Rep. Nathan Deal (R-GA) this week introduced the Personal Philanthropy Account Act of 2007 (H.R. 2000) that would encourage private philanthropy by permitting cash contributions by individuals and matching employer contributions of up to $15,000 per year to a trust account maintained by a bank or other person approved by the Secretary. Account holders would be required to distribute annually at least 5% of the account value exceeding $10,000 to organizations described in section 501(c)(3).

Full Text:

To amend the Internal Revenue Code of 1986 to encourage private philanthropy.

IN THE HOUSE OF REPRESENTATIVES

April 23, 2007

Mr. DEAL of Georgia introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to encourage private philanthropy.

      Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

      This Act may be cited as the `Personal Philanthropy Account Act of 2007'.

SEC. 2. PERSONAL PHILANTHROPY ACCOUNTS.

      (a) In General- Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to additional itemized deductions for individuals) is amended by redesignating section 224 as section 225 and by inserting after section 223 the following new section:

`SEC. 224. PERSONAL PHILANTHROPY ACCOUNTS.

      `(a) Allowance of Deduction-

            `(1) IN GENERAL- In the case of an individual, there shall be allowed as a deduction for the taxable year an amount equal to the aggregate amount paid in cash during such taxable year (and not described in subsection (d)(2)(A)(ii)) by or on behalf of such individual to a personal philanthropy account of such individual.

            `(2) COORDINATION WITH CHARITABLE CONTRIBUTIONS-

                  `(A) IN GENERAL- With respect to any amount allowable as a deduction under paragraph (1)--

                        `(i) no other deduction shall be allowed under any other provision of this title, and

                        `(ii) such amount shall be considered a charitable contribution for purposes of section 170(b)(1).

                  `(B) EMPLOYER CONTRIBUTIONS- With respect to any amount contributed by an employer on behalf of the account holder--

                        `(i) except as provided in clause (ii), such amount shall be considered a charitable contribution for purposes of section 170(b)(2), and

                        `(ii) if the employer provides such amount pursuant to a program under which the employer matches employee contributions at least dollar-for-dollar on contributions up to 5 percent of all employees' compensation--

                              `(I) clause (i) shall not apply with respect to such amount, and

                              `(II) such amount shall not be taken into account under subsection (b)(1).

      `(b) Personal Philanthropy Account- For purposes of this section, the term `personal philanthropy account' means a trust created or organized in the United States exclusively for the purpose of making distributions for the charitable purposes designated by an individual who is the account holder of the trust (and designated as an personal philanthropy account at the time created or organized), but only if the written governing instrument creating the trust meets the following requirements:

            `(1) Except in the case of a rollover contribution described in subsection (d)(3), no contribution will be accepted unless it is in cash, and contributions will not be accepted for the taxable year on behalf of any individual in excess of $15,000.

            `(2) The trustee is a bank (as defined in section 408(n)) or such other person who demonstrates to the satisfaction of the Secretary that the manner in which that person will administer the trust will be consistent with the requirements of this section or who has so demonstrated with respect to any personal philanthropy account and who is not disqualified under subsection (f).

            `(3) No part of the trust assets will be invested in life insurance contracts.

            `(4) The assets of the trust shall not be commingled with other property except in a common trust fund or common investment fund.

      `(c) Definitions and Special Rules- For purposes of this section--

            `(1) DEFAULT DISTRIBUTION RULES-

                  `(A) IN GENERAL- No account shall be treated as a personal philanthropy account unless at all times there are in effect qualified default charitable organization designations under subparagraphs (B) and (C).

                  `(B) QUALIFIED DEFAULT CHARITABLE ORGANIZATION DESIGNATION- For purposes of subparagraph (A), a qualified default charitable organization designation in effect under this subparagraph is the designation by the account holder of an organization to which the remainder of such account may be made in the form of a qualified philanthropy payment upon the death of the account holder in any case in which the account holder fails to provide by will or other suitable estate document for the distribution of the assets of such account.

                  `(C) TRUSTEE DESIGNATION- For purposes of subparagraph (A), a qualified default charitable organization designation in effect under this subparagraph is the designation by the trustee of the personal philanthropy account of an organization to which a payment under subparagraph (B) will be made if the organization designated under subparagraph (B) is not qualified to receive a qualified philanthropy payment at the time of such payment.

            `(2) MINIMUM DISTRIBUTION REQUIREMENTS-

                  `(A) IN GENERAL- No account shall be treated as a personal philanthropy account for a taxable year unless such account meets the minimum distribution requirements for such taxable year.

                  `(B) MINIMUM DISTRIBUTION REQUIREMENT- An account meets the minimum distribution requirements for a taxable year if the aggregate distributions from the account for the taxable year are not less than 5 percent of the balance of such account as of the last day of the preceding taxable year.

                  `(C) EXCEPTION FOR ACCOUNTS WITH A BALANCE OF LESS THAN $10,000- Subparagraph (A) shall not apply to any account for a taxable year if the balance of such account as of the last day of the preceding taxable year is less than $10,000.

