How Tax Rules Impacting Charitable Giving Are Made - Part I: A Brief Review of the Legislative Process

How Tax Rules Impacting Charitable Giving Are Made - Part I: A Brief Review of the Legislative Process

Article posted in Legislative on 14 December 2000| comments
audience: National Publication | last updated: 15 September 2012
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Summary

This article explores the legislative process involved in making the tax rules governing charitable giving. Part II of this article will explore the regulatory process. This review of the processes involved in making the rules assist the reader in understanding and evaluating where a particular proposal stands, how it got to that point and the likelihood that it will come into effect.

by: Emanuel J. Kallina, II, Esquire & Jonathan D. Ackerman, Esquire

Introduction

This article and the next one to follow explore the processes by which tax laws and regulations governing charitable giving are made. Charities, donors and advisors should follow these laws and regulations to determine favorable and unfavorable changes affecting the charitable community. Sometimes the status of a particular proposal can be confusing. A review of the legislative and regulatory processes involved in making the rules may help in understanding and evaluating where a particular proposal stands, how it got to that point and the likelihood that it will come into effect.

This first article focuses on the legislative process. As explained in more detail below, laws are proposed as bills in Congress. These bills generally start in the House of Representatives but sometimes they start in the Senate. Once a bill has passed both Houses of Congress (that is, the House of Representatives and the Senate), the bill goes to the President for consideration. If the President signs the bill, it becomes law. In some cases, a bill may become law without the President's signature.

The regulatory process is explored in the next article. Regulations interpreting charitable giving tax laws come from the executive branch of the government. The Treasury Department and its Internal Revenue Service division play key roles here.

Of course, it should be kept in mind that the third branch of government, the judiciary, also has an important impact on the rules governing charitable giving. However, the role of the judiciary on charitable giving rules is beyond the scope of these articles.

The Legislative Process

Under the United States Constitution, the legislative powers of the federal government are granted to Congress, which consists of the Senate and House of Representatives.1 Each state has two Senators so there are 100 Senators and each Senator has one vote.2 There are 435 Members in the House of Representatives and each Member has one vote. These House Members are apportioned among the states based on population.3 Congress is required to assemble annually4 and a particular Congress has two sessions and is considered to last for two years.5

Bills

Congressional proposals come in four forms. Relevant here are bills and joint resolutions. Most laws are proposed in the form of bills so we will use that term in most of the discussion below. Joint resolutions are essentially the same as bills although joint resolutions may have a preamble. Bills may be amended by joint resolutions and joint resolutions may be amended by bills. The procedural rules are the same for both types of proposals.6 Generally, a bill or joint resolution may originate in either the Senate or House. However, the Constitution provides that revenue-raising bills must originate in the House7 and tradition has been that appropriations bills also start in the House. Regardless of where a bill originates, the other house of Congress must agree to it and will have the opportunity to propose amendments.8

A bill initiated by the House has the letters "H.R." in front of the number of the bill and a bill initiated by the Senate has the letter "S." in front of the number. Similarly, joint resolutions coming from the House have the letters "H.J. Res." in front of their numbers and joint resolutions coming from the Senate are proceeded by the letters "S.J. Res." The bill or joint resolution keeps the same number through all of its stages in the legislative process. If the same or similar bills are introduced in both the Senate and the House, they are often referred to as companion bills.9

Proposals that wind up as bills or joint resolutions come from many sources, including Senators, Members of the House, constituents of Senators or House Members, states, the President, cabinet members and governmental agencies. For example, the idea for a charitable giving tax bill could come from the President's annual budget proposal or the related testimony of someone in the Treasury Department or another agency or division. Government agencies of the executive branch may even employ people to draft proposals into bills, which the agencies then ask Congress to enact.10

In the House of Representatives, a House Member introduces a bill by putting it into a wooden box (called the hopper) in the House chamber. Senators generally introduce bills by giving them to a clerk sitting at the presiding officer's desk. Senators may also introduce a bill more formally by announcing it on the floor of the Senate. The House Member or Senator who introduces a bill is referred to as the bill's sponsor. If more than one House Member or Senator introduces a bill, the House Members or Senators are referred to as co-sponsors. Generally, at least one sponsor must sign the bill prior to its introduction. Additional sponsors may be added after a bill has been introduced.11

Committees

If there is no objection to the introduction of a bill in the Senate, its title is read aloud and then the bill goes to the appropriate committee. The Senate Finance Committee would receive a charitable giving tax bill. If there is an objection to the introduction of a bill, it is postponed until the next day. Bills or titles are not usually read in the House. After introduction in the House, a bill is referred to the appropriate committee. A charitable giving tax bill would go to the House Ways and Means Committee. The title of a House bill is listed in a journal and the bill is printed in the Congressional Record. Senators typically request that their bills get printed in the Congressional Record, also. A copy of the bill is sent to the office of the chairperson of the committee receiving the bill where it gets listed on the committee's calendar. In some cases, Congress may pass a resolution creating a task force to study and report on particular issues related to a bill. Some bills may go to more than one committee. A committee will have both Republican and Democratic members.12

