H.R.7
Charitable Giving Act of 2003 (Introduced in House)
TITLE I--CHARITABLE GIVING INCENTIVES
SEC. 101. DEDUCTION FOR PORTION OF CHARITABLE CONTRIBUTIONS TO BE ALLOWED TO INDIVIDUALS WHO DO NOT ITEMIZE DEDUCTIONS.
(a) IN GENERAL- Section 170 (relating to charitable, etc., contributions and gifts) is amended by redesignating subsection (m) as subsection (n) and by inserting after subsection (l) the following new subsection:
`(m) DEDUCTION FOR INDIVIDUALS NOT ITEMIZING DEDUCTIONS-
`(1) IN GENERAL- In the case of an individual who does not itemize deductions for any taxable year, there shall be taken into account as a direct charitable deduction under section 63 an amount equal to the amount allowable under subsection (a) for the taxable year for cash contributions (determined without regard to any carryover), to the extent that such contributions exceed $250 ($500 in the case of a joint return) but do not exceed $500 ($1,000 in the case of a joint return).
`(2) TERMINATION- This subsection shall not apply to any taxable year beginning after December 31, 2005.'.
(b) DIRECT CHARITABLE DEDUCTION-
(1) IN GENERAL- Subsection (b) of section 63 (defining taxable income) is amended by striking `and' at the end of paragraph (1), by striking the period at the end of paragraph (2) and inserting `, and', and by adding at the end the following new paragraph:
`(3) the direct charitable deduction.'.
(2) DEFINITION- Section 63 is amended by redesignating subsection (g) as subsection (h) and by inserting after subsection (f) the following new subsection:
`(g) DIRECT CHARITABLE DEDUCTION- For purposes of this section, the term `direct charitable deduction' means that portion of the amount allowable under section 170(a) which is taken as a direct charitable deduction for the taxable year under section 170(m).'.
(3) CONFORMING AMENDMENT- Subsection (d) of section 63 is amended by striking `and' at the end of paragraph (1), by striking the period at the end of paragraph (2) and inserting `, and', and by adding at the end the following new paragraph:
`(3) the direct charitable deduction.'.
(c) STUDY-
(1) IN GENERAL- The Secretary of the Treasury shall study the effect of the amendments made
by this section on increased charitable giving and taxpayer compliance, including a comparison of taxpayer compliance between taxpayers who itemize their charitable contributions and taxpayers who claim a direct charitable deduction.
(2) REPORT- By not later than December 31, 2005, the Secretary of the Treasury shall report on the study required under paragraph (1) to the Committee on Finance of the Senate and the Committee on Ways and Means of the House of Representatives.
(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2003.
SEC. 102. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT PLANS FOR CHARITABLE PURPOSES.
(a) IN GENERAL- Subsection (d) of section 408 (relating to individual retirement accounts) is amended by adding at the end the following new paragraph:
`(8) DISTRIBUTIONS FOR CHARITABLE PURPOSES-
`(A) IN GENERAL- No amount shall be includible in gross income by reason of a qualified charitable distribution.
`(B) QUALIFIED CHARITABLE DISTRIBUTION- For purposes of this paragraph, the term `qualified charitable distribution' means any distribution from an individual retirement plan--
`(i) which is made on or after the date that the individual for whose benefit the plan is maintained has attained age 70 1/2 , and
`(ii) which is made directly by the trustee--
`(I) to an organization described in section 170(c), or
`(II) to a split-interest entity.
A distribution shall be treated as a qualified charitable distribution only to the extent that the distribution would be includible in gross income without regard to subparagraph (A) and, in the case of a distribution to a split-interest entity, only if no person holds an income interest in the amounts in the split-interest entity attributable to such distribution other than one or more of the following: the individual for whose benefit such plan is maintained, the spouse of such individual, or any organization described in section 170(c).
