H.R. 4719

America Gives More Act of 2014

Sponsor
Rep. Tom Reed

Committee
Ways and Means

Date
July 17, 2014 (113th Congress, 2nd Session)

Staff Contact
David Smentek

Floor Situation

On Thursday, July 17, 2014, the House will consider H.R. 4719, the America Gives More Act of 2014, under a rule.  H.R. 4719 was introduced on May 29, 2014 by Rep. Tom Reed (R-NY), and referred to the Ways and Means Committee, which ordered the bill reported by a vote of 23-13.[1]

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[1] See Committee Report 113-498, at 7.

Bill Summary

H.R. 4719 includes a package of five bipartisan bills reported by the Ways and Means Committee that would improve and make permanent a number of tax rules governing charitable donations and charitable organizations.  This package includes: H.R. 4719, the Fighting Hunger Incentive Act of 2014, sponsored by Rep. Tom Reed (R-NY)[2]; H.R. 4619, the Permanent IRA Charitable Contribution Act of 2014, sponsored by Rep. Aaron Schock (R-IL)[3]; H.R. 2807, the Conservation Easement Incentive Act of 2014, sponsored by Rep. Jim Gerlach (R-PA)[4]; H.R. 3134, the Charitable Giving Extension Act, sponsored by Rep. Mike Kelly (R-PA)[5]; and H.R. 4691, the Private Foundation Excise Tax Simplification Act of 2014, sponsored by Rep. Erik Paulsen (R-MN).[6]

Section 2 of H.R. 4719 makes permanent the enhanced deduction for contributions of food inventory by any type of business.[7]   In addition, H.R. 4719 provides a special basis rule for pass-through business that do not maintain inventories, which allows them to treat their basis in the contributed food equal to 25 percent of the Fair Market Value (FMV) of such food.[8]  Moreover, the bill provides a rule to determine the FMV of food inventory that cannot or will not be sold by the business because of its internal standards; lack of market or similar circumstances; or because it was produced exclusively for the purpose of transferring it to a charitable organization.  In these circumstances, the FMV would be determined by taking into account the price at which the business would sell the same or similar food at the time of the contribution.  Finally, this provision increases the 10-percent limitation on contributions of food inventory to 15 percent of the taxpayer’s taxable income.  A similar temporary provision expired at the end of 2013.[9]  This provision, which makes the enhanced deduction available to a larger number of businesses, will incentivize food-service companies and farms to donate surplus food that would otherwise be discarded.[10]  Because donated food inventory must be properly saved, packaged, labeled, and stored, the enhanced deduction will allow food-service companies to incur and offset these costs, helping to provide a vital service to community food pantries and other tax-exempt organizations.[11]

Section 3 of H.R. 4719 makes permanent a provision allowing tax-free distributions from IRAs for charitable purposes.[12]  This provision provides that individuals who are at least 70½ years old may make tax-free distributions of up to $100,000 per year from an IRA to a qualifying charitable organization.  Under current law, taxpayers may claim itemized deductions for charitable contributions, limited to a certain percentage of an individual taxpayer’s adjusted gross income (AGI).  This provision would make permanent an identical provision that expired after December 31, 2013.[13]  Making tax-free IRA charitable distributions permanent would further incentivize taxpayers to contribute to charitable organizations.  According to testimony received by the Ways and Means Committee, “in the first two years it was available, the IRA charitable distribution option prompted more than $140 million in charitable donations, with the median gift just under $4,500[…].”[14]

Section 4 of H.R. 4719 makes permanent the temporary deduction for contributions of conservation easements.[15]  The deduction allows individuals to deduct the FMV of qualified conservation contributions up to 50 percent of the individual’s AGI.  Farmers and ranchers are permitted to deduct the FMV of qualified conservation contributions up to 100 percent of their AGI, provide the property used remains available for agricultural or livestock production.[16]  The temporary deduction expired December 31, 2013.  This provision also allows Alaska Native Corporations to deduct a qualified conservation easement contribution up to 100 percent of taxable income.  According to testimony received by the Ways and Means Committee, in the first two years following the deduction’s enactment, the number of conservation easements doubled (compared to the prior two years), and increased the acreage conserved by approximately 32 percent.[17]

Section 5 of H.R. 4719 allows individual taxpayers to deduct charitable contributions made after the close of the tax year but before the due date of the return (April 15 of a calendar year) for the tax year covered by the return.[18]    Under current law, in order for a contribution to be eligible for a tax deduction, it must be made by the last day of the tax year for which a return is filed.  Enabling individuals to take deductions for contributions made after the end of a tax year but before the due date for that year’s return “is expected to increase charitable giving, because many taxpayers will decide to give more generously at the time they are preparing and finalizing their returns.”[19]

Section 6 of H.R. 4719 amends the Internal Revenue Code to set the excise tax rate on net investment income of private foundations at 1 percent.[20]  Under current law, the net investment income of private foundations exempt from tax under section 501(a) of the Internal Revenue Code is subject to a 2-percent excise tax on its net investment income.[21]  A private foundation may have the excise tax reduced from 2 percent to 1 percent in any year in which it exceeds its average historical level of charitable donation.[22]  Under the current two-tier system, foundations must ensure that its distributions in a given year exceed its historical level of distributions.  The structure of the tax incentivizes foundations to limit contributions, because a significant increase would make it more difficult for them to qualify for a reduced rate in future years.[23]  This provision eliminates the special reduced excise tax rate, simplifying the structure of the tax, reducing the rate to a flat 1 percent, and incentivizing foundations to increase charitable contributions.

