§1215. Recapture of tax benefit for charitable contributions of exempt use property not used for an exempt use

Pension Protection Act of 2006

Title XII Provisions Relating to Exempt Organizations

Subtitle B Reforming Exempt Organizations

Part 1 General Reforms

(a) RECAPTURE OF DEDUCTION ON CERTAIN SALES OF EXEMPT USE PROPERTY.-

(a)(1) IN GENERAL.-Clause ( i) of section 170(e )(1)(B) (related to certain contributions of ordinary income and capital gain property) is amended to read as follows:

"( i) of tangible personal property-

"(I) if the use by the donee is unrelated to the purpose or function constituting the basis for its exemption under section 501 (or, in the case of a governmental unit, to any purpose or function described in subsection (c)), or

"(II) which is applicable property (as defined in paragraph (7)(C)) which is sold, exchanged, or otherwise disposed of by the donee before the last day of the taxable year in which the contribution was made and with respect to which the donee has not made a certification in accordance with paragraph (7)(D),".

(a)(2) DISPOSITIONS AFTER CLOSE OF TAXABLE YEAR.-Section 170(e) is amended by adding at the end the following new paragraph:

"(7) RECAPTURE OF DEDUCTION ON CERTAIN DISPOSITIONS OF EXEMPT USE PROPERTY.-

"(A) IN GENERAL.-In the case of an applicable disposition of applicable property, there shall be included in the income of the donor of such property for the taxable year of such donor in which the applicable disposition occurs an amount equal to the excess (if any) of-

"( i) the amount of the deduction allowed to the donor under this section with respect to such property, over

"(ii) the donor's basis in such property at the time such property was contributed.

"(B) APPLICABLE DISPOSITION.- For purposes of this paragraph, the term 'applicable disposition' means any sale, exchange, or other disposition by the donee of applicable property-

"( i) after the last day of the taxable year of the donor in which such property was contributed, and

"(ii) before the last day of the 3-year period beginning on the date of the contribution of such property, unless the donee makes a certification in accordance with subparagraph (D).

"(C) APPLICABLE PROPERTY.-For purposes of this paragraph, the term 'applicable property' means charitable deduction property (as defined in section 6050L(a)(2)(A))-

"( i) which is tangible personal property the use of which is identified by the donee as related to the purpose or function constituting the basis of the donee's exemption under section 501, and

"(ii) for which a deduction in excess of the donor's basis is allowed.

"(D) CERTIFICATION.-A certification meets the requirements of this subparagraph if it is a written statement which is signed under penalty of perjury by an officer of the donee organization and-

"( i) which-

"(I) certifies that the use of the property by the donee was related to the purpose or function constituting the basis for the donee's exemption under section 501, and

"(II) describes how the property was used and how such use furthered such purpose or function, or

"(ii) which-

"(I) states the intended use of the property by the donee at the time of the contribution, and

"(II) certifies that such intended use has become impossible or infeasible to implement.".

(b) REPORTING REQUIREMENTS.-Paragraph (1) of section 6050L(a) (relating to returns relating to certain dispositions of donated property) is amended-

(b)(1) by striking "2 years" and inserting "3 years", and

(b)(2) by striking "and" at the end of subparagraph (D), by striking the period at the end of subparagraph (E) and inserting a comma, and by inserting at the end the following:

"(F) a description of the donee's use of the property, and

"(G) a statement indicating whether the use of the property was related to the purpose or function constituting the basis for the donee's exemption under section 501.

In any case in which the donee indicates that the use of applicable property (as defined in section 170(e )(7)(C)) was related to the purpose or function constituting the basis for the exemption of the donee under section 501 under subparagraph (G), the donee shall include with the return the certification described in section 170(e)(7)(D) if such certification is made under section 170(e)(7).".

(c) PENALTY.-

(c)(1) IN GENERAL.-Part I of subchapter B of chapter 68 (relating to assessable penalties) is amended by inserting after section 6720A the following new section:

"SEC. 6720B. FRAUDULENT IDENTIFICATION OF EXEMPT USE PROPERTY.

"In addition to any criminal penalty provided by law, any person who identifies applicable property (as defined in section 170(e )(7)(C)) as having a use which is related to a purpose or function constituting the basis for the donee's exemption under section 501 and who knows that such property is not intended for such a use shall pay a penalty of $10,000.".

(c)(2) CLERICAL AMENDMENT.- The table of sections for part I of subchapter B of chapter 68 is amended by adding after the item relating to section 6720A the following new item: "Sec. 6720B. Fraudulent identification of exempt use property. ".

(d) EFFECTIVE DATE.-

(d)(1) RECAPTURE.- The amendments made by subsection (a) shall apply to contributions after September 1, 2006.

(d)(2) REPORTING.- The amendments made by subsection (b) shall apply to returns filed after September 1, 2006.

(d)(3) PENALTY.- The amendments made by subsection (c) shall apply to identifications made after the date of the enactment of this Act.