Proposed Legislation - Charitable Split-Dollar Life Insurance

Proposed Legislation - Charitable Split-Dollar Life Insurance

News story posted in Legislative on 8 February 1999| comments
audience: National Publication | last updated: 18 May 2011
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Summary

A Bill was introduced which, if passed, would prohibit charitable split-dollar insurance. The charitable tax deductions will be disallowed on a retroactive basis and a charity engaging in a split-dollar arrangement in life insurance with a private individual after 2/4/99 will jeopardize its tax-exempt status.

PGDC SUMMARY:

A Bill was introduced which, if passed, would prohibit charitable split-dollar insurance. The charitable tax deductions will be disallowed on a retroactive basis and a charity engaging in a split-dollar arrangement in life insurance with a private individual after 2/4/99 will jeopardize its tax-exempt status.

POINTS TO PONDER:

Is Congress codifying the private benefit common law rule in section 2(a)(2) of the Bill?

FULL TEXT:

106TH CONGRESS
1ST SESSION

H.R. ______

IN THE HOUSE OF REPRESENTATIVES

Mr. KLECZKA introduced the following bill; which was referred to the Committee on ________________

A BILL

To remove any doubt that split-dollar insurance arrangements are an unwarranted tax avoidance scheme and are prohibited under current law.

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 "Charitable Integrity Restoration Act".

SECTION 2. CLARIFICATION OF PROHIBITION OF CHARITABLE SPLIT-DOLLAR INSURANCE AND OTHER PERSONAL BENEFIT ARRANGEMENTS.

(a) IN GENERAL. - Nothing in the Internal Revenue Code of 1986 or in any other provision of law shall be construed to permit any deduction under section 170, 545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522 of such Code for any transfer of money or property directly or indirectly to a charitable organization if there is a reasonable expectation that as a consequence of such transfer the organization will directly or indirectly -

(1) purchase a life insurance, endowment, or annuity contract benefiting the donor or any designee of the donor, or

(2) engage in any other transaction which provides a personal benefit directly or indirectly to the donor or any designee of the donor.

(b) IMPACT ON EXEMPT STATUS. - Any purchase, or the engaging in any transaction, which results under subsection (a) in the disallowance of a deduction shall be treated for purposes of section 501 of the Internal Revenue Code of 1986 as an expenditure which inures to the benefit of a private individual.

(c) EFFECTIVE DATES. -

(1) CONTRIBUTIONS. - Subsection (a) shall apply to all contributions, whether made before, on, or after the date of the enactment of this Act.

(2) PAYMENTS, ETC. - Subsection (b) shall apply to payments made, and other transactions engaged in, after February 4, 1999.

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