PRINTER'S NO. 368
No. 327 Session of 1999
INTRODUCED BY HART, JUBELIRER, WOZNIAK, HELFRICK, CORMAN, CONTI,
DENT, COSTA, TOMLINSON, WHITE, GERLACH, EARLL, SALVATORE,
LAVALLE, STOUT, KASUNIC, BOSCOLA AND SLOCUM,
FEBRUARY 11, 1999
REFERRED TO FINANCE, FEBRUARY 11, 1999
AN ACT
1 Providing a tax credit for certain charitable contributions; and
2 imposing penalties.
3 The General Assembly of the Commonwealth of Pennsylvania
4 hereby enacts as follows:
5 Section 1. Short title.
6 This act shall be known and may be cited as the Charity Tax
7 Credit Act.
8 Section 2. Legislative findings.
9 The General Assembly finds and declares as follows:
10 (1) Between 1965 and 1995, government spending on
11 welfare programs increased ten times, in real terms, to
12 nearly $380,000,000,000 per year.
13 (2) Although Federal and State Governments currently
14 spend 5.3% of gross domestic product, more than was spent at
15 the peak of the Great Depression, to fund over 70 separate
16 programs to assist the poor, the child poverty rate increased
17 from 15% to 20% between 1970 and 1995, and the national
1 poverty rate rose slightly.
2 (3) It would benefit the Commonwealth to find ways to
3 reduce the current reliance on government programs and to
4 better support the role of cost-effective private charities
5 which reclaim lives through personal attention to the
6 problems of those in need.
7 (4) It would benefit the Commonwealth to promote
8 participation in charitable giving in order to foster civic
9 responsibility and increased volunteerism.
10 (5) It would benefit the Commonwealth to increase the
11 private resources of private charities which provide
12 assistance to the poor in order to address the needs of those
13 most directly affected by past and future changes adopted
14 under Federal and State welfare reform laws.
15 (6) Ten other states currently offer some form of tax
16 credit program to encourage individuals to support charities
17 that help the poor, and the Commonwealth currently provides
18 similar incentives to businesses under the Neighborhood
19 Assistance Tax Credit Program.
20 (7) It is in the public interest for the Commonwealth to
21 enact a charity tax credit designed to empower individual
22 citizens to direct the use of their tax dollars for
23 charitable purposes, to expand the role of local, privately
24 funded and effective private charities and to expand the
25 safety net to help Pennsylvanians successfully make a
26 permanent transition from welfare to work.
27 Section 3. Definitions.
28 The following words and phrases when used in this act shall
29 have the meanings given to them in this section unless the
30 context clearly indicates otherwise:
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1 "Bureau." The Bureau of Charitable Organizations of the
2 Department of State.
3 "Contribution." The promise, grant, pledge or gift of money,
4 property, goods, services, financial assistance or other similar
5 remittance.
6 "Individual." A natural person, including the members of a
7 partnership or association and the shareholders of a
8 Pennsylvania S Corporation as defined in section 301(l) of the
9 act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code
10 of 1971.
11 "Institution of purely public charity." An institution of
12 purely public charity within the meaning of the act of November
13 26, 1997 (P.L.508, No.55), known as the Institutions of Purely
14 Public Charity Act.
15 "Qualified institution of purely public charity." An
16 institution of purely public charity that meets all of the
17 following criteria:
18 (1) The institution has filed with the bureau and
19 received approval of an application containing information
20 which the bureau determines to be necessary in order to
21 administer the provisions of this act.
22 (2) The institution donates at least 75% of its annual
23 revenues, including contributions, to relief of poverty
24 assistance.
25 (3) The institution donates or renders gratuitously a
26 substantial portion of its goods or services or it can
27 demonstrate that it has implemented a written policy and a
28 written fee schedule based on individual or family income.
29 The schedule shall provide that no person receiving goods or
30 services from the institution pays a fee that is equal to or
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1 greater than the cost of goods or services provided to that
2 person.
3 (4) The institution applies no more than 5% of its
4 annual revenues, including contributions, to lobbying, legal
5 assistance, public policy advocacy or research, voter
6 registration, political organization or carrying on
7 propaganda.
8 (5) The institution receives no more than 50% of its
9 annual revenues, including contributions, from government
10 sources.