When a bill reaches a committee, the committee will consider it in depth and may obtain feedback from the general public, the relevant government agencies and departments and the General Accounting Office. If an agency or department in the executive branch plans to issue a report on a bill, that report is usually sent first to the Office of Management and Budget to make sure that the report is in line with the President's objectives. The committee is not bound by any of the reports it receives on a bill. The committee may issue subpoenas for testimony or documents it needs. Committees also have professional staffs which help with the committees' review and consideration of bills. Sometimes a subcommittee will be charged with the initial consideration of a particular item.13

A committee will schedule a time for public hearings when a bill is considered especially important. Public hearings are announced in the Congressional Record and sometimes notices are sent to specific individuals, agencies or organizations. Hearings are open to the public and are often covered by the news media unless there is a vote for a closed hearing. Witnesses may be required to submit a written copy of their proposed testimony prior to the hearing. Committee members may ask questions of the witnesses. The witnesses give testimony at the hearings and the testimony is recorded by an official reporter. A transcript of the testimony can be reviewed at the committee clerk's office and the committee will often have a transcript of the testimony printed up and distributed.14

If a subcommittee is handling a bill, the subcommittee will typically meet for a "markup" of the bill once the hearings on the bill, if any, have been held. The subcommittee votes on the bill after the subcommittee has completed its review and deliberations. The subcommittee may then refer the bill to the full committee, either favorably or unfavorably and either with or without amendments. Alternately, the subcommittee may recommend that the committee postpone the bill indefinitely.15 A bill in a markup session is sometimes nick-named a "Chairman's Mark."

The committees themselves have regular meetings and sometimes hold special meetings. Committee meetings are generally open to the public and the news media but the committee may vote to close a meeting. Often, the committee's staff and certain department representatives will be allowed to remain at an otherwise closed meeting. Committee members may offer amendments to a bill. The committee will vote on the bill and any amendments offered and will then either send the bill favorably or unfavorably back to the full House or Senate. If the amendments are substantial, the amended bill is sometimes sent back as a substitute bill or as a new bill with all the amendments incorporated into it. As an alternate to sending the bill back to the House or Senate, the committee may fail to take action on the bill or "table" it. It is also possible that a committee may send a bill back to the House or Senate without a recommendation.16

House and Senate Consideration

When a committee sends a bill back to the House or Senate, the committee's staff will prepare a written report describing the bill, the committee's amendments and the committee's recommendation. The report has to refer to any changes to existing laws and include any laws that the bill would repeal or amend. A report on a bill that the committee is sending back favorably also has to include, among other things, an estimate of the costs and a statement of the budgetary authority or the impact on revenues or tax expenditures. The Congressional Budget Office will prepare the cost estimate in certain cases. Committee members may also include additional information or minority views in the report. Each report is given a number and is printed up by the Government Printing Office. The prefix of the number is the number of that particular Congress. Often these committee reports are used in interpreting a law after it has been enacted.17

Assuming the bill has originated in the House of Representatives, the House will calendar the bill for consideration once the bill has been reported on by a House committee. With certain exceptions, the House cannot consider the bill until the third business day that the committee report has been available to the House Members. The House of Representatives has five business calendars. A bill that has a favorable committee report is assigned a calendar number on either the calendar called the "Union Calendar" or the calendar referred to as the "House Calendar." The Union Calendar is used for bills that, among other things, raise revenue, change a tax law or make an appropriation. If a bill placed on the House Calendar or the Union Calendar is deemed noncontroversial, it may be placed on the "Corrections Calendar." If a bill is on the Corrections Calendar, a 3/5ths vote of the voting House Members is necessary to pass the bill in the House. If a bill on the Corrections Calendar is not passed, it may still be considered in the usual manner under the House Calendar or Union Calendar.18

Bills are not necessarily considered by calendar number as more urgent bills will need to be considered before less urgent ones. There are various procedures in place for getting a bill considered out of order or even for having a bill discharged from a committee back to the House for consideration before the committee reports on it. In general, the order of business in the House is handled by the Committee on Rules. In many cases, when a committee reports on a bill, the chairperson of that committee will ask the Committee on Rules to arrange for the bill to be considered either immediately or subsequently.19

Once it is time for a bill to be considered, the House follows various detailed parliamentary rules governing the method of consideration, debates and votes on the bill. A mechanism known as the Committee of the Whole House allows action even when a quorum is not present. A quorum is 218 House Members (a majority of the 435 total House Members). A quorum in the Committee of the Whole House is 100 House Members. Any measure on the Union Calendar, including tax bills, must be considered first by the Committee of the Whole House. Typically, the Committee on Rules will issue a rule for a bill to be considered by the Committee of the Whole House and this rule will set the time for the debates in the Committee of the Whole House.20