`(C) CONTRIBUTIONS MUST BE OTHERWISE DEDUCTIBLE- For purposes of this paragraph--
`(i) DIRECT CONTRIBUTIONS- A distribution to an organization described in section 170(c) shall be treated as a qualified charitable distribution only if a deduction for the entire distribution would be allowable under section 170 (determined without regard to subsection (b) thereof and this paragraph).
`(ii) SPLIT-INTEREST GIFTS- A distribution to a split-interest entity shall be treated as a qualified charitable distribution only if a deduction for the entire value of the interest in the distribution for the use of an organization described in section 170(c) would be allowable under section 170 (determined without regard to subsection (b) thereof and this paragraph).
`(D) APPLICATION OF SECTION 72- Notwithstanding section 72, in determining the extent to which a distribution is a qualified charitable distribution, the entire amount of the distribution shall be treated as includible in gross income without regard to subparagraph (A) to the extent that such amount does not exceed the aggregate amount which would have been so includible if all amounts were distributed from all individual retirement plans treated as 1 contract under paragraph (2)(A) for purposes of determining the inclusion on such distribution under section 72. Proper adjustments shall be made in applying section 72 to other distributions in such taxable year and subsequent taxable years.
`(E) SPECIAL RULES FOR SPLIT-INTEREST ENTITIES-
`(i) CHARITABLE REMAINDER TRUSTS- Notwithstanding section 664(b), distributions made from a trust described in subparagraph (G)(i) shall be treated as ordinary income in the hands of the beneficiary to whom is paid the annuity described in section 664(d)(1)(A) or the payment described in section 664(d)(2)(A).
`(ii) POOLED INCOME FUNDS- No amount shall be includible in the gross income of a pooled income fund (as defined in subparagraph (G)(ii)) by reason of a qualified charitable distribution to such fund, and all distributions from the fund which are attributable to qualified charitable distributions shall be treated as ordinary income to the beneficiary.
`(iii) CHARITABLE GIFT ANNUITIES- Qualified charitable distributions made for a charitable gift annuity shall not be treated as an investment in the contract.
`(F) DENIAL OF DEDUCTION- Qualified charitable distributions shall not be taken into account in determining the deduction under section 170.
`(G) SPLIT-INTEREST ENTITY DEFINED- For purposes of this paragraph, the term `split-interest entity' means--
`(i) a charitable remainder annuity trust or a charitable remainder unitrust (as such terms are defined in section 664(d)) which must be funded exclusively by qualified charitable distributions,
`(ii) a pooled income fund (as defined in section 642(c)(5)), but only if the fund accounts separately for amounts attributable to qualified charitable distributions, and
`(iii) a charitable gift annuity (as defined in section 501(m)(5)).'.
(b) MODIFICATIONS RELATING TO INFORMATION RETURNS BY CERTAIN TRUSTS-
(1) RETURNS- Section 6034 (relating to returns by trusts described in section 4947(a)(2) or claiming charitable deductions under section 642(c)) is amended to read as follows:
`SEC. 6034. RETURNS BY TRUSTS DESCRIBED IN SECTION 4947(a)(2) OR CLAIMING CHARITABLE DEDUCTIONS UNDER SECTION 642(c).
`(a) TRUSTS DESCRIBED IN SECTION 4947(a)(2)- Every trust described in section 4947(a)(2) shall furnish such information with respect to the taxable year as the Secretary may by forms or regulations require.
`(b) TRUSTS CLAIMING A CHARITABLE DEDUCTION UNDER SECTION 642(c)-
`(1) IN GENERAL- Every trust not required to file a return under subsection (a) but claiming a deduction under section 642(c) for the taxable year shall furnish such information with respect to such taxable year as the Secretary may by forms or regulations prescribe, including--
`(A) the amount of the deduction taken under section 642(c) within such year,
`(B) the amount paid out within such year which represents amounts for which deductions under section 642(c) have been taken in prior years,
`(C) the amount for which such deductions have been taken in prior years but which has not been paid out at the beginning of such year,
`(D) the amount paid out of principal in the current and prior years for the purposes described in section 642(c),
`(E) the total income of the trust within such year and the expenses attributable thereto, and
`(F) a balance sheet showing the assets, liabilities, and net worth of the trust as of the beginning of such year.
