October 8, 1998 | Read Time: 3 minutes
The House of Representatives has approved a tax bill that includes a key break for donors who give appreciated stock to private foundations.
The bill, which contains $80-billion in tax cuts over the next five years, would make permanent a tax break for donors who want to use appreciated stock to set up or supplement private foundations. In addition, the legislation would make it much easier for the public to get information about foundations’ finances.
Until June 30 of this year, donors could deduct the full market value of appreciated stock they gave to private foundations. But starting on July 1, such donors have been allowed to deduct only the amount they originally spent to buy the stock.
The bill would not only renew the break and make it retroactive to July 1, but also make it permanent. That means foundations would no longer have to return to Congress year after year seeking renewal of the provision, which has expired several times. What’s more, donors would no longer be confused about when they are eligible for the break.
The appreciated-stock provision is packaged with a change in the disclosure rules for private foundations.
Under the requirement, foundations would immediately have to provide their three most recent informational tax returns, called Forms 990-PF, to anyone who requested them in person. Foundations would be given 30 days to send copies to people who made written requests for the forms.
Currently, a private foundation must make its Forms 990-PF available only for inspection — not for photocopying — if the request for the form is made in person by a U.S. citizen within 180 days after the foundation has published a notice in a newspaper that it has filed the annual return with the government. The bill would drop the requirement that private foundations publish notices.
The proposed changes would bring the disclosure requirements for foundations in line with those passed by Congress for charities two years ago. The charity requirements will take effect once the Internal Revenue Service issues final regulations on how it will enforce the law.
Another provision of the bill could influence charitable bequests, since it would speed up a planned increase in the value of estates that are exempt from federal tax. Some charities worry that such a change could lead many people who are planning their estates to feel that they have less reason to leave money to charity.
Last year Congress voted to increase the $600,000 exemption to $1-million over the next decade. The measure now under consideration would put the $1-million exemption in place on January 1, 1999.
The legislation’s prospects are uncertain, especially because President Clinton has promised to veto it.
Mr. Clinton opposes the House’s efforts to pay for new and expanded tax breaks with money from the expected federal budget surplus. He says that the money should instead be used to strengthen the Social Security system.
A copy of the tax bill, HR 4579, may be obtained through the Library of Congress’s World-Wide Web site at http://thomas.loc.gov/home/thomas2.html