            `(3) DENIAL OF DEDUCTION TO DEPENDENTS- No deduction shall be allowed under this section to any individual with respect to whom a deduction under section 151 is allowable to another taxpayer for a taxable year beginning in the calendar year in which such individual's taxable year begins.

            `(4) INFLATION ADJUSTMENT- In the case of any taxable year beginning in a calendar year after 2009, the dollar amount contained in subsection (b)(1) shall be increased by an amount equal to--

                  `(A) such dollar amount, multiplied by

                  `(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting `calendar year 2008' for `calendar year 1992' in subparagraph (B) thereof.

            Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $50.

      `(d) Tax Treatment of Distributions-

            `(1) IN GENERAL- Any distribution from a personal philanthropy account shall be includible in the gross income of the account holder in the manner as provided in section 72.

            `(2) QUALIFIED PHILANTHROPY PAYMENTS OR IMMEDIATE RETURN OF CONTRIBUTIONS-

                  `(A) IN GENERAL- No amount shall be includible in gross income under paragraph (1) to the extent that such distribution--

                        `(i) is a qualified philanthropy payment, or

                        `(ii) is equal to the amount of contributions made within 30 days before the date of such distribution.

                  `(B) QUALIFIED PHILANTHROPY PAYMENT DEFINED- For purposes of this section, the term `qualified philanthropy payment' means a distribution from a personal philanthropy account--

                        `(i) which is made, pursuant to a request by the account holder, by the trustee of the account within 30 days after receipt by the trustee of a certification under subparagraph (C), and

                        `(ii) which is paid for a purpose specified in section 170(c).

                  A trustee who fails to meet the 30-day requirement of clause (i) shall be subject to disqualification as a trustee.

                  `(C) ORGANIZATION CERTIFICATION- For purposes of subparagraph (B)(i), a certification under this subparagraph is a certification by an organization pursuant to a written request by the trustee of a personal philanthropy account that the organization is an organization which--

                        `(i) is described in section 501(c)(3) and exempt from tax under section 501(a), and

                        `(ii) is not a personal philanthropy account.

                  `(D) COORDINATION WITH CHARITABLE CONTRIBUTIONS-

                        `(i) No deduction shall be allowed under sections 170, 642(c), 2055, 2106(a)(2), or 2522 for any amount excluded from gross income under subparagraph (A).

                        `(ii) Under regulations, the amount allowable as a deduction under sections 170, 642(c), 2055, 2106(a)(2), or 2522 (as appropriate) for the taxable year (without regard to this clause) shall be reduced by the amount excluded from gross income for the taxable year under subparagraph (A).

                        `(iii) Section 170(d) shall not apply to any amount excluded from gross income under subparagraph (A).

            `(3) ROLLOVER CONTRIBUTIONS-

                  `(A) IN GENERAL- Paragraph (1) shall not apply to any amount paid or distributed from a personal philanthropy account to the extent that the amount received is paid, not later than the 60th day after the date of such payment or distribution, into another personal philanthropy account of the same account holder. The preceding sentence shall not apply to any payment or distribution if it applied to any prior payment or distribution during the 12-month period ending on the date of the payment or distribution.

                  `(B) HEIR- Paragraph (1) shall not apply to any amount paid or distributed from a personal philanthropy account of a decedent to the extent that the amount received is paid, not later than the 60th day after the date of such payment or distribution, into the personal philanthropy account of an heir of the decedent, as designated by the will of the decedent.

            `(4) ADDITIONAL TAX FOR DISTRIBUTIONS NOT USED FOR CHARITABLE CONTRIBUTION PURPOSES- The tax imposed by this chapter for any taxable year on any account holder with respect to any distribution from a personal philanthropy account which is includible in gross income shall be increased by 100 percent of the amount which is so includible.

      `(e) Tax Treatment of Account-

            `(1) IN GENERAL- A personal philanthropy account shall be exempt from taxation under this subtitle. Notwithstanding the preceding sentence, the personal philanthropy account shall be subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable organizations).

            `(2) ACCOUNT TERMINATIONS- Rules similar to the rules of paragraphs (2) and (4) of section 408(e) shall apply to any personal philanthropy account.

      `(f) Disqualification of Trustee- The trustee of a personal philanthropy account shall not be qualified to be a trustee of such account after a final determination by the Secretary that the trustee has disbursed more than 10 percent of its payments from personal philanthropy accounts to non-qualifying organizations in a calendar year.

      `(g) Fees- The Commissioner of the Securities and Exchange Commission (or the Commissioner's designee) shall certify that fees charged by any trustee or asset manager of a personal philanthropy account are fair and reasonable. The failure to so certify shall result in the disqualification of such person as a trustee or asset manager of personal philanthropy accounts.

      `(h) Reports- The trustee of a personal philanthropy account shall make such reports regarding such account to the Secretary and to the holder the account with respect to contributions, distributions, and such other matters as the Secretary may require. The reports required by this subsection shall be filed at such time and in such manner and furnished to such individuals at such time and in such manner as may be required.'.

      (b) Deduction Allowed Whether or Not Individual Itemizes Other Deductions- Subsection (a) of section 62 of such Code is amended by inserting before the flush sentence at the end the following new paragraph:

            `(22) PERSONAL PHILANTHROPY ACCOUNTS- The deduction allowed under section 224.'.

