben12 efit a personal philanthropy account is established 

13 and any contributor to such account shall be exempt 

14 from the tax imposed by this section with respect to 

15 any transaction concerning such account (which 

16 would otherwise be taxable under this section) if sec17 tion 224(d) applies with respect to such trans18 action.’’. 

19 (2) PLAN DEFINED.—Paragraph (1) of section 

20 4975(e) of such Code is amended by striking ‘‘or’’ 

21 at the end of subparagraph (F), by striking the pe22 riod at the end of subparagraph (G) and inserting 

23 ‘‘, or’’, and by inserting after subparagraph (G) the 

24 following new subparagraph: 


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1 ‘‘(H) a personal philanthropy account de2 scribed in section 224.’’. 

3 (e) PENALTY ON FAILURE TO REPORT.—Paragraph 

4 (2) of section 6693(a) of such Code (relating to provisions) 

5 is amended by striking ‘‘and’’ at the end of subparagraph 

6 (D), by striking the period at the end of subparagraph 

7 (E) and inserting ‘‘, and’’, and by inserting after subpara8 graph (E) the following new subparagraph: 

9 ‘‘(F) section 224(f) (relating to personal 

10 philanthropy accounts).’’. 

11 (f) CONFORMING AMENDMENT.—Paragraph (2) of 

12 section 26(b) of such Code is amended by striking ‘‘and’’ 

13 at the end of subparagraph (S), by striking the period at 

14 the end of subparagraph (T) and inserting ‘‘, and’’, and 

15 by adding at the end the following new subparagraph: 

16 ‘‘(U) section 224(d)(4) (relating to addi17 tional tax with respect to distributions not used 

18 for charitable contribution purposes).’’. 

19 (g) CLERICAL AMENDMENTS.— 

20 (1) The table of sections for part VII of sub21 chapter B of chapter 1 of such Code is amended by 

22 redesignating the item relating to section 224 as an 

23 item relating to section 225 and by inserting after 

24 the item relating to section 223 the following new 

25 item: 

‘‘Sec. 224. Personal philanthropy accounts.’’. 


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1 (2) The table of sections for part III of sub2 chapter B of chapter 1 of such Code is amended by 

3 inserting after the item relating to section 139A the 

4 following new item: 

‘‘Sec. 139B. Contributions by employer to personal philanthropy accounts.’’. 

5 (h) EFFECTIVE DATE.—The amendments made by 

6 this section shall apply to taxable years beginning after 

7 December 31, 2006. 

Æ 


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