Time spent on debates is recorded and the debate will end when the time runs out. Usually, the bill is read a second time after the debates conclude and amendments may be suggested at this time. In most instances, the House Members have five minutes to describe their amendment proposals. The germaneness rule requires that amendments must be on the same subject matter as the matter under consideration.21

After consideration of the amendments, the Committee of the Whole House reports the bill, including any amendments adopted, back to the House. There are various procedures for debates and voting by the House Members on bills and amendments. A bill approved for passage may be sent back to a committee. The motion to recommit the bill to a committee may include amendments proposed by the minority or may direct the committee to hold additional hearings or review the bill in light of specific political viewpoints.22

Once a bill is passed by the House, it becomes an "act." However, it is commonly still referred to as a bill by most people. A copy of the bill in the exact form that it passed is given to the Senate. The House's enrolling clerk is responsible for preparing this engrossed copy. Because of the large number of amendments that may be included when a bill is passed by the House, the creation of this copy may be a difficult job.23

When the Senate receives the engrossed bill from the House, the bill is given to the appropriate Senate committee for review. The Senate Finance Committee will consider charitable giving tax bills. A reprinted copy referred to as an "act print" or a "Senate referred print" is made of the bill and these copies are available in the document rooms of both the House and Senate.24

As with the House committee, the Senate committee will consider the bill in depth and may report the bill back to the Senate favorably or unfavorably and with or without amendments. The committee will issue a report on the bill and the report may include individual or minority views. The meetings of the Senate committee will be open to the public unless the committee votes to close the meeting when certain types of issues are involved.25

Once a bill is sent back to the Senate from a committee, the Senate has its own rules for determining when and how a bill and amendments are considered and how voting is conducted. If the bill is coming from a standing committee, the committee report must be available for two business days before the bill can be considered unless this time frame is waived or there is an emergency. Bills may be considered in the Senate via unanimous consent requests or via motions to consider a measure on the calendar. Unlike the House, the Senate tends to use the unanimous consent method frequently. The Senate has two calendars and legislation, including tax bills, will be placed on the calendar known as the "Calendar of Business."26

With some exceptions, Senators are generally able to speak for an unlimited time in a debate on a bill and debate ends when no more Senators wish to speak. Occasionally, Senators may "filibuster" a bill that they oppose. In simple terms, a filibuster is a long speech designed to prevent any action being taken. Debates may be closed in a process known as "cloture" if sixteen Senators sign a motion to that effect and the motion is approved by 3/5ths of the Senators. If cloture is invoked, the debate time will be limited. Once the allowable debate time has ended, the Senate considers the bill and any pending amendments. Unless the bill is a general appropriations bill or cloture is invoked, amendments do not necessarily have to be germane to the subject of the bill.27

Once the amendments have been acted upon, the bill is considered ready for engrossing. At this time, it will be read again by title and a vote is taken. As in the House, there are different voting procedures that may be used.28

The next step is for the original engrossed House bill and any engrossed Senate amendments to be sent back to the House noting the Senate's action and asking the House to approve any amendments made by the Senate.29

The House will then decide whether to accept the Senate's amendments. Sometimes the House will pass the bill as amended. Occasionally, the amendments may be referred back to a House committee. The House and Senate may also agree to send the bill to a Conference Committee which will include both House Members and Senators. The Speaker of the House will appoint the House Members who will be part of the Conference Committee and must attempt to include the main supporters of the bill's primary provisions as it was passed in the House. The Presiding Officer of the Senate appoints the Senators who will be part of the Conference Committee.30

If the bill originates in the Senate, the process noted above is generally simply reversed. However, the Senate may pass a bill and then by unanimous consent vote that the bill is a vehicle for a similar House bill.31

The Congressional Record prints a daily transcript of House and Senate proceedings. Often, a House Member or Senator will be allowed to edit or add to his or her comments. Any such revisions are printed in a different typeface from the verbatim proceedings.32

Conference Committees

The Conference Committee may only consider portions of the bill that are in disagreement between the House and Senate. The Conference Committee members are sometimes referred to as managers. Although the House Members and Senators on the Conference Committee meet together, the Conference Committee takes action as if were two separate committees because the House Conference Committee members vote separately from the Senate Conference Committee members. One meeting of the Conference Committee will usually be open to the public unless there has been a vote to close the meeting. After considering the disagreed portions of the bill, the Conference Committee will report its recommendations back to the Senate and House. The Conference Committee may recommend that the Senate recede from some or all of its amendments or that the House recede from some or all of its subsequent amendments to the Senate bill or the Senate amendments. Additionally, the Conference Committee may recommend that the House recede from some or all of its disagreement with the Senate amendments and agree to some or all of those Senate amendments, either with or without further amendment.33

