Tax News

CCH (cch.taxgroup.com) reports:

  The House passed HR 7083, the Charity Enhancement Bill of 2008, by voice vote on September 27 during an unusual weekend session. Introduced by House Ways and Means Committee Oversight Subcommittee Chairman John Lewis, D-Ga., the bill is intended "to fix unintended consequences of the Pension Protection Act of 2006 (PPA) P.L. 109-280), which failed to take into account unique and unforeseen situations in the charitable sector, such as the effect on scholarships and charitable giving," a Ways and Means press release announced after the vote. The bill is in response to a flood of written comments submitted to the Oversight Subcommittee by charitable institutions and foundations over the past year, complaining that certain PPA provisions have had the effect of hampering worthwhile charitable works.

  CCH Comment. While the Charity Enhancement Bill is a bi-partisan bill, its fate in the Senate before adjournment for the elections is uncertain based on the limited time available on the Senate calendar for pending bills other than the financial bailout legislation. The Charity Enhancement Bill is separate from the Pension Protection Technical Corrections Bill of 2008, HR 6382, passed by voice vote in the House on July 9, which primarily corrects non-charitable related PPA provisions. Its fate in the Senate is similarly dependent upon room on the Senate calendar before adjournment.

  The Charity Enhancement Bill of 2008 limits the extent to which certain PPA provisions should be applied, as well as rectifies other unintended restrictions on exempt organizations. HR 7083 would:

  --Remove from PPA's definition of "donor advised funds" those charitable funds created, funded and advised solely by one or more public charities or governmental entities;

  --Remove from PPA's restrictions on distributions from donor advised funds legitimate and carefully-monitored scholarship awards approved in advance by the charitable organization holding the donor advised fund;

  --Repeal the special written acknowledgment required for charitable contributions to donor advised funds stating that the sponsoring organization has exclusive legal control over the assets contributed;

  --Lift excess-benefit restrictions (and, thereby encourage voluntary boards) by allowing supporting organizations to pay substantial contributors reasonable compensation for services and reimburse reasonable and necessary expenses;

  --Except from holdings and payout requirements certain pre-1970 fully-funded Type III supporting organizations in which the original donors and family are no longer involved; and

  --Treat contributions by Indian tribal governments the same as contributions by states (i.e., as public support) in determining classification as a public charity or private foundation (and, thereby supporting their philanthropy).

  The Charity Enhancement Bill of 2008 also would tighten two provisions and raise $76 million in the process by:

  --Increasing e-filing (and, therefore, transparency) by exempt organizations by allowing the IRS to require e-filing of annual Form 990 information returns by organizations filing at least five returns with the IRS annually; and

  --Expanding the Code Sec. 6657 bad check penalty introduced by the Small Business and Work Opportunity Tax Act of 2007 (P.L. 110-28) so that the penalty also applies in cases of bed electronic payments.

  By George Jones, CCH News Staff

SFC Release: Grassley Statement on House Charity Bill