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Care Act of 2003

Location: Washington, DC

Mr. KERRY. Madam President, I rise today to offer my support for the CARE Act of 2003. Now that the objectionable "charitable choice" provisions of the bill have been removed, and the Republicans have agreed to pay for the tax provisions in the bill, the positives of the legislation clearly outweigh the negatives and the final result is worthy of support.

There are several aspects of the bill of which I want to make note. Let me briefly mention them.

First, several elements in the bill were included as amendments after several Senators, including myself, worked to add them in the Finance Committee. These include an enhanced tax deduction for contributions of food inventory, which will be very helpful for food banks assisting the poor; a new market-value deduction for art donated to nonprofit institutions by an artist during his or her lifetime; and some restoration of funding for the social service block grant program. These are all worthy provisions.

Second, I have argued that while we have the largest deficits in history and face pressing domestic needs and the long-term expense of rebuilding Iraq, we should not have any new tax cuts that are not paid for. That is why I have offered a stimulus package whose costs are offset in future years, so we can stimulate the economy today without passing the bill to our kids. I am pleased that the Finance Committee worked in a bipartisan way to pay for the provisions in the CARE Act, in order to eliminate any long-term cost. Moreover, I am especially pleased that the major pay-for provisions in the bill are clarification of the economic substance doctrine and other provisions related to tax shelters. I introduced legislation to reform these shelters during the 107th Congress and the Finance Committee took much of the language from my original bill when they needed a more comprehensive offset this year. Most notably, last year's offsets for the CARE Act did not include the economic substance provision; now it represents the single largest pay-for. At a time when we are learning how far companies will go to abuse the tax system, changes to these shelter provisions come at just the right time.

Finally, although the nonitemizer deduction for charitable contributions is getting the most attention in this bill, the largest permanent provision of the CARE Act will allow tax-free IRA rollovers to charitable organizations.
Under the bill, people will be able to make planned charitable gifts out of IRAs at age 59½, and direct gifts at age 70½, without any tax consequence. This is language that I worked on with Senator Dorgan, and I worked hard in the Finance Committee to have the Dorgan-Kerry language included in the CARE markup. The new language will be very beneficial to the many colleges, universities, and cultural institutions throughout my home State.

The new law will make a big difference, and it is important that people understand how it works. Under current law, one's itemized deductions are generally limited to one-half of one's income. In the case of a retired worker with $30,000 of annual income, but $150,000 accumulated in an IRA, this limitation would prevent the retiree from making a $30,000 donation from the IRA to the charity of his or her choice. The entire $30,000 withdrawal from the IRA would be taxed as income, but only $15,000—50 percent of annual income—would be allowed as a charitable deduction. Under this bill, however, the entire contribution would be free of any tax consequence: The withdrawal would not be taxed as income, and the contribution would not be counted as a deduction. The taxpayer can simply make the transfer to the charity completely tax-free.

If the objective of this bill is to increase charitable giving, this is the central provision that will drive that result. I thank the sponsors of the bill, Senators LIEBERMAN and SANTORUM, and the Finance Committee leadership, Senators GRASSLEY and BAUCUS, and I urge my colleagues to support the CARE Act.

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