ACTION

FROM THE COMMITTEE ON WAYS AND MEANS

FOR IMMEDIATE RELEASE, Contact: (202) 225-3625
July 12, 2001
No. FC 8-A

Thomas Announces Committee Action
H.R. 7, the "Community Solutions Act of 2001"

Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways and Means, today announced that on Wednesday, July 11, 2001, the Committee ordered favorably reported, as amended, H.R. 7, the "Community Solutions Act of 2001," by a recorded vote of 23-16.

DESCRIPTION OF RECOMMENDATIONS AS APPROVED:

TAX PROVISIONS:

The bill would provide over $13 billion in tax relief over 10 years. The bill would provide incentives for charitable contributions by individuals and businesses by:

• Allowing taxpayers who do not itemize deductions to have a deduction from adjusted gross income for charitable contributions paid in cash. The maximum deduction would be phased-in as follows: $25 ($50 in the case of a joint return) in 2002 and 2003; $50 ($100 in the case of a joint return) in 2004 through 2006; $75 ($150 in the case of a joint return) in 2007 through 2009; and $100 ($200 in the case of a joint return) in 2010 and thereafter.

• Providing an exclusion from gross income for otherwise taxable withdrawals from traditional or Roth IRAs that are made for charitable provisions.

• Increasing the percentage limitation on corporate charitable contributions from 10 percent to 15 percent of modified taxable income. The increase would be phased-in over nine years, starting in taxable years beginning after December 31, 2001.

• Allowing all trades or businesses, not just C corporations, to be eligible for an enhanced deduction for donations of food inventory, and clarifying the valuation rules that apply to such donations.

• Modifying the excise tax on the net investment income of private foundations by replacing the two rates of tax under present law with a single rate of tax, and setting the single rate of tax at one percent.

• Imposing a 100 percent excise tax on the unrelated business taxable income of a charitable remainder trust, instead of removing the income tax exemption of such a trust for any year in which the trust has any unrelated business taxable income.

• Modifying the self-constructed property rule that applies to certain charitable contributions of scientific property used for research and computer technology and equipment.

• Allowing shareholders in an S corporation to increase their basis in their S corporation shares to permit them to take a full charitable deduction for charitable contributions by the S corporation.

OTHER PROVISIONS:

The bill would also increase the authorization for the Assets for Independence Act matched savings program, which supports the creation and funding of Individual Development Accounts or IDAs for low-income working families. Under the provision approved by the Committee, funding for this program would rise from $25 million to $50 million per year beginning in FY 2002, and funds would be available through FY 2008 (rather than only through FY 2003 as under current law).

The bill would also make certain other changes to the program consistent with its extension and additional funding, including:

• Allowing additional Federally-insured credit unions to serve as eligible grant applicants to operate IDA projects.

• Replacing the current lifetime limit on individual and household receipt of Federal matching grants with an annual limit of up to $500 in Federal matching grants per individual.

• Making certain other technical and conforming changes.

The Assets for Independence Act program, created in 1998 and amended in 2000, provides demonstration grant funds to nonprofit or governmental organizations, community-development banks and certain credit unions to operate IDA projects to benefit low-income working families. Individuals may use accumulated savings toward the purchase of a first home, to finance a post-secondary education, or to support a small business enterprise. Individuals participating in Assets for Independence IDA projects may receive between one dollar and eight dollars in matching grants for every dollar they contribute.