[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6595 Introduced in House (IH)]
<DOC>
117th CONGRESS
2d Session
H. R. 6595
To amend the Internal Revenue Code of 1986 to modify rules relating to
donor advised funds, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 3, 2022
Ms. Pingree (for herself, Mr. Reed, Mr. Khanna, and Ms. Porter)
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 modify rules relating to
donor advised funds, and for other purposes.
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 ``Accelerating Charitable Efforts
Act'' or the ``ACE Act''.
SEC. 2. ADDITIONAL RESTRICTIONS ON DEDUCTIONS FOR CONTRIBUTIONS TO
DONOR ADVISED FUNDS.
(a) Limitation on Deduction.--Section 170(f) of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
paragraph:
``(19) Time for deduction of contributions to donor advised
funds.--
``(A) Nonqualified donor advised funds.--
``(i) In general.--In the case of a
contribution to a donor advised fund (as
defined in section 4966(d)(2)) which is not a
qualified donor advised fund or a qualified
community foundation donor advised fund--
``(I) in the case of any
contribution of property other than
cash, no deduction shall be allowed
under this section unless the
sponsoring organization sells such
property for cash,
``(II) no deduction shall be
allowed under this section for any
contribution before the taxable year
that includes the date on which the
sponsoring organization makes a
qualifying distribution of such
contribution (or the proceeds from the
sale of such contribution), and
``(III) the amount of the deduction
shall be equal to the amount of the
qualifying distribution.
``(ii) Qualifying distribution.--For
purposes of this subparagraph, the term
`qualifying distribution' means any
distribution which is not a taxable
distribution (as defined in section 4966(c),
determined without regard to paragraph (2)(C)
thereof).
``(iii) Ordering rule.--For purposes of
this subparagraph, distributions shall be
treated as made from contributions (and any
earnings attributable thereto) on a first-in,
first-out basis.
``(B) Nonpublicly traded assets of qualified donor
advised funds.--
``(i) In general.--In the case of a
contribution of a non-publicly traded asset to
a qualified donor advised fund or a qualified
community foundation donor advised fund--
``(I) no deduction shall be allowed
under this section for any taxable year
before the taxable year that includes
the date on which the sponsoring
organization sells the asset, and
``(II) the amount of the deduction
allowed under subsection (a) shall not
exceed the amount of gross proceeds
received from such sale and credited to
the account or fund identified with the
taxpayer.
``(ii) Non-publicly traded asset.--For
purposes of this subparagraph, the term `non-
publicly traded asset' means any asset for
which (as of the date of the contribution)
market quotations are not readily available on
an established securities market.
``(C) Contemporaneous written acknowledgement.--
``(i) In general.--In the case of a
contribution described in subparagraph (A) or
(B), no deduction shall be allowed under
subsection (a) for such contribution unless the
taxpayer substantiates the contribution by a
contemporaneous written acknowledgement of the
contribution by the sponsoring organization
that meets the requirements of clause (ii).
``(ii) Content of acknowledgement.--An
acknowledgement meets the requirements of this
subparagraph if it includes the following
information:
``(I) The name of the donor.
``(II) In the case of a
contribution described in subparagraph
(A)--
``(aa) if such contribution
is described in subparagraph
(A)(i)(I), a certification that
the asset was sold for cash and
the amount of cash received in
such sale, and
``(bb) a certification that
a qualifying distribution has
been made from such
contribution (or the proceeds
from the sale of such
contribution), an
identification of the amount of
such qualifying distribution,
and a statement that the
deductible amount may not
exceed the amount of such
qualifying distribution.
``(III) In the case of a
contribution described in subparagraph
(B), a certification that the asset was
sold and the amount of the gross
proceeds received from such sale and
credited to the account or fund of the
taxpayer, together with a statement
that the deductible amount may not
exceed the amount of the gross proceeds
received from the sale of the asset and
credited to the account or fund of the
taxpayer.
``(iii) Contemporaneous.--For purposes of
clause (i), an acknowledgement shall be
considered to be contemporaneous if the
sponsoring organization provides it within 30
days of--
``(I) in the case of a contribution
described in subparagraph (A), the date
of the qualifying distribution, and
``(II) in the case of a
contribution described in subparagraph
(B), the date that the gross proceeds
from the sale of the asset are credited
to the account or fund of the taxpayer.