11 "Relief of poverty assistance." Assistance, including
12 material support, financial aid, vocational or life skills
13 instruction provided directly to persons or families, where such
14 direct assistance is provided in an effort to relieve poverty.
15 The term does not include management expenses or payments of any
16 kind to an affiliate of an institution.
17 Section 4. Charity tax credit.
18 (a) Eligibility.--An individual who makes a monetary
19 donation to a qualified institution of purely public charity
20 shall be entitled to a credit against the tax imposed by Article
21 III of the act of March 4, 1971 (P.L.6, No.2), known as the Tax
22 Reform Code of 1971, as provided in this section.
23 (b) Amount.--
24 (1) The credit authorized by this section shall be,
25 subject to the limitation of paragraph (2), for the first
26 taxable year following the enactment of this act and every
27 year thereafter in which a donation is made, 10% of the
28 amount donated.
29 (2) In any taxable year, the credit under paragraph (1)
30 shall not exceed $500.
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1 (c) Administration.--
2 (1) The Department of Revenue, in cooperation with the
3 bureau and utilizing the existing reporting procedures under
4 section 9 of the act of November 26, 1997 (P.L.508, No.55),
5 known as the Institution of Purely Public Charity Act, shall
6 administer the provisions of this act, promulgate appropriate
7 regulations and forms for that purpose and make
8 determinations as may be required. Determinations made with
9 respect to the tax credit provided in this act may be
10 reviewed and appealed in the manner provided by law for other
11 corporate or personal tax credits.
12 (2) The Department of Revenue, after the tax credit has
13 been in effect for four years, shall conduct a review of this
14 act's effectiveness and shall make a recommendation to the
15 General Assembly regarding the continuation of the credit
16 pursuant to this act.
17 (3) The bureau shall, by regulation, establish
18 application and appeal deadlines and procedures as follows:
19 (i) The bureau must approve or deny an application
20 within 60 days of receiving the completed application.
21 The application shall be deemed approved if the bureau
22 fails to act within 60 days of receiving the application.
23 (ii) The procedures established by the bureau under
24 this paragraph shall include the requirement that the
25 principal officer of an institution which no longer meets
26 the criteria for a qualified institution of purely public
27 charity notify the bureau within 90 days of the date the
28 institution no longer meets the criteria.
29 (iii) For the purposes of this subsection, at the
30 election of the individual, a contribution which is made
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1 not later than the time prescribed by law for filing the
2 return of tax for taxable year, not including extensions,
3 shall be treated as made on the last day of such taxable
4 year.
5 (iv) An institution that files an application
6 seeking designation as a qualified institution of purely
7 public charity shall pay an annual filing fee of $15. All
8 fees collected under this act shall be deposited in the
9 State Treasury. The amount of the fee may be adjusted by
10 the department by regulation.
11 (4) The bureau shall maintain a list of the entities for
12 which applications have been approved. The list of eligible
13 entities shall be effective for contributions made in the
14 calendar year beginning on January 1 after the filing
15 deadline established by the bureau.
16 (5) The bureau may randomly and periodically review the
17 applications submitted and audit the entities holding
18 approved applications to ensure that those entities meet the
19 criteria to be qualified institutions of purely public
20 charity. An institution which the bureau determines does not
21 meet the criteria for a qualified institution of purely
22 public charity shall be removed from the list of entities to
23 which contributions qualify for a tax credit.
24 (6) The bureau shall, upon request, provide to any
25 individual a list of qualified institutions of purely public
26 charity.
27 Section 5. Penalties.
28 (a) Civil.--If the principal officer of an entity fails to
29 notify the bureau within the specified time period that the
30 entity no longer meets the criteria for a qualified institution
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1 of purely public charity, the bureau may levy an administrative
2 penalty not to exceed $1,000 per occurrence.
3 (b) Criminal.--A person who intentionally files an
4 application with the bureau under this act which the person
5 knows to be fraudulent commits a misdemeanor of the second
6 degree.
7 Section 6. Severability.
8 The provisions of this act are severable. If any provision of
9 this act or its application to any person or circumstance is
10 held invalid, the invalidity shall not affect other provisions
11 or applications of this act which can be given effect without
12 the invalid provision or application.
13 Section 7. Applicability.
14 This act shall apply to tax years beginning after the
15 effective date of this act.
16 Section 8. Effective date.
17 This act shall take effect immediately.
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