The Charitable Giving Act (HR 3908) was introduced on September 27, 2005 by Representatives Roy Blunt (R-MO) and Harold Ford (D-TN). The bill is essentially the same measure that the House passed in the 108th Congress (H.R. 7) by a vote of 408 to 13. The CARE Act (S. 1780) was also reintroduced by Senators Rick Santorum (R-PA) and Joseph Lieberman (D-CT) on September 28, 2005. Both bills include charitable giving incentives such as the nonitemizer deduction and the IRA rollover, as well as a lobbying expenditure simplification provision. Several provisions from H.R. 3908 were among the package of charitable incentives and reforms that were included in the pension reform bill (H.R. 4), which was signed into law by President Bush on August 17, 2006.

The House Committee on Small Business Subcommittee on Rural Enterprises, Agriculture and Technology held a hearing on The Charitable Giving Act (H.R. 3908) on May 25, 2006. Diana Aviv, IS President and CEO, testified at the hearing about the need for tax incentives to encourage charitable giving. Diana Aviv's Testimony (PDF)
See the Subcommittee website for other statements and testimony.

Side by Side Comparison of S 1780 and HR 3908 (PDF)

The nonitemizer provision in the House bill would only be effective for one year (2006), whereas the Senate provision would be for two tax years (2005 and 2006). The IRA roll over provisions differ only in the eligibility age for deferred gifts. The House bill sets the age at 70 ½ and the Senate bill sets it at 59 ½.

A significant difference in the 2005 House bill is that unlike the version in the 108th Congress, HR 3908 would not lower the foundation excise tax on investment income from 2% to 1%. It would, however, eliminate the existing reduction in that tax when foundations meet certain distribution requirements. HR 3908 would also restrict which administrative expenses can count towards a private foundation's "payout" requirements. Under this provision, compensation paid to foundation officers or substantial contributors that exceeds $100,000 annually, and expenses incurred for air transportation that is not coach-class commercial travel may not be treated as qualifying distributions. In addition, HR 3908 would increase the foundation excise tax on self-dealing from 5% to 25%. The Senate CARE Act does not contain any of these provisions.

SUMMARY OF THE CHARITABLE GIVING ACT, H.R. 3908

Charitable Giving Incentives
Charitable Deduction for Nonitemizers—This provision is identical to the Senate CARE Act except that it would be in effect only for tax year 2006. Individuals who take the standard deduction could take a deduction of up to $250 for contributions once their giving exceeds a $250 floor, while married donors filing jointly can deduct up to $500 for contributions in excess of a $500 floor. The bill requires that Treasury complete a study by end of 2007 on the effect of the proposal on increased charitable giving, and of taxpayer compliance.

IRA Charitable Rollover—The bill provides that donors who are at least 70 ½ would be eligible to
rollover amounts from an IRA as direct or split-interest gifts. The proposal is permanent.

Increase Cap on Corporate Charitable Contributions—The bill would increase the cap on
corporate charitable deductions from 10 percent to 20 percent of taxable income. The cap would be 11 percent from 2005, 12 percent in 2006, 13 percent in 2007, 14 percent in 2008, 15 percent in 2009-2012, and 20 percent in 2013 and thereafter.

Excise Tax on Foundations—The bill eliminates the current two-tiered system (1% to 2%) excise tax on private foundation investment income to a flat 2 percent of investment income.

Foundation Administrative Expenses—Administrative expenses directly attributable to direct charitable activities, grant selection, grant monitoring and administration, compliance with federal, state or local law, or furthering public accountability of the private foundation may be treated as qualifying distributions. Compensation paid to disqualified persons that exceeds $100,000 annually, and expenses incurred for air transportation that is not coach-class commercial travel may not be treated as qualifying distributions.

Excise Tax Penalty on Self-Dealing—The foundation excise tax on self-dealing would be raised from 5 percent to 25 percent.

Donations of Scientific Property, Computer Technology and Equipment—The bill provides for an expansion of the charitable deduction for scientific property used for research and for computer
technology and equipment used for educational purposes.

S Corporation Stock for Charitable Purposes—The bill provides an adjustment to the basis of S
corporation stock for certain charitable contributions.

Other Charitable Giving Incentives—The bill provides an enhanced deduction for donations of food that is slightly narrower than the provision in the Senate bill. The bill does not provide an enhanced deduction for donations of book inventory, gifts of property for conservation purposes, or donations of artistic, literary, musical and scholarly works.

Oversight Provisions
Lobbying Simplification—The bill eliminates the separate limitation for grassroots lobbying expenditures applicable to electing charities. Electing charities would remain subject to the overall
limitation on lobbying expenditures, which would not change in amount, but electing charities would not be required to limit grassroots expenditures as a percentage of overall lobbying.

Landowner Incentives Program—The bill provides that funds received by private landowners from
the Department of Interior to carry out habitat restoration or wildlife protection measures are tax-free. The provision would treat Department of Interior and United States Department of Agriculture conservation grants similarly for tax liability purposes.

Other Provisions
Individual Development Accounts—The bill reauthorizes the program, which establishes matched savings accounts for low-income working families, through fiscal year 2008.

Compassion Capital Fund—The bill provides authorizations for several agencies to issue grants
for technical assistance and capacity building to nongovernmental organizations that operate
social service programs or a cooperative agreement whereby another organization provides
technical assistance to another entity that provides social services. The provision authorizes $150
million in 2006, and such sums as necessary for fiscal years 2007 through 2010.

Sense of the Congress Regarding Corporate Contributions to Faith-Based Organizations—The bill provides that it is the sense of Congress that corporations are important partners with government in efforts to overcome difficult societal problems, and corporations should not adopt policies that prohibit the corporation from contributing to organizations merely because such organization is faith-based.

Legislative History
The House of Representatives passed the Charitable Giving Act (H.R. 7) by an overwhelming vote of 408 to 13 on September 17, 2003. The Senate passed its companion bill, the CARE Act (S. 476), on April 9, 2003 by a vote of 95 to 5. A House-Senate conference to resolve differences between the two bills was not convened before the 108th Congress adjourned in December 2004. H.R. 7 did not include the controversial faith-based program provisions that were included in a similar bill passed by the House in the 107th Congress. The Blunt-Ford bill as introduced included a new provision not in the Senate bill that would exclude administrative expenses from qualifying distributions for private foundations.

Last updated: August 23, 2006