U.S. Tax Reform Bills Revised by Sponsors; Restrictions on Gifts Overseas Eliminated

Proposed federal tax reforms which would have drastically affected charitable contributions and bequests by Americans to institutions abroad, including those in Israel, have been dropped from legislation prepared for consideration in both the House and Senate, the Jewish Telegraphic Agency was informed today.

Both Sen. Gaylord Nelson (D. Wis.) and Rep. James Corman (D. Calif.) have trimmed their extensive reform proposals so that they are virtually identical in such deletions. Moreover, both sponsors have indicated that their revised proposals are not expected to receive Congressional consideration at the remainder of the current session, either in the form of hearings or floor debate. Rep. Corman, whose bill is in the House ways and means committee, said he would introduce the revised bill when the 93rd Congress convenes in January.

Rep. Corman said yesterday that he had deleted a section of his bill which called for a “floor on charitable contributions.” This would have permitted “extraordinary amounts” to be deductible from federal income taxes when they exceeded three percent of the taxpayer’s adjusted gross income but “routine contributions to churches and other charities, would not be deductible.” Medical costs below three percent of the taxpayer’s gross income are not deductible under present federal tax laws.

The other section Rep. Corman has withdrawn related to charitable contributions “in the case of estate tax,” which had provided that such a bequest be deductible for real estate tax purposes “only if it is to be used predominantly within the United States or its possessions.” This section said that “under present law, a citizen of the United States can give his entire estate to a church located in Germany or to an orphanage in Israel and no federal estate tax will be imposed on his estate.”

Sen. Nelson’s bill, which is before the Senate Finance Committee, never had the proposed floor of three percent on charitable contributions. Sen. Nelson has now deleted the provision which would have banned deduction of bequests “predominantly” made to institutions abroad. That was disclosed to the JTA by Paul Offner, Sen. Nelson’s aide on tax legislation. He told the JTA, which has been checking out developments on the Nelson-Corman bills, that the deletions made the two measures “totally similar.”