``(iv) Information to secretary.--A
sponsoring organization required to provide an
acknowledgement under this paragraph shall
provide to the Secretary the information
contained in the acknowledgement. Such
information shall be provided at such time and
in such manner as the Secretary may prescribe.
``(D) Qualified donor advised fund.--For purposes
of this paragraph, the term `qualified donor advised
fund' means a donor advised fund (as defined in section
4966(d)(2)) established under an agreement that
requires, for the duration of such fund, the
termination of any advisory privilege with respect to
any contribution (including any earnings thereon) made
by any donor (or any person appointed or designated by
a donor) before the last day of the 14th taxable year
beginning after the taxable year in which the
contribution was made.
``(E) Qualified community foundation donor advised
fund.--For purposes of this paragraph--
``(i) In general.--The term `qualified
community foundation donor advised fund' means
a donor advised fund (as defined in section
4966(d)(2)) which is owned or controlled by a
qualified community foundation and which meets
one or more of the requirements of clauses (ii)
or (iii).
``(ii) Maximum value of advisory
privileges.--
``(I) In general.--A donor advised
fund meets the requirements of this
clause if each individual who has
advisory privileges with respect to
such fund does not have advisory
privileges with respect to 1 or more
donor advised funds held by the
qualified community foundation with an
aggregate value at any time after the
date of the enactment of this paragraph
in excess of $1,000,000.
``(II) Inflation adjustment.--In
the case of any taxable year beginning
after 2021, the $1,000,000 amount in
subclause (I) shall be increased by an
amount equal to such dollar amount
multiplied by the cost-of-living
adjustment determined under section
1(f)(3) for the calendar year in which
the taxable year begins, determined by
substituting in subparagraph (A)(ii)
thereof `calendar year 2020' for
`calendar year 2016'. If any amount as
adjusted under the preceding sentence
is not a multiple of $10,000, such
dollar amount shall be rounded to the
next lowest multiple of $10,000.
``(iii) Minimum payout.--A donor advised
fund meets the requirements of this paragraph
if the fund is established under an agreement
that requires that the fund make qualifying
distributions (as defined in subparagraph
(A)(ii)) each calendar year in an amount not
less than 5 percent of the value of the fund
(determined as of the last day of the preceding
calendar year).
``(iv) Qualified community foundation.--The
term `qualified community foundation' means an
organization--
``(I) which is described in section
501(c)(3),
``(II) which is organized and
operated for the purpose of
understanding and serving the needs of
a particular geographic community that
is no larger than 4 States by engaging
donors and pooling donations to create
charitable funds in direct furtherance
of those needs, and
``(III) which holds substantial
assets (but in no case less than 25
percent of the organization's total
assets) outside of donor advised funds.
``(v) Sponsoring organization.--The term
`sponsoring organization' has the meaning given
such term under section 4966(d)(1).''.
(b) Other Requirements for Qualified Donor Advised Funds.--Section
170(f)(18) of the Internal Revenue Code of 1986 is amended by striking
``and'' at the end of subparagraph (A)(ii), by striking the period at
the end of subparagraph (B) and inserting ``, and'', and by adding at
the end the following new subparagraph:
``(C) in the case of a contribution to a qualified
donor advised fund (as defined in paragraph (19)(D)),
the taxpayer identifies for the sponsoring organization
a preferred organization for the purposes of making
distributions of so much of the amount contributed (and
any earnings attributable thereto) as has not been
distributed before the end of the last day of the 14th
taxable year beginning after the taxable year in which
the contribution was made.''.
(c) Effective Date.--The amendments made by this section shall
apply to contributions made after the date of the enactment of this
Act.
SEC. 3. FAILURE OF DONOR ADVISED FUNDS TO DISTRIBUTE CONTRIBUTIONS.
(a) In General.--Subchapter G of chapter 42 of the Internal Revenue
Code of 1986 is amended by adding at the end the following new section:
``SEC. 4967A. FAILURE OF DONOR ADVISED FUNDS TO DISTRIBUTE
CONTRIBUTIONS.
``(a) In General.--In the case of a contribution which is held in a
donor advised fund (other than a qualified community foundation donor
advised fund), there is hereby imposed a tax equal to 50 percent of so
much of the portion of such contribution (and any earnings attributable
thereto) as has not been distributed by the sponsoring organization in
a qualifying distribution before the last day of the sixth month
following the last day of the applicable taxable year with respect to
such contribution. The tax imposed by this subsection shall be paid by
such sponsoring organization.