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[2] H.R. 4719 was ordered favorably by the Ways and Means Committee by a vote of 23-13.  See Committee Report 113-498, at 7.
[3] H.R. 4619 was ordered favorably by the Ways and Means Committee by a vote of 23-14.  See Committee Report 113-496, at 7.
[4] H.R. 2807 was ordered favorably by the Ways and Means Committee by a vote of 23-14.  See Committee Report 113-494, at 8.
[5] H.R. 3134 was ordered favorably by the Ways and Means Committee by a vote of 23-12.  See Committee Report 113-495, at 4-5.
[6] H.R. 4691 was ordered favorably by the Ways and Means Committee by a vote of 23-10.  See Committee Report 113-497, at 5.
[7] Section 2 is based upon H.R. 4719, the Fighting Hunger Incentive Act of 2014, sponsored by
[8] See Committee Report 113-498, at 3.
[9] Id. at 3.
[10] See Committee Report 113-498, at 3.
[11] Id. at 3.
[12] Section 3 is based upon H.R. 4619, the Permanent IRA Charitable Contribution Incentive Act, sponsored by Rep. Aaron Schock (R-IL).
[13] See Committee Report 113-496, at 2.
[14] Id. at 2.
[15] Section 4 is based upon H.R. 2807, the Conservation Easement Incentive Act of 2014, sponsored by Rep. Jim Gerlach (R-PA).
[16] See Committee Report 113-494, at 2.
[17] Id. at 2.
[18] Section 5 is based upon H.R. 3134, the Charitable Giving Extension Act, sponsored by Rep. Mike Kelly (R-PA).
[19] See Committee Report 113-495, at 4.
[20] Section 6 is based upon H.R. 4691, the Private Foundation Excise Tax Simplification Act of 2014, sponsored by Rep. Erik Paulsen (R-MN).
[21] See Committee Report 113-497, at 3.
[22] See Committee Report 113-497, at 3.
[23] Id. at 4.

Cost

The Joint Committee on Taxation (JCT) has scored each provision of the bill separately.  In total, enacting H.R. 4719 would reduce revenues in total by approximately $16.2 billion over the 2014-2024 period.

  • The JCT estimates that enacting Section 2 of the bill (originally H.R. 4719, the Fighting Hunger Incentive Act of 2014) would reduce revenues by approximately $1.9 billion over the 2014-2024 period.[24]
  • The JCT estimates that enacting Section 3 of the bill (originally H.R. 4619, the Permanent IRA Charitable Contribution Act of 2014) would reduce revenues by approximately $8.4 billion over the 2014-2024 period.[25]
  • The JCT estimates that enacting Section 4 of the bill (originally H.R. 2807, the Conservation Easement Incentive Act of 2014) would reduce revenues by approximately $1.2 billion over the 2014-2014 period.[26]
  • The JCT estimates that enacting Section 5 of the bill (originally H.R. 3134, the Charitable Giving Extension Act) would reduce revenues by about $2.8 billion over the 2014-2024 period.[27]
  • The JCT estimates that enacting Section 6 of the bill (originally H.R. 4691, the Private Foundation Excise Tax Simplification Act of 2014) would reduce revenues by approximately $1.9 billion over the 2014-2024 period.[28]

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[24] http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr4719.pdf
[25] http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr4619.pdf
[26] http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr2807.pdf
[27] http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr3134.pdf
[28] http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr4691.pdf

Additional Information

For questions or further information contact the GOP Conference at 5-5107.

Additional Views

STATEMENT OF ADMINISTRATION POLICY
H.R. 4719 – America Gives More Act of 2014
(Rep. Reed, R-New York, and 9 cosponsors)

The Administration supports measures that enhance non-profits, philanthropic organizations, and faith-based and other community organizations in their many roles, including as a safety net for those most in need, an economic engine for job creation, a tool for environmental conservation that encourages land protections for current and future generations, and an incubator of innovation to foster solutions to some of the Nation’s toughest challenges.  The President’s Budget includes a number of proposals that would enhance and simplify charitable giving incentives for many individuals.

However, the Administration strongly opposes House passage of H.R. 4719, which would permanently extend three current provisions that offer enhanced tax breaks for certain donations and add another two similar provisions without offsetting the cost.  If this same, unprecedented approach of making certain traditional tax extenders permanent without offsets were followed for the other traditional tax extenders, it would add $500 billion or more to deficits over the next ten years, wiping out most of the deficit reduction achieved through the American Taxpayer Relief Act of 2013.  Just two months ago, House Republicans themselves passed a budget resolution that required offsetting any tax extenders that were made permanent with other revenue measures.

As with other similar proposals, Republicans are imposing a double standard by adding to the deficit to continue and create tax breaks that primarily benefit higher-income individuals, while insisting on offsetting the proposed extension of emergency unemployment benefits and the discretionary funding increases for defense and non-defense priorities such as research and development in the Bipartisan Budget Act of 2013.  House Republicans also are making clear their priorities by rushing to make these tax cuts permanent without offsets even as the House Republican budget resolution calls for raising taxes on 26 million working families and students by letting important improvements to the Earned Income Tax Credit, Child Tax Credit, and education tax credits expire.

The Administration wants to work with Congress to make progress on measures that strengthen America’s social sector.  However, H.R. 4719 represents the wrong approach.

If the President were presented with H.R. 4719, his senior advisors would recommend that he veto the bill.