I 
108TH CONGRESS 
2D SESSION 
H. R. 3837
To amend the Internal Revenue Code of 1986 to limit the deduction for 
charitable contributions of patents and similar property. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 25, 2004
Mr. HOUGHTON (for himself, Mr. PORTMAN, and Mr. MORAN of Kansas) in-
troduced the following bill; which was referred to the Committee on Ways 
and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to limit the 
deduction for charitable contributions of patents and 
similar property.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. LIMITATION OF DEDUCTION FOR CHARITABLE 
CONTRIBUTIONS OF PATENTS AND SIMILAR 
PROPERTY. 
(a) IN GENERAL.—Subparagraph (B) of section 
170(e)(1) of the Internal Revenue Code of 1986 (relating 
to certain contributions of capital gain property) is amend-
ed by striking ‘‘or’’ at the end of clause (i), by inserting
‘‘or’’ at the end of clause (ii), and by inserting after clause 
(ii) the following new clause: 
‘‘(iii) except as provided in paragraph 
(7), of any patent, copyright, trademark, 
trade name, trade secret, know-how, soft-
ware, or similar property,’’. 
(b) SPECIAL RULE.—Section 170(e) of such Code is 
amended by adding at the end the following new para-
graph: 
‘‘(7) SPECIAL RULE FOR CERTAIN CONTRIBU-
TIONS OF PATENTS, COPYRIGHTS, ETC.—
‘‘(A) EXCEPTION FOR CONTRIBUTIONS TO 
QUALIFIED
RESEARCH
ORGANIZATIONS.—Sub-
paragraph (B) of paragraph (1) shall not apply 
to any qualified contribution to a qualified re-
search organization. 
‘‘(B) QUALIFIED
RESEARCH
ORGANIZA-
TION
DEFINED.—For purposes of this para-
graph, the term ‘qualified research organiza-
tion’ means an organization that applies its ex-
pertise to the scientific and commercial develop-
ment of qualified contributions and is described 
in clause (iii), (iv), or (vi) of subsection 
(b)(1)(A) or subparagraph (A), (B), or (C) of 
section 41(e)(6) .
‘‘(C) 
QUALIFIED
CONTRIBUTION
DE-
FINED.—For purposes of this paragraph, a con-
tribution of property described in paragraph 
(1)(B)(iii) shall be treated as a qualified con-
tribution only if—
‘‘(i) such contribution is a gift of all 
right, title, and interest in and to property 
described in clause (iii) of paragraph 
(1)(B), 
‘‘(ii) the donor and donee of any cash 
or cash equivalent in connection with such 
contribution agree to limit the use of such 
cash or cash equivalent to costs of patent 
prosecution or maintenance and the sci-
entific and commercial development of 
qualified donations in general, and 
‘‘(iii) under regulations prescribed by 
the Secretary, the donor of the qualified 
contribution discloses both the contribution 
described in clause (i) and a complete de-
scription of the terms of any restricted 
cash or cash equivalents grant described in 
clause (ii) on its income tax return for the 
taxable year during which such contribu-
tion is made.’’.
(c) QUALIFIED APPRAISAL REQUIRED.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall prescribe regulations or other guidance 
under section 170(a)(1) of the Internal Revenue 
Code of 1986 requiring the donor of property de-
scribed in section 170(e)(1)(B)(iii) of such Code to 
obtain one or more qualified appraisals of the fair 
market value of such property by a qualified ap-
praiser or appraisers. 
(2) QUALIFIED APPRAISER.—For purposes of 
paragraph (1), the term ‘‘qualified appraiser’’ means 
an appraiser who has valuation credentials and expe-
rience in appraising such property, who is not an 
employee of the donor or donee, and who satisfies 
any professional valuation education and qualifica-
tion requirements that are prescribed by the Sec-
retary. 
(3) QUALIFIED
APPRAISAL.—For purposes of 
paragraph (1), the term ‘‘qualified appraisal’’ means 
an appraisal that satisfies the requirements (without 
regard to any value limitation) for a qualified ap-
praisal under section 170(a)(1) of such Code (as in 
effect on the date of the enactment of this Act), with 
the following modifications:
(A) The valuation methodologies to be 
used shall be those prescribed by the Secretary. 
(B) The appraisal shall take into account 
the competitive patent environment and remain-
ing life of a donated patent. 
(C) The valuation of property described in 
section 170(e)(7) of such Code shall take into 
account the potential use of such property by 
any qualified donee, including the value to be 
generated through further technology develop-
ment and commercialization by the donee and 
potential licensees of the property. 
(D) If the value of the property exceeds 
$5,000,000, a second appraisal prepared by a 
qualified appraiser independently selected by a 
professional organization designated by the Sec-
retary shall be required. 
(E) The donee shall acknowledge receipt of 
the appraisal summary required to be filed by 
the donor. 
(F) The amount of any cash or cash equiv-
alent grant described in section 170(e)(7)(C)(ii) 
of such Code and a complete description of the 
terms of any such grant shall be fully described 
in the information returns of the donee organi-
zation for the taxable year of receipt and subse-
quent taxable years, as required by the Sec-
retary. 
(d) ANTI-ABUSE RULES.—The Secretary may pre-
scribe such regulations or other guidance as may be nec-
essary or appropriate to prevent the avoidance of the pur-
poses of paragraphs (1)(B)(iii) and (7) of section 170(e) 
of such Code (as added by this section), including pre-
venting—
(1) the circumvention of the reduction of the 
deduction under such section by embedding or bun-
dling the patent or similar property as part of a 
charitable contribution of property that includes the 
patent or similar property, 
(2) the manipulation of the basis of the prop-
erty to increase the amount of the charitable deduc-
tion through the use of related persons, pass-thru 
entities, or other intermediaries, or through the use 
of any provision of law or regulation (including the 
consolidated return regulations), and 
(3) a donor from changing the form of the pat-
ent or similar property to property of a form for 
which different deduction rules would apply. 
(e) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided by para-
graph (2), the amendments made by this section 
shall apply to contributions made after the date of 
the enactment of this Act. 
(2) APPRAISALS.—Subsection (c) shall apply to 
contributions made after the date of adoption of reg-
ulations, or date of issuance of guidance, required by 
subsection (c), whichever is earlier.
Æ