`(2) EXCEPTIONS- Paragraph (1) shall not apply to a trust for any taxable year if--
`(A) all the net income for such year, determined under the applicable principles of the law of trusts, is required to be distributed currently to the beneficiaries, or
`(B) the trust is described in section 4947(a)(1).'.
(2) INCREASE IN PENALTY RELATING TO FILING OF INFORMATION RETURN BY SPLIT-INTEREST TRUSTS- Paragraph (2) of section 6652(c) (relating to returns by exempt organizations and by certain trusts) is amended by adding at the end the following new subparagraph:
`(C) SPLIT-INTEREST TRUSTS- In the case of a trust which is required to file a return under section 6034(a), subparagraphs (A) and (B) of this paragraph shall not apply and paragraph (1) shall apply in the same manner as if such return were required under section 6033, except that--
`(i) the 5 percent limitation in the second sentence of paragraph (1)(A) shall not apply,
`(ii) in the case of any trust with gross income in excess of $250,000, the first sentence of paragraph (1)(A) shall be applied by substituting `$100' for `$20', and the second sentence thereof shall be applied by substituting `$50,000' for `$10,000', and
`(iii) the third sentence of paragraph (1)(A) shall be disregarded.
In addition to any penalty imposed on the trust pursuant to this subparagraph, if the person required to file such return knowingly fails to file the return, such penalty shall also be imposed on such person who shall be personally liable for such penalty.'.
(3) CONFIDENTIALITY OF NONCHARITABLE BENEFICIARIES- Subsection (b) of section 6104 (relating to inspection of annual information returns) is amended by adding at the end the following new sentence: `In the case of a trust which is required to file a return under section 6034(a), this subsection shall not apply to information regarding beneficiaries which are not organizations described in section 170(c).'.
(c) EFFECTIVE DATES-
(1) SUBSECTION (a)- The amendment made by subsection (a) shall apply to distributions made after December 31, 2003.
(2) SUBSECTION (b)- The amendments made by subsection (b) shall apply to returns for taxable years beginning after December 31, 2003.

SEC. 103. INCREASE IN CAP ON CORPORATE CHARITABLE CONTRIBUTIONS.
(a) IN GENERAL- Paragraph (2) of section 170(b) (relating to corporations) is amended by striking `10 percent' and inserting `the applicable percentage'.
(b) APPLICABLE PERCENTAGE- Subsection (b) of section 170 is amended by adding at the end the following new paragraph:
`(3) APPLICABLE PERCENTAGE DEFINED- For purposes of paragraph (2), the applicable percentage shall be determined in accordance with the following table:
`For taxable years beginning in calendar year-- The applicable --percentage is--
2004 -- 11
2005 -- 12
2006 -- 13
2007 -- 14
2008 through 2011-- 15
2012 and thereafter-- 20.'.

(c) CONFORMING AMENDMENTS-
(1) Sections 512(b)(10) and 805(b)(2)(A) are each amended by striking `10 percent' each place it occurs and inserting `the applicable percentage (determined under section 170(b)(3))'.
(2) Sections 545(b)(2) and 556(b)(2) are each amended by striking `10-percent limitation' and inserting `applicable percentage limitation'.
(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2003.
SEC. 104. CHARITABLE DEDUCTION FOR CONTRIBUTIONS OF FOOD INVENTORY.
(a) IN GENERAL- Paragraph (3) of section 170(e) (relating to special rule for certain contributions of inventory and other property) is amended by redesignating subparagraph (C) as subparagraph (D) and by inserting after subparagraph (B) the following new subparagraph:
`(C) SPECIAL RULE FOR CONTRIBUTIONS OF FOOD INVENTORY-
`(i) GENERAL RULE- In the case of a charitable contribution of food, this paragraph shall be applied--
`(I) without regard to whether the contribution is made by a C corporation, and
`(II) only for food that is apparently wholesome food.
