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Issues The principal issues presented by the fund expenditure provisions of the bill are as follows:
First, should the allocation of revenues among the Sport Fish Restoration Program, the Boating Safety Fund, and the Land and Water Conservation Fund be modified?
Second, should these funds be established as true trust funds in the Treasury, and if so, should
the operative provisions of the funds be transferred to the Trust Fund Code of the Internal Revenue Code for efficiency of administration and oversight?
Explanation of Trust Fund Provisions Aquatic Resources Trust Fund
In general The bill would establish a new trust fund, the Aquatic Resources Trust Fund (the “Trust Fund”), in the Internal Revenue Code, to be administered by the Secretary of the Treasury. The new Trust Fund would expand and combine funding for the present sport fish restoration and boating safety programs into a single trust fund. The Trust Fund would consist of two accounts, the Sport Fish Restoration Account and the Boating Safety Account, described below.
Amounts equivalent to the following revenues would be appropriated to finance the purposes of the new Trust Fund:
a. Revenues from the expanded excise tax on sport fishing equipment;
b. Revenues from the 9-cents-per-gallon excise taxes on gasoline and special fuels used in motorboats (other than $1 million of those revenues, which would continue to be transferred to the Land and Water Conservation Fund); and
c. Import duties on fishing equipment and on yachts and pleasure craft.
Sport Fish Restoration Account The present Sport Fish Restoration Program would be replaced by an expanded program financed by the new Sport Fish Restoration Account. This expanded program would be financed by trust fund revenues attributable to (1) the expanded excise tax on sport fishing equipment, (2) the motorboat fuels taxes (to the extent these revenues exceed the amount transferred to the Boating Safety Account and the Land and Water Conservation Fund), and (3) import duties on fishing equipment and on yachts and pleasure craft.
The expenditure purposes established for the Sport Fish Restoration Account would be those purposes established for the present Sport Fish Restoration Program (16 U.S.C. 777a, as amended), as expanded by Title II of the bill (relating to expenditure authorizations). Expenditure purposes would be limited to those provided by law as of October 1, 1983 (i.e., the purposes provided as of the day after the date of the bill's enactment, including amendments to the program made by the bill, but not immediately effective).
Monies in the account would be available for expenditure by the Secretary of the Interior as provided in the Act of August 9, 1950, and would remain available until spent.
Boating Safety Account The National Recreational Boating Safety and Facilities Improvement Fund would be repealed and a new, permanent, Boating Safety Account established in the Aquatic Resources Trust Fund to carry out its purposes, as amended by the bill. The Boating Safety Account would be financed by an amount equivalent to a portion of the revenues from the excise taxes on motorboat fuels. As under the present Boating Safety Fund, amounts allocated to the Account could not exceed $45 million in any fiscal year, and the uncommitted balance of the Account could not exceed $45 million at any time.
The expenditure purposes established for the Boating Safety Account would be the same as those established for the present Boating Safety Fund, as amended by Title I of the bill (relating to expenditure authorizations). Expenditure purposes would be limited to those provided by section 30 of the Federal Boat Safety Act of 1971, as of October 1, 1983 (i.e., the purposes provided as of the day after the date of enactment of the bill, including amendments to that Act made by the bill, but not immediately effective).
Specifically, monies in the Account could be expended, subject to appropriation acts, as follows:
a. Two-thirds of the amount allocated to the Account in any fiscal year (i.e., up to $30 million) for State boating safety programs; and
b. One-third of the amount allocated to the Account (i.e., up to $15 million) to the operating expenses account of the Coast Guard (including the Coast Guard Auxiliary) to defray the cost of services provided by it for recreational boating safety. Monies in the Account would be available, subject to appropriations acts, for expenditure by the Secretary of Transportation pursuant to that Secretary's contract authority, and would remain available until spent. Land and Water Conservation Fund
An amount not exceeding $1 million per fiscal year of the revenues attributable to the excise taxes on gasoline and special motor fuels used in motorboats would be transferred to the Land and Water Conservation Fund.4 No other amendments would be made by the bill to that Fund.
4 Thus, under the bill, amounts equivalent to the revenues derived from the excise taxes on motorboat fuels would be allocated first to the Land and Water Conservation Fund (in an amount not exceeding $1 million), and second, to the Boating Safety Account (in an amount not exceeding $45 million), with the excess being allocated first to the Sport Fish Restoration Account. By contrast, under present law, these amounts are allocated first to the Boating Safety Fund (in an amount not exceeding $45 million), with the entire excess being allocated to the Land and Water Conservation Fund.
The trust fund provisions of the bill would be effective on October 1, 1983.
Revenue Effect The estimated revenues available for the Sport Fish Restoration Program under present law and under H.R. 2163 for fiscal years 1984-1988 are shown in Table 4 (below).
The Boating Safety Account would receive up to $45 million per year (through fiscal year 1988) from the taxes on motorboat fuels, and the Land and Water Conservation Fund would receive up to $1 million per year (fiscal years 1984-1988) from these taxes.
Table 4.-Estimated Revenues Available for Sport Fish Restora
tion Program Under Present Law and Under H.R. 2163 (as Passed by the House of Representatives), Fiscal Years 1984-88
[In millions of dollars]
1 Partial year; January 1, 1984, effective date. 2 Amounts now go into the general revenues.
3 Excess over the $45 million limit going to the Boating Safety Account and the $1 million to the Land and Water Conservation Fund. Such excess amounts now go into the Land and Water Conservation Fund.
4 This assumes that the full $45 million per year would be transferred to the Boating Safety Account. However, if, as the Treasury Department assumes, there is only $15 million appropriated and transferred each year, then there would be an additional $30 million per year available for the Sport Fish Restoration Program.
5 Amounts are available for appropriation for the Sport Fish Restoration Program in the year following receipