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.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.
This Act may be cited as the "Enhanced Incentives for Charitable Giving Act of 1999".

SEC. 2. CHARITABLE CONTRIBUTIONS TO CERTAIN LOW INCOME SCHOOLS MAY BE MADE IN NEXT TAXABLE YEAR.
(a) In General. -- Section 170(f) of the Internal Revenue Code of 1986 (relating to disallowance of deduction in certain cases and special rules) is amended by adding at the end the following new paragraph:
(10) Time when certain contributions deemed made. --
(A) In general. -- At the election of the taxpayer, a qualified low-income school contribution shall be deemed to be made on the last day of the preceding taxable year if the contribution is made on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (not including extensions thereof). The election may be made at the time of the filing of the return for such table year, and shall be made and substantiated in such manner as the Secretary shall by regulations prescribe.
(B) Qualified low-income school contribution. -- For purposes of subparagraph (A), the term 'qualified low-income school contribution' means a charitable contribution to an educational organization described in subsection (b)(1)(A)(ii) --
(i) which is a public, private, or sectarian school which provides elementary or secondary education (through grade 12), as determined under State law, and
(ii) with respect to which at least 50 percent of the students attending such school are eligible for free or reduced-cost lunches under the school lunch program established under the National School Lunch Act.".
(b) Effective Date. -- The amendment made by this section shall apply to taxable years beginning after December 31, 1999.

SEC. 3. DEDUCTION FOR PORTION OF CHARITABLE CONTRIBUTIONS TO BE ALLOWED TO INDIVIDUALS WHO DO NOT ITEMIZE DEDUCTIONS.
(a) In General. -- Section 170 of the Internal Revenue Code of 1986 (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. -- In the case of an individual who does not itemize his deductions for the taxable year, there shall be taken into account as a direct charitable deduction under section 63 an amount equal to the lesser of --
(1) the amount allowable as a deduction under subsection (a) for the taxable year, or
(2) $50 ($100 in the case of a joint return).".
(b) Direct Charitable Deduction. --
(1) In general. -- Subsection (b) of section 63 of the Internal Revenue Code of 1986 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 of such Code 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 of such Code 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) Effective Date. -- The amendments made by this section shall apply to taxable years beginning after December 31, 1999.

SEC. 4. INCREASE IN LIMIT ON CHARITABLE CONTRIBUTIONS AS PERCENTAGE OF AGI.
(a) In General. --
(1) Individual limit. -- Section 170(b)(1) of the Internal Revenue Code of 1986 (relating to percentage limitations) is amended --
(A) by striking "50 percent" in subparagraph (A) and inserting "the 75 percent", and
(B) by striking "30 percent" each place it appears in subparagraph (C) and inserting "50 percent".
(2) Corporate limit. -- Section 170(b)(2) of such Code is amended by striking "10 percent" and inserting "20 percent".
(b) Conforming Amendments. -- Section 170(d)(1)(A) of the Internal Revenue Code of 1986 is amended by striking "50 percent" each place it appears and inserting "75 percent".
(c) Effective Date. -- The amendments made by this section shall apply to taxable years beginning after December 31, 1999.

SEC. 5. LIMITED EXCEPTION TO EXCESS BUSINESS HOLDINGS RULE.
(a) In General. -- Section 4943(c)(2) of the Internal Revenue Code of 1986 (relating to permitted holdings in a corporation) is amended by adding at the end the following new subparagraph:
(D) Rule where voting stock is publicly traded. --
(i) In general. -- If --
(I) the private foundation and all disqualified persons together do not own more than the 49 percent of the voting stock and not more than the 49 percent in value of all outstanding shares of all classes of stock of an incorporated business enterprise,
(II) the voting stock owned by the private foundation and all disqualified persons together is stock for which market quotations are readily available on an established securities market, and
(III) the requirements of clause (ii) are met, then subparagraph (A) shall be applied by substituting '49 percent' for '20 percent'.
(ii) Requirements to be met. -- The requirements of this clause are met during any taxable year --
(I) in which disqualified persons with respect to the private foundation do not receive compensation (as an employee or otherwise) from the corporation or engage in any act with such corporation which would constitute self-dealing within the meaning of section 4941(d) if such corporation were a private foundation and if each such disqualified person were a disqualified person with respect to such corporation,
(II) in which disqualified persons with respect to such private foundation do not own in the aggregate more than 2 percent of the voting stock and not more than 2 percent in value of all outstanding shares of all classes of stock in such corporation, and
(III) for which there is submitted with the annual return of the private foundation for such year (filed within the time prescribed by law, including extensions, for filing such return) a certification which is signed by all the members of an audit committee of the Board of Directors of such corporation consisting of a majority of persons who are not disqualified persons with respect to such private foundation and which certifies that such members, after due inquiry, are not aware that any disqualified person has received compensation from such corporation or has engaged in any act with such corporation that would constitute self-dealing within the meaning of section 4941(d) if such corporation were a private foundation and if each such disqualified person were a disqualified person with respect to such corporation.
For purposes of this clause, the fact that a disqualified person has received compensation from such corporation or has engaged in any act with such corporation which would constitute self-dealing within the meaning of section 4941(d) shall be disregarded if such receipt or act is corrected not later than the due date (not including extensions thereof) for the filing of the private foundation's annual return for the year in which the receipt or act occurs and on the terms that would be necessary to correct such receipt or act and thereby avoid imposition of tax under section 4941(b).".
(b) Effective Date. -- The amendment made by this section shall apply to foundations established by bequest of decedents dying after December 31, 1999.