The Conference Committee's recommendations go into a report signed by a majority of the House Conference Committee members and a majority of the Senate Conference Committee members. The report will include a detailed explanation of the Conference Committee's work. A copy of the Conference Committee's report and a copy of the engrossed bill and amendments will be sent to either the House or the Senate, whichever is to be the first to act on the bill. Typically, this will be the Senate.34

If the Conference Committee cannot agree to some kind of compromise, the Conference Committee will report this disagreement back to the House and Senate. New Conference Committee members may be appointed or the House may issue instructions on what to do to the Conference Committee. However, the instructions will not be binding on the Conference Committee.35

The Conference Committee report may not be amended when it reaches the House or Senate. The report may be debated and then it must either be accepted or rejected. However, the Senate may vote to recommit the report to the Conference Committee. If the Senate has already accepted the Conference Committee's report, the House may not then send it back to the Conference Committee when the House subsequently receives the report. Instead, the House may request that the report be sent to a new Conference Committee and new Conference Committee members will need to be appointed.36

Enactment into Law

Ultimately, an identical bill must be passed by both the Senate and the House or the bill will not become law. Once the House and Senate have approved an identical bill, a copy of the bill is enrolled for sending to the President. If the bill originated in the House, the Clerk of the House will prepare the enrolled bill. If the bill originated in the Senate, the Secretary of the Senate will do this work. In either case, the appropriate persons in the Senate and House will sign the final bill. After these persons have both signed the bill, the Committee on House Administration will present a bill that originated in the House to the President or the Secretary of the Senate will present the bill to the President if the bill originated in the Senate. Once the bill is delivered to the President, usually by delivery to a clerk at the White House, this starts a 10-day time frame for the President's action on the bill. The 10-day time period does not include Sundays.37

The President may sign the bill into law or may veto the bill. A President vetoes a bill by returning it to Congress with his or her objections. A veto may be overridden by a 2/3rds vote in both the Senate and the House. If Congress is in session and the President fails to take action on the bill during the 10-day period, the Constitution provides that the bill becomes law without the President's signature. However, if the President fails to take action and Congress adjourns during the 10-day period, the bill does not become law. This last method is referred to as a "pocket veto." Usually a bill becomes law on the date the President signs it or on the date Congress overrides a veto. However, the bill may specify a different effective date.38

Newly passed public legislation is given a "public law number" and is published by the Archivist of the United States as soon as possible after enactment. Public law numbers are given in sequence from the beginning to the end of each session of Congress. In most cases, a law is first published in a pamphlet as a "slip law." The Office of the Federal Register, National Archives and Records Administration, adds editorial comments, references to the United States Code provisions involved and legislative history information. Copies of the slip law go to the Senate and the House and are available to the public. The laws then go into the United States Statutes at Large which are arranged chronologically by the date of enactment.39

Next, the Law Revision Counsel of the House of Representatives put the laws into the United States Code which is arranged by subject matter. The United States Code is published every six years but supplements are issued after the termination of each regular session of Congress.40 Charitable giving tax laws go into the Internal Revenue Code which is found in Title 26 of the United States Code. Congress recodified the Internal Revenue Code, which includes the federal statutes relating exclusively to internal revenue, for the second and most recent time in 1986. The Internal Revenue Code was originally passed as such in 1939 and was recodified for the first time in 1954.41

The next article will deal with the regulatory process and how it impacts charitable giving.


Footnotes


  1. U.S. Const. art. I, §1.back

  2. U.S. Const. art. I, §3.back

  3. U.S. Const. art. I, §2.back

  4. U.S. Const. amend. XX, §2.back

  5. Charles W. Johnson, "How Our Laws are Made," Jan. 1, 2000, available in www.thomas.loc.gov.back

  6. Id (joint resolutions amending the Constitution are handled differently, however).back

  7. U.S. Const. art. I, §7.back

  8. Charles W. Johnson, "How Our Laws are Made," Jan. 1, 2000, available in www.thomas.loc.gov.back

  9. Id.back

  10. Id.back

  11. Id.back

  12. Id.back

  13. Id.back

  14. Id.back

  15. Id.back

  16. Id.back

  17. Id.back

  18. Id.back

  19. Id.back

  20. Id.back

  21. Id.back

  22. Id.back

  23. Id.back

  24. Id.back

  25. Id.back

  26. Id.back

  27. Id.back

  28. Id.back

  29. Id.back

  30. Id.back

  31. Id.back

  32. Id.back

  33. Id.back

  34. Id.back

  35. Id.back

  36. Id.back

  37. Id.back

  38. Id.back

  39. Id.back

  40. Id.back

  41. Jay A. Shuman, "Federal Tax Research for Beginners," April 1996, available in www.nyu.edu.library.back

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