``(b) Applicable Taxable Year.--For purposes of this section, the
term `applicable taxable year' means--
``(1) in the case of a contribution to a qualified donor
advised fund, the 14th taxable year beginning after the taxable
year in which the contribution was made, and
``(2) in the case of a contribution to any other donor
advised fund (other than a qualified community foundation donor
advised fund), the 49th taxable year beginning after the
taxable year in which the contribution was made.
``(c) Definitions and Other Rules.--
``(1) Qualified donor advised fund.--The term `qualified
donor advised fund' has the meaning given such term under
section 170(f)(19)(D).
``(2) Qualified community foundation donor advised fund.--
The term `qualified community foundation donor advised fund'
has the meaning given such term under section 170(f)(19)(E).
``(3) Qualifying distribution.--The term `qualifying
distribution' has the meaning given such term under section
170(f)(19)(A)(ii).
``(4) Ordering rule.--Rules similar to the rules of section
170(f)(19)(A)(iii) shall apply for purposes of this section.''.
(b) Conforming Amendment.--The table of sections for subchapter G
of chapter 42 of such Code is amended by adding at the end the
following new item:
``Sec. 4967A. Failure of donor advised funds to distribute
contributions.''.
(c) Effective Date.--The amendments made by this section shall
apply to contributions made after the date of the enactment of this
Act.
SEC. 4. TREATMENT OF PRIVATE FOUNDATION ADMINISTRATIVE EXPENSES PAID TO
DISQUALIFIED PERSONS.
(a) In General.--Section 4942(g) of the Internal Revenue Code of
1986 is amended by adding at the end the following new paragraph:
``(5) Disallowance of administrative expenses paid to
disqualified persons.--
``(A) In general.--For purposes of paragraph
(1)(A), administrative expenses paid to any person
described in subparagraph (B) shall not be treated as a
qualifying distribution.
``(B) Person described.--A person is described in
this subparagraph if such person is a disqualified
person (as defined in section 4946(a)(1)) with respect
to the private foundation, other than a foundation
manager (as defined in section 4946(b)(1)) of such
private foundation who is not a member of the family
(as defined in section 4946(d)) of any individual
described in subparagraph (A) or (C) of section
4946(a)(1).''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2021.
SEC. 5. TREATMENT OF DISTRIBUTIONS TO DONOR ADVISED FUNDS FROM PRIVATE
FOUNDATIONS.
(a) Prohibition on Treatment as Qualifying Distributions.--
(1) In general.--Section 4942(g)(1)(A) of the Internal
Revenue Code of 1986 is amended by striking ``paragraph (3),
or'' and inserting ``paragraph (3), or (iii) a sponsoring
organization (as defined in section 4966(d)(1)) if such
contribution will be held in a donor advised fund (as defined
in section 4966(d)(2)), except as provided in paragraph (3),
or''.
(2) Conforming amendment.--Section 4942(g)(3) is amended by
striking ``(i) or (ii)'' and inserting ``(i), (ii), or (iii)''.
(b) Reporting.--Section 6033(c) of the Internal Revenue Code of
1986 is amended--
(1) by redesignating paragraphs (1) and (2) as paragraphs
(2) and (3), respectively,
(2) by inserting before paragraph (2) (as redesignated) the
following new paragraph:
``(1) the private foundation shall include in its annual
return under this section information on--
``(A) the amount of any contribution to a
sponsoring organization (as defined in section
4966(d)(1)) which will be held in a donor advised fund
(as defined in section 4966(d)(2)),
``(B) the sponsoring organization to which such
contribution was made, and
``(C) the donation advice given to such
organization (if any),'', and
(3) in the matter following paragraph (3) (as redesignated)
by striking ``paragraph (1)'' and inserting ``paragraph (2)''.
(c) Effective Dates.--
(1) Prohibition.--The amendment made by subsection (a)
shall apply to distributions made after December 31, 2021.
(2) Reporting.--The amendments made by subsection (b) shall
apply to returns required to be filed after December 31, 2021.
SEC. 6. TREATMENT OF CONTRIBUTIONS FROM DONOR ADVISED FUNDS FOR
PURPOSES OF DETERMINING PUBLIC SUPPORT.
