H.R. 644

America Gives More Act of 2015

Sponsor
Rep. Tom Reed

Committee
Ways and Means

Date
February 12, 2015 (114th Congress, 1st Session)

Staff Contact
David Smentek

Floor Situation

On Thursday, February 12, 2015, the House will consider H.R. 644, the America Gives More Act of 2015, under a rule.  H.R. 644 was introduced on February 2, 2015 by Rep. Tom Reed (R-NY), and referred to the Ways and Means Committee.  The bill was marked up on February 4, 2015 and favorably reported by a vote of 22-14.[1]

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[1] See Committee Report 114-18, at 7.

Bill Summary

H.R. 644 improves and makes permanent a number of tax rules governing charitable donations and charitable organizations.  H.R. 644 includes a number of provisions that were included in H.R. 4719, the America Gives More Act of 2014, which passed in the House on July 17, 2014 by a vote of 277-130 (See Roll Call #432); and H.R. 5806, the Supporting America’s Charities Act, which passed in the House on December 11, 2014 by a vote of 275-149. (See Roll Call #562)

H.R. 644 includes the following provisions introduced in the 114th Congress and marked up by the House Ways and Means Committee: H.R. 644, the Fighting Hunger Incentive Act of 2014, sponsored by Rep. Tom Reed (R-NY)[2]; H.R. 637, the Permanent IRA Charitable Contribution Act of 2015, sponsored by Rep. Aaron Schock (R-IL)[3]; H.R. 641, the Conservation Easement Incentive Act of 2015, sponsored by Rep. Mike Kelly (R-PA)[4]; and H.R. 640, the Private Foundation Excise Tax Simplification Act of 2015 sponsored by Rep. Erik Paulsen (R-MN).[5]

Section 2 of H.R. 644 makes permanent the enhanced deduction for contributions of food inventory by any type of business.[6]   In addition, H.R. 644 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.[7]  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 charitable contributions to 15 percent of the taxpayer’s taxable income for contributions of food inventory.  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.[8]  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.[9]

Section 3 of H.R. 644 makes permanent a provision allowing tax-free distributions from IRAs for charitable purposes.[10]  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).  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[…].”[11]

Section 4 of H.R. 644 improves and makes permanent the temporary deduction for contributions of conservation easements.[12]  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.[13]  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.[14]

Section 5 of H.R. 644 amends the Internal Revenue Code to set the excise tax rate on net investment income of private foundations at 1 percent.[15]  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.[16]  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.[17]  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.[18]  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. 644 was ordered favorably by the Ways and Means Committee by a vote of 22-14.  See Committee Report 114-18, at
[3] H.R. 637 was ordered favorably by the Ways and Means Committee by a vote of 24-14.  See Committee Report 114-20, at 7.
[4] H.R. 641 was ordered favorably by the Ways and Means Committee by a vote of 24-14.  See Committee Report 114-17, at 7.[5] H.R. 4691 was ordered favorably by the Ways and Means Committee by a vote of 24-14.  See Committee Report 114-19, at 5.[6] Section 2 is based upon H.R. 644, the Fighting Hunger Incentive Act of 2014, sponsored by Rep. Tom Reed (R-NY).
[7] See Committee Report 114-18, at 3.
[8] See Committee Report 113-498, at 3.
[9] Id. at 3.
[10] Section 3 is based upon H.R. 637, the Permanent IRA Charitable Contribution Incentive Act of 2015, sponsored by Rep. Aaron Schock (R-IL).
[11] Id. at 2.
[12] Section 4 is based upon H.R. 641, the Conservation Easement Incentive Act of 2015, sponsored by Rep. Mike Kelly (R-PA).
[13] See Committee Report 114-17, at 2.
[14] Id. at 2.
[15] Section 5 is based upon H.R. 640, the Private Foundation Excise Tax Simplification Act of 2015, sponsored by Rep. Erik Paulsen (R-MN).
[16] See Committee Report 114-19, at 3.
[17] See Committee Report 114-19, at 3.
[18] Id. at 4.

Cost

The Joint Committee on Taxation (JCT) has scored each provision of the bill separately:

  • The JCT estimates that enacting Section 2 of the bill (originally H.R. 644, the Fighting Hunger Incentive Act of 2015) would reduce revenues by approximately $2.2 billion over the 2015-2025 period.[19]
  • The JCT estimates that enacting Section 3 of the bill (originally H.R. 637, the Permanent IRA Charitable Contribution Act of 2015) would reduce revenues by approximately $8.8 billion over the 2015-2025 period.[20]
  • The JCT estimates that enacting Section 4 of the bill (originally H.R. 641, the Conservation Easement Incentive Act of 2015) would reduce revenues by approximately $1.2 billion over the 2015-2025 period.[21]
  • The JCT estimates that enacting Section 5 of the bill (originally H.R. 640, the Private Foundation Excise Tax Simplification Act of 2015) would reduce revenues by approximately $2.0 billion over the 2015-2025 period.[22]

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[19] http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr644.pdf
[20] http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr637.pdf
[21] http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr641.pdf
[22] http://www.cbo.gov/sites/default/files/cbofiles/attachments/hr640.pdf

Additional Information

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