      (c) Exclusion for Employer Contributions to Personal Philanthropy Accounts-

            (1) IN GENERAL- Part III of subchapter B of chapter 1 of such Code is amended by inserting after section 139A the following new section:

`SEC. 139B. CONTRIBUTIONS BY EMPLOYER TO PERSONAL PHILANTHROPY ACCOUNTS.

      `(a) In General- Gross income of an employee does not include contributions by the employer to the personal philanthropy account of the employee.

      `(b) Personal Philanthropy Account- For purposes of this section, the term `personal philanthropy account' shall have the meaning given to such term by section 224.

      `(c) Exclusion Not To Exceed Compensation-

            `(1) EMPLOYEES- The amount excluded from gross income by subsection (a) with respect to an employee shall not exceed such employee's wages, salaries, tips, and other employee compensation which are attributable to such employee's employment by the employer referred to in such subsection.

            `(2) SELF-EMPLOYED INDIVIDUALS- The amount excluded from gross income by subsection (a) for contributions with respect to an individual who is self employed shall not exceed such individual's earned income (as defined in section 401(c)(2)) derived by the taxpayer from the trade or business with respect to which the individual is self-employed.

            `(3) COMMUNITY PROPERTY LAWS NOT TO APPLY- The limitations under this subsection shall be determined without regard to community property laws.'.

            (2) CONFORMING AMENDMENTS-

                  (A) Section 3121(a) of such Code is amended by striking `or' at the end of paragraph (21), by striking the period at the end of paragraph (22) and inserting `; or', and by inserting after paragraph (22) the following new paragraph:

            `(23) any payment made to a personal philanthropy account (as defined in section 224) of an employee.'.

                  (B) Section 3231(e) of such Code is amended by adding at the end the following new paragraph:

            `(13) PERSONAL PHILANTHROPY ACCOUNT CONTRIBUTIONS- The term `compensation' shall not include any payment made to a personal philanthropy account (as defined in section 224) of an employee.'.

                  (C) Section 3306(b) of such Code is amended by striking `or' at the end of paragraph (18), by striking the period at the end of paragraph (19) and inserting `; or', and by inserting after paragraph (19) the following new paragraph:

            `(20) any payment made to a personal philanthropy account (as defined in section 224) of an employee.'.

                  (D) Section 3401(a) of such Code is amended by striking `or' at the end of paragraph (21), by striking the period at the end of paragraph (22) and inserting `; or', and by inserting after paragraph (22) the following new paragraph:

            `(23) any payment made to a personal philanthropy account (as defined in section 224) of an employee.'.

                  (E) Section 6051(a) of such Code is amended by striking `and' at the end of paragraph (12), by striking the period at the end of paragraph (13) and inserting `, and', and by inserting after paragraph (13) the following new paragraph:

            `(14) the amount contributed to any personal philanthropy account (as defined in section 224) of such employee or such employee's spouse.'.

      (d) Prohibited Transactions-

            (1) EXCEPTION FOR TAXABLE DISTRIBUTIONS FROM PERSONAL PHILANTHROPY ACCOUNTS- Subsection (c) of section 4975 of such Code (defining to prohibited transaction) is amended by adding at the end the following new paragraph:

            `(7) SPECIAL RULE FOR PERSONAL PHILANTHROPY ACCOUNTS- An individual for whose benefit a personal philanthropy account is established and any contributor to such account shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if section 224(d) applies with respect to such transaction.'.

            (2) PLAN DEFINED- Paragraph (1) of section 4975(e) of such Code is amended by striking `or' at the end of subparagraph (F), by striking the period at the end of subparagraph (G) and inserting `, or', and by inserting after subparagraph (G) the following new subparagraph:

                  `(H) a personal philanthropy account described in section 224.'.

      (e) Penalty on Failure to Report- Paragraph (2) of section 6693(a) of such Code (relating to provisions) is amended by striking `and' at the end of subparagraph (D), by striking the period at the end of subparagraph (E) and inserting `, and', and by inserting after subparagraph (E) the following new subparagraph:

                  `(F) section 224(f) (relating to personal philanthropy accounts).'.

      (f) Conforming Amendment- Paragraph (2) of section 26(b) of such Code is amended by striking `and' at the end of subparagraph (S), by striking the period at the end of subparagraph (T) and inserting `, and', and by adding at the end the following new subparagraph:

                  `(U) section 224(d)(4) (relating to additional tax with respect to distributions not used for charitable contribution purposes).'.

      (g) Clerical Amendments-

            (1) The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by redesignating the item relating to section 224 as an item relating to section 225 and by inserting after the item relating to section 223 the following new item:

            `Sec. 224. Personal philanthropy accounts.'.

            (2) The table of sections for part III of subchapter B of chapter 1 of such Code is amended by inserting after the item relating to section 139A the following new item:

            `Sec. 139B. Contributions by employer to personal philanthropy accounts.'.

      (h) Effective Date- The amendments made by this section shall apply to taxable years beginning after December 31, 2007.