(a) Private Foundations.--Section 509 of the Internal Revenue Code
of 1986 is amended by adding at the end the following new subsection:
``(g) Special Rules for Support From Donor Advised Funds.--
``(1) In general.--For purposes of subsection (a)(2),
except as otherwise provided in this subsection, all amounts
received from sponsoring organizations (as defined in section
4966(d)(1))--
``(A) shall not be treated as support received from
an organization described in section 170(b)(1)(A), and
``(B) shall be treated as support received from one
person.
``(2) Exception where donor identified.--In the case of
support from a sponsoring organization which is provided from
funds which are identified with a donor to a donor advised fund
(as defined in section 4966(d)(2)) and the sponsoring
organization identifies such donor, such support shall be
treated as provided by such donor.
``(3) Exception for amounts not contributed from donor
advised funds.--Paragraph (1) shall not apply to any amount if
the sponsoring organization specifies that--
``(A) the amount is not a distribution from a donor
advised fund (as so defined), and
``(B) no donor (or any person appointed or
designated by such donor) had advisory privileges with
respect to the provision of the support.''.
(b) Determination of Contribution Limitations.--Section
170(b)(1)(A) of such Code is amended by adding at the end the
following: ``For purposes of clause (vi), rules similar to the rules of
section 509(g) shall apply.''.
(c) Effective Date.--The amendments made by this section shall
apply to contributions made in taxable years beginning after the date
of the enactment of this Act.
SEC. 7. EXEMPTION FROM TAX ON INVESTMENT INCOME FOR CERTAIN PRIVATE
FOUNDATIONS MAKING SIGNIFICANT QUALIFYING DISTRIBUTIONS.
(a) In General.--Section 4940 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsection:
``(e) Exemption for Foundations Making Significant Qualifying
Distributions.--No tax shall be imposed by this section for any taxable
year on any private foundation if such private foundation makes
qualifying distributions (as defined in section 4942(g)) during such
taxable year in an amount that is not less than 7 percent of the excess
of--
``(1) the aggregate fair market value of all assets of the
foundation (other than those which are used (or held for use)
directly in carrying out the foundation's exempt purpose)
determined as of the first date of the taxable year, over
``(2) the acquisition indebtedness with respect to such
assets (determined under section 514(c)(1)).''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after the date of the enactment of this Act.
SEC. 8. EXEMPTION FROM TAX ON INVESTMENT INCOME OF LIMITED-DURATION
PRIVATE FOUNDATIONS.
(a) In General.--Section 4940 of the Internal Revenue Code of 1986,
as amended by section 7, is amended by adding at the end the following
new subsection:
``(f) Exemption for Limited-Duration Foundations.--
``(1) Exemption.--
``(A) In general.--No tax shall be imposed by
subsection (a) on any private foundation if such
private foundation meets the requirements of
subparagraph (B).
``(B) Requirements.--A private foundation meets the
requirements of this subparagraph if, at the time of
its establishment and at all times thereafter--
``(i) such private foundation has a
duration specified in its governing documents
of not more than 25 years, and
``(ii) such private foundation makes no
distributions to disqualified private
foundations.
``(C) Disqualified private foundation.--For
purposes of this subsection, the term disqualified
private foundation means, with respect to the private
foundation described in subparagraph (B), another
private foundation with respect to which there is a
disqualified person who is also a disqualified person
with respect to such private foundation described in
subparagraph (B).
``(2) Recapture tax.--
``(A) In general.--If--
``(i) no tax is imposed under subsection
(a) on a private foundation by reason of
paragraph (1), and
``(ii) such private foundation--
``(I) fails to meet the
requirements of paragraph (1)(B) in any
subsequent taxable year,
``(II) has a duration of more than
25 years, or
``(III) makes a distribution to a
disqualified private foundation,
a tax shall be imposed on such foundation in
the amount determined under subparagraph (B)
for the first taxable year in which such
private foundation is described in clause (ii).
``(B) Amount of tax.--The amount of tax determined
under this subparagraph is the aggregate amount of
taxes which would have been imposed on such private
foundation for all taxable years before the first
taxable year in which such foundation was described in
subparagraph (A)(ii) if paragraph (1) had not
applied.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after the date of the enactment of this Act.
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