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JCT Describes S Corporation Charity Rule Bill

FEB. 3, 2015

JCX-16-15

DATED FEB. 3, 2015
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Citations: JCX-16-15

 

Scheduled for Markup

 

by the

 

HOUSE COMMITTEE ON WAYS AND MEANS

 

on February 4, 2015

 

 

Prepared by the Staff

 

of the

 

JOINT COMMITTEE ON TAXATION

 

 

February 3, 2015

 

JCX-16R-15

 

 

                               CONTENTS

 

 

 INTRODUCTION

 

 

      A.   Permanent Rule Regarding Basis Adjustment to Stock of S

 

           Corporations Making Charitable Contributions of Property

 

           (sec. 1367 of the Code)

 

 

      B.   Estimated Revenue Effects

 

INTRODUCTION

 

 

The House Committee on Ways and Means has scheduled a committee markup of H.R. 630, a bill to make permanent certain rules regarding basis adjustments to stock of S corporations making charitable contributions of property, on February 4, 2015. This document,1 prepared by the staff of the Joint Committee on Taxation, provides a description of the bill.

 

A. Permanent Rule Regarding Basis Adjustment to Stock of S

 

Corporations Making Charitable Contributions of Property

 

(sec. 1367 of the Code)

 

 

Present Law

 

 

Under present law, if an S corporation contributes money or other property to a charity, each shareholder takes into account the shareholder's pro rata share of the contribution in determining its own income tax liability.2 A shareholder of an S corporation reduces the basis in the stock of the S corporation by the amount of the charitable contribution that flows through to the shareholder.3

In the case of charitable contributions made in taxable years beginning before January 1, 2015, the amount of a shareholder's basis reduction in the stock of an S corporation by reason of a charitable contribution made by the corporation is equal to the shareholder's pro rata share of the adjusted basis of the contributed property. For contributions made in taxable years beginning after December 31, 2014, the amount of the reduction is the shareholder's pro rata share of the fair market value of the contributed property.

 

Description of Proposal

 

 

The proposal makes permanent the basis reduction rule applicable for contributions made in taxable years beginning before January 1, 2015.

 

Effective Date

 

 

The proposal applies to charitable contributions made in taxable years beginning after December 31, 2014.

 

B. Estimated Revenue Effects

 

 

                               Fiscal Years

 

                          [Millions of Dollars]

 

 _____________________________________________________________________

 

 

   2015        2016        2017        2018        2019        2020

 

 _____________________________________________________________________

 

 

    -23         -49         -53         -55         -57         -59

 

 

   2021      2022      2023      2024      2025   2015-20   2015-25

 

 _____________________________________________________________________

 

 

    -61       -64       -68       -71       -75      -296      -635

 

FOOTNOTES

 

 

1 This document may be cited as follows: Joint Committee on Taxation, Description of H.R. 630, A Bill to Make Permanent Certain Rules Regarding Basis Adjustments to Stock of S Corporations Making Charitable Contributions of Property (JCX-16-15), February 3, 2015. This document can also be found on the Joint Committee on Taxation website at www.jct.gov.

2 Sec. 1366(a)(1)(A).

3 Sec. 1367(a)(2)(B).

 

END OF FOOTNOTES
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