Sec. 201. Modification of rules for charitable contributions of fractional gifts
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Paragraph
(1)of section 170(o) of the Internal Revenue Code of 1986 is amended to read as follows: No deduction shall be allowed for a contribution of an undivided portion of a taxpayer's entire interest in tangible personal property unless— all interests in the property are held immediately before such contribution by— the taxpayer, or the taxpayer and the donee, in the case of an initial fractional contribution, such contribution is an undivided portion of not less than 10 percent of all interests in the property, in the case of an initial fractional contribution, the contribution is made pursuant to a written binding contract which requires the donor— to contribute not less than 20 percent of all interests in the property on or before the date that is 11 years after the date of the initial fractional contribution, and to contribute all of the interests in such property to the donee (or if such donee is no longer in existence, to any person described in subsection (c)) on or before the earlier of the date of the death of the donor or the date which is 20 years after the date of the initial fractional contribution, and if the value of the tangible personal property with respect to which the undivided portion of the taxpayer's entire interest relates is greater than $1,000,000 (or such greater amount as determined by the Secretary), the taxpayer attaches to the return for the taxable year in which such contribution is made a statement of value obtained from the Internal Revenue Service. In the case of a donor who dies before the date which is 20 years after the date of the initial fractional contribution, clause (iii)(II) is satisfied with respect to such initial fractional contribution if the donor's will specifies that all of the interests in such property will be contributed to the donee before such date. The Secretary may, by regulation, provide for exceptions to subparagraph (A)(i) in cases where all persons who hold an interest in the property make proportional contributions of an undivided portion of the entire interest held by such persons. Such regulations may modify the requirements of clauses
(ii)and
(iii)of subparagraph
(A)to the extent necessary to carry out the purposes of this subparagraph. . Paragraph
(2)of section 170(o) of such Code is amended to read as follows: In the case of any additional contribution, the fair market value of such contribution shall be determined by using a certified appraisal from the Art Advisory Panel of the Commissioner of Internal Revenue. . Paragraph
(3)of section 170(o) of such Code is amended— by redesignating subparagraph
(B)as subparagraph (C), and by striking subparagraph
(A)and inserting the following: The Secretary shall provide for the recapture of the amount of any deduction allowed under this section (plus interest) with respect to any contribution of an undivided portion of a taxpayer's entire interest in tangible personal property— in any case in which the donor fails to meet the requirements described in paragraph (1)(A)(iii), and in any case where such property is not in the physical possession of the donee (other than in the case of art which is fragile or unwieldy) and used in a use which is related to a purpose or function constituting the basis for the donee organization's exemption under section 501 during any applicable period for a period of time which bears substantially the same ratio to 5 years as— the percentage of the undivided interest of the donee in the property (determined on the day after such contribution was made), bears to 100 percent. For purposes of subparagraph (A), the applicable period means— the 5-year period beginning on the date of the later of the initial fractional contribution, and each subsequent 5-year period occurring during the 20-year period described in paragraph (1)(A)(iii)(II). . Paragraph
(1)of section 2522(e) of the Internal Revenue Code of 1986 is amended to read as follows: No deduction shall be allowed for a contribution of an undivided portion of a taxpayer's entire interest in tangible personal property unless— all interests in the property are held immediately before such contribution by— the taxpayer, or the taxpayer and the donee, in the case of an initial fractional contribution, such contribution is an undivided portion of not less than 10 percent of all interests in the property, in the case of an initial fractional contribution, the contribution is made pursuant to a written binding contract which requires the donor— to contribute not less than 20 percent of all interests in the property on or before the date that is 11 years after the date of the initial fractional contribution, and to contribute all of the interests in such property to the donee (or if such donee is no longer in existence, to any person described in subsection (c)) on or before the earlier of the date of the death of the donor or the date which is 20 years after the date of the initial fractional contribution, and if the value of the tangible personal property with respect to which the undivided portion of the taxpayer's entire interest relates is greater than $1,000,000 (or such greater amount as determined by the Secretary), the taxpayer attaches to the return for the taxable year in which such contribution is made a statement of value obtained from the Internal Revenue Service. In the case of a donor who dies before the date which is 20 years after the date of the initial fractional contribution, clause (iii)(II) is satisfied with respect to such initial fractional contribution if the donor's will specifies that all of the interests in such property will be contributed to the donee before such date. The Secretary may, by regulation, provide for exceptions to subparagraph (A)(i) in cases where all persons who hold an interest in the property make proportional contributions of an undivided portion of the entire interest held by such persons. Such regulations may modify the requirements of clauses
(ii)and
(iii)of subparagraph
(A)to the extent necessary to carry out the purposes of this subparagraph. . Paragraph
(2)of section 2522(e) of such Code is amended— by redesignating subparagraphs
(B)and
(C)as subparagraphs
(C)and (D), respectively, and by striking subparagraph
(A)and inserting the following: The Secretary shall provide for the recapture of the amount of any deduction allowed under this section (plus interest) with respect to any contribution of an undivided portion of a taxpayer's entire interest in tangible personal property— in any case in which the donor fails to meet the requirements described in paragraph (1)(A)(iii), and in any case where such property is not in the physical possession of the donee (other than in the case of art which is fragile or unwieldy) and used in a use which is related to a purpose or function constituting the basis for the donee organization's exemption under section 501 during any applicable period for a period of time which bears substantially the same ratio to 5 years as— the percentage of the undivided interest of the donee in the property (determined on the day after such contribution was made), bears to 100 percent. For purposes of subparagraph (A), the applicable period means— the 5-year period beginning on the date of the later of the initial fractional contribution, and each subsequent 5-year period occurring during the 20-year period described in paragraph (1)(A)(iii)(II). . The amendments made by this section shall apply to contributions and gifts made after the date of the enactment of this Act. In the case of any additional contribution (as defined in section 170(o)(4) of the Internal Revenue Code of 1986) with respect to an initial fractional contribution (as defined in such section) made after August 17, 2006, and before the date of the enactment of this Act— except for purposes of determining the fair market value of such contribution under section 170(o)(2) of the Internal Revenue Code of 1986 (as amended by this Act), such contribution shall be treated as an initial fractional contribution (as so defined) subject to the amendments made by this section, and sections 170(o)(3)(A)(i) and 2522(e)(3)(A)(i) of such Code (as in effect before the date of the enactment of this Act) shall not apply with respect to any prior contribution of an undivided portion of the taxpayer's interest in the property.