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Congressional Research Service Report on Charitable Contributions

JUN. 18, 2002

Congressional Research Service Report on Charitable Contributions

DATED JUN. 18, 2002
DOCUMENT ATTRIBUTES

 

Congressional Research Service

 

Taxation Briefing Book

 

 

Charitable Contributions

 

Jane G. Gravelle

 

 

[1] The Community Solutions Act of 2001 (H.R. 7), which passed the House on July 19, 2001 has eight new tax provisions designed to benefit charities and charitable giving. The provisions include charitable deductions for non-itemizers capped at $50 for singles and $100 for joints returns, rollovers of IRA amounts into charitable uses, a reduction in the excise tax on private foundation income, an increase in the deductions cap for corporate contributions, and several narrower provisions. The narrower provisions include extending deductions for food inventories to noncorporate businesses, providing benefits for Subchapter S corporations (corporations taxed as partnerships), modifying the tax treatment of charitable remainder trusts and modification in rules for contribution of self-constructed property. The bill also contains provisions relating to charitable choice (directed at religious organizations' role in administering government programs). According to the Joint Committee on Taxation, the charitable tax benefit provisions are Projected to cost $13.3 billion over 10 years; when fully phased in they would cost $2.4 billion on an annual basis.

[2] The President proposed three of these tax provisions in his original tax proposal, but these provisions were not included in the 2001 tax cut (P.L. 107-16). The President's FY2003 budget includes these provisions except for the minor one relating to self- constructed property, with expanded features in two cases (the non- itemizers deduction and deductions for inventories), along with a change expediting consideration of applications for exempt status.

[3] S. 1924, introduced in the Senate by Senators Leiberman and Santorum. after discussion with the President, would provide a temporary non-itemizers deduction with a cap of $400 ($800 for joint returns); the bill also provided a series of similar tax benefits. The Senate Finance Committee is currently considering a bill referred to as the "CARE Act of 2002" with a temporary non- itemizers deduction with a floor and a ceiling ($250/$500 for singles and $500/$1000 for joint returns), costing $10 billion from 2002- 2012. Currently the proposal includes the IRA rollover provision but not the excise tax reduction or the increase in corporate contributions cap. The minor provisions of H.R. 7 are included. There are also a number of additional provisions, with the most important in revenue cost terms being enhanced deductions for contributions of appreciated bonds, provisions encouraging contributions for conservation purposes and enhanced deductions for book inventories. The bill also includes revenue offsets relating to tax shelters and user fees and increases in grants.

[4] For a more detailed summary, see CRS Report RS21144(pdf), Tax Incentives for Charity: An Overview of the Community Solutions Act. For an analysis of the tax deduction for non-itemizers, see CRS Report RL31108(pdf), Economic Analysis of the Charitable Contribution Deduction for Non- Itemizers. See also CRS Report RL31097 (pdf), Charitable Contributions of Food Inventory: Proposals for Change Under the Community Solutions Act of 2001.

[5] CRS Contact: Jane G. Gravelle (7-7829)

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