`(ii) LIMITATION- In the case of taxpayer other than a C corporation, clause (i) shall not apply to any contribution of apparently wholesome food from a trade or business of the taxpayer to the extent that such contribution exceeds the applicable percentage (within the meaning of subsection (b)(3)) of the amount of net income of the taxpayer from the trade or business with respect to which such food is inventory. For purposes of the preceding sentence, the amount of net income of the taxpayer from a trade or business is the excess of--
`(I) the aggregate amount of gross income from such trade or business received or accrued by the taxpayer during the taxable year, over
`(II) the aggregate amount of any deductions allocable to such trade or business allowed to the taxpayer under this chapter for the taxable year.
`(iii) DETERMINATION OF FAIR MARKET VALUE- In the case of a qualified contribution of apparently wholesome food to which this paragraph applies and which, solely by reason of internal standards of the taxpayer or lack of market, cannot or will not be sold, the fair market value of such food shall be determined by taking into account the price at which the same or substantially the same food items (as to both type and quality) are sold by the taxpayer at the time of the contribution (or, if not so sold at such time, in the recent past).
`(iv) APPARENTLY WHOLESOME FOOD- For purposes of this subparagraph, the term `apparently wholesome food' shall have the meaning given to such term by section 22(b)(2) of the Bill Emerson Good Samaritan Food Donation Act (42 U.S.C. 1791(b)(2)), as in effect on the date of the enactment of this subparagraph.'.
(b) EFFECTIVE DATE- The amendment made by section shall apply to taxable years beginning after December 31, 2003.
SEC. 105. REFORM OF CERTAIN EXCISE TAXES RELATED TO PRIVATE FOUNDATIONS.
(a) REDUCTION OF TAX ON NET INVESTMENT INCOME- Subsection (a) of section 4940 (relating to excise tax based on investment income) is amended by striking `2 percent' and inserting `1 percent'.
(b) REPEAL OF REDUCTION IN TAX WHERE PRIVATE FOUNDATION MEETS CERTAIN DISTRIBUTION REQUIREMENTS- Section 4940 is amended by striking subsection (e).
(c) MODIFICATION OF EXCISE TAX ON FAILURE TO DISTRIBUTE INCOME-
(1) ADMINISTRATIVE EXPENSES NOT TREATED AS DISTRIBUTIONS- Subparagraph (A) of section 4942(g)(1) is amended by striking `including that portion of reasonable and necessary administrative expenses' and inserting `excluding administrative expenses'.
(2) EXCLUSION NOT TO APPLY TO CERTAIN PRIVATE FOUNDATIONS- Paragraph (3) of section 4942(j) is amended--
(A) by striking `(within the meaning of paragraph (1) or (2) of subsection (g))' each place it appears, and
(B) by inserting at the end the following: `For purposes of this paragraph, the term `qualifying distributions' means qualifying distributions within the meaning of paragraph (1) or (2) of subsection (g), except that `including that portion of reasonable and necessary administrative expenses' shall be substituted for `excluding administrative expenses' in subsection (g)(1)(A).'.
(3) CONFORMING AMENDMENT- Subsection (g) of section 4942 is amended by striking paragraph (4).
(d) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2003.
SEC. 106. EXCISE TAX ON UNRELATED BUSINESS TAXABLE INCOME OF CHARITABLE REMAINDER TRUSTS.
(a) IN GENERAL- Subsection (c) of section 664 (relating to exemption from income taxes) is amended to read as follows:
`(c) TAXATION OF TRUSTS-
`(1) INCOME TAX- A charitable remainder annuity trust and a charitable remainder unitrust shall, for any taxable year, not be subject to any tax imposed by this subtitle.
