The Senate Finance Committee passed the Chair's amended version of the CARE Act (S 1924, the Leiberman-Santorum compromise on the President's faith-based initiative) on June 18th by a voice vote. The main portions of the bill create new incentives for charitable giving and specify equal treatment of faith-based and secular nonprofits when applying for federal grants. It also simplifies the rules on lobbying by 501(c)(3) groups that use the expenditure test in the IRS rules, by doing away with the distinction between direct and grassroots lobbying. It is not clear whether the bill will come up on the Senate floor before the summer recess. Some Senators, including Sen. Jeff Bingaman (D-NM), have raised concerns about the cost of the bill, and whether the revenue raising offsets it contains are sufficient. The committee approved amendments proposed by Chairman Max Baucus (D-MT) and Ranking Member Charles Grassley (R-IA), including reinstatement of a scaled back version of Individual Development Accounts. Senator Blanche Lincoln (D-AR) withdrew an amendment that would allow private foundations to increase stock holdings in corporations from 2% to 5%, with an agreement from Baucus that the issue will be re-introduced when the bill comes to floor, and anti-abuse language has been added. If the CARE Act does pass on the Senate floor, the next step is a question mark. A push for the House to pass the CARE Act as a substitute for HR 7, it's more controversial faith-based bill, is expected. Charitable choice supporters in the House could oppose such a move, or may decide their agenda can be implemented administratively. (see related article) Here is a summary of the Baucus-Grassley and Committee amendments: 1. Nonitemizer charitable deduction. The provision allows taxpayers who do not itemize their deductions to claim an above-the-line deduction for their charitable giving to the extent that their total gifts exceed $250 for the year ($500 for joint returns). However, the maximum deduction that may be claimed is $250 ($500 for joint returns). Thus, for example, a single taxpayer who donated $350 during the year could claim a deduction for $100 (the amount in excess of the $250 floor). The deduction would be limited to cash contributions, and would be in effect during 2002 and 2003. The Treasury Department would be required to conduct a study on the effects of the proposal on charitable giving and on taxpayer compliance with the new rule. 2. IRA Charitable Rollover. The proposal would allow donors age 59 1/2 or over to rollover amounts from an IRA to create a life income gift (such as a charitable gift annuity). Donors age 70 1/2 or over would become eligible to also rollover amounts from an IRA as direct gifts. The proposal would be effective beginning 1/1/2003, and would be permanent. 3. 501(h) Simplification. The proposal includes a provision to simplify the rules that apply to charities that elect to be covered by section 501(h), which provides specific lobbying definitions, and a formula to determine allowable expenditures. The proposal would remove the "sub-limit" that restricts "grassroots" lobbying to 25% of a charities overall lobbying activities. The proposal would be effective 1/1/2002. 4. Social Services (Title XX) Block Grant. The proposal would increase the Title XX block grant from its current level ($1.7 billion in FY 2002) to $1.975 in FY 2003 and $2.8 billion in FY 2004. 5. Disclosure. The proposal includes several new disclosure requirements that generally follow several of the recommendations made by the Joint Committee on Taxation. The proposal would: 1) expand the definition of "written determinations" of the IRS that are subject to public disclosure; 2) require organizations to list on its 990 any names under which it does business, as well as any web sites it maintains; 3) require private foundations to prepare, and make publicly available, a summary description of its capital gains and losses for the year in lieu of a complete report (unless a member of the public requested the full report); 4) require the IRS to remind taxpayers that the Form 990 is publicly available in certain IRS publications; 5) allow the IRS to disclose to state charity officials certain information about tax-exempt organizations. 6. Contribution of Bonds. The proposal would allow a full, fair market value deduction for certain appreciated bonds donated to private foundations, beginning 1/1/2003. 7. Conservation easements. The proposal provides additional incentives for land owners to donate conservation easements to charities, beginning 1/1/2003. Language imposing a 20% excise tax on sales of protected land for non-conservation purposes will be added to prevent abuse. 8. Expedited Exemption Review. The proposal includes a provision to allow expedited review of application for tax-exempt status for small charities applying for federal grants. 9. Declaratory Judgment. The proposal extends a declaratory judgment procedure currently available to section 501(c)(3) organizations seeking certain rulings related to its tax status, to other types of tax-exempt organizations (such as those 501(c)(4) organizations, and so forth). 10. The Chairman's mark also includes provisions that would allow an enhanced deduction for gifts of food items, books, and certain computer and other scientific property donated to charity. These provisions are generally effective 1/1/2003 (the technology rules apply 1/1/2002). 11. Church-related Provisions. The proposal clarifies the definition of what constitutes a church tax inquiry to include contacts made by the IRS to education churches on exempt-organization law topics, and modifies the definition of a church "convention" or "association". 12. September 11th Relief Payments. The proposal codifies an IRS determination that certain payments made by charities in response to September 11th would be tax-free if certain conditions were met. This treatment would expire on 9/11/2003. 13. Individual Development Accounts. Tax credit up to $500 for financial institutions that match savings of eligible low income persons dollar for dollar. Savings could only be withdrawn for first-time home purchase, small business start-up or higher education. The IDA accounts can be matched up to $2500 over a five year period. 14. Allow private foundations to increase scholarship awards to 35% of applicants or 20% of eligible students from affiliated organizations. 15. Offset the cost of charitable giving incentives by ending tax shelters for companies that move their headquarters overseas, requiring greater disclosre of tax shelters, and extending IRS user fees through 2007. Another offset extends custom fees, but there is a question of whether or not that revenue has already been used as an offset in another bill.