Exempt Organizations Advisory - Chairman Grassley Proposes Charitable Reforms for Tax Reconciliation Bill

On November 14, 2005, the staff of the Joint Committee on Taxation released a "Description of the Chairman’s Modification to the Provisions of the ‘Tax Relief Act of 2005.’" A markup, which has been scheduled and postponed several times as Chairman Charles Grassley struggles to get the necessary votes to pass the bill, is now set for 2:15 P.M. today.

Chairman Charles Grassley’s amendments include the following charitable reform proposals:

1. Charitable deduction for nonitemizers; floor on deductions for itemizers;
   
2. Tax-free distributions from individual retirement arrangements for charitabl purposes;
   
3. Charitable deduction for contributions of food inventory;
   
4. Basis adjustment to stock of S corporation contributing property;
   
5. Modify tax treatment of certain payments to controlling exempt organization and public disclosure of information relating to UBIT;
   
6. Encourage contributions of real property made for conservation purposes;
   
7. Charitable deduction for contributions of book inventory;
   
8. Tax involvement by exempt organizations in tax-shelter transactions;
   
9. Apply an excise tax to acquisitions of interests in insurance contracts in which certain exempt organizations hold an interest;
   
10. Increase the amounts of excise taxes imposed on public charities, social welfare organizations, and private foundations;
    
11. Improve accountability of donor advised funds;
    
12. Improve accountability of supporting organizations;
    
13. Reform rules for charitable contributions of easements on buildings in
    registered historic districts;
    
14. Reform rules relating to charitable contributions of taxidermy and recapture tax benefit on property not used for an exempt use;
    
15. Limit charitable deduction for contributions of clothing and household items and modify recordkeeping and substantiation requirements for certain charitable contributions;
    
16. Contributions of fractional interests in tangible personal property;
    
17. Provisions relating to substantial and gross overstatement of valuations of
    property;
    
18. Expand the base of the tax on private foundation net investment income;
    
19. Establish additional exemption standards for credit counseling organizations;
    
20. Impose loan and redemption requirements on pooled financing bonds; and
    
21. Amend information reporting requirements to include interest on tax-exempt bonds.

More information on each of the proposals can be found in JCX-77-05.

For more information on this topic, please contact Catherine W. Wilkinson or Suzanne Ross McDowell.

The Exempt Organization Advisory is a general summary of the law and is not intended as specific legal advice for any organization.

Internal Revenue Service - Circular 230 Disclosure: As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

For more information on this topic, please contact the authors or the attorneys with whom you usually work at Steptoe.

Questions and comments about the Exempt Organizations Advisory are always welcome and should be sent to bstone@steptoe.com.