`(2) EXCISE TAX-
`(A) IN GENERAL- In the case of a charitable remainder annuity trust or a charitable remainder unitrust that has unrelated business taxable income (within the meaning of section 512, determined as if part III of subchapter F applied to such trust) for a taxable year, there is hereby imposed on such trust or unitrust an excise tax equal to the amount of such unrelated business taxable income.

SEC. 106. EXCISE TAX ON UNRELATED BUSINESS TAXABLE INCOME OF CHARITABLE REMAINDER TRUSTS.
(a) IN GENERAL- Subsection (c) of section 664 (relating to exemption from income taxes) is amended to read as follows:
`(c) TAXATION OF TRUSTS-
`(1) INCOME TAX- A charitable remainder annuity trust and a charitable remainder unitrust shall, for any taxable year, not be subject to any tax imposed by this subtitle.
`(2) EXCISE TAX-
`(A) IN GENERAL- In the case of a charitable remainder annuity trust or a charitable remainder unitrust that has unrelated business taxable income (within the meaning of section 512, determined as if part III of subchapter F applied to such trust) for a taxable year, there is hereby imposed on such trust or unitrust an excise tax equal to the amount of such unrelated business taxable income.
`(B) CERTAIN RULES TO APPLY- The tax imposed by subparagraph (A) shall be treated as imposed by chapter 42 for purposes of this title other than subchapter E of chapter 42.
`(C) CHARACTER OF DISTRIBUTIONS AND COORDINATION WITH DISTRIBUTION REQUIREMENTS- The amounts taken into account in determining unrelated business taxable income (as defined in subparagraph (A)) shall not be taken into account for purposes of--
`(i) subsection (b),
`(ii) determining the value of trust assets under subsection (d)(2), and
`(iii) determining income under subsection (d)(3).
`(D) TAX COURT PROCEEDINGS- For purposes of this paragraph, the references in section 6212(c)(1) to section 4940 shall be deemed to include references to this paragraph.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to taxable years beginning after December 31, 2003.
SEC. 107. EXPANSION OF CHARITABLE CONTRIBUTION ALLOWED FOR SCIENTIFIC PROPERTY USED FOR RESEARCH AND FOR COMPUTER TECHNOLOGY AND EQUIPMENT USED FOR EDUCATIONAL PURPOSES.
(a) SCIENTIFIC PROPERTY USED FOR RESEARCH-
(1) IN GENERAL- Clause (ii) of section 170(e)(4)(B) (defining qualified research contributions) is amended by inserting `or assembled' after `constructed'.
(2) CONFORMING AMENDMENT- Clause (iii) of section 170(e)(4)(B) is amended by inserting `or assembling' after `construction'.
(b) COMPUTER TECHNOLOGY AND EQUIPMENT FOR EDUCATIONAL PURPOSES-
(1) IN GENERAL- Clause (ii) of section 170(e)(6)(B) is amended by inserting `or assembled' after `constructed' and `or assembling' after `construction'.
(2) SPECIAL RULE EXTENDED- Section 170(e)(6)(G) is amended by striking `2003' and inserting `2005'.
(3) CONFORMING AMENDMENTS- Subparagraph (D) of section 170(e)(6) is amended by inserting `or assembled' after `constructed' and `or assembling' after `construction'.
(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2003.
SEC. 108. ADJUSTMENT TO BASIS OF S CORPORATION STOCK FOR CERTAIN CHARITABLE CONTRIBUTIONS.
(a) IN GENERAL- Paragraph (2) of section 1367(a) (relating to adjustments to basis of stock of shareholders, etc.) is amended by adding at the end the following new flush sentence:
`The decrease under subparagraph (B) by reason of a charitable contribution (as defined in section 170(c)) of property shall be the amount equal to the shareholder's pro rata share of the adjusted basis of such property.'.
(b) EFFECTIVE DATE- The amendment made by this section shall apply to taxable years beginning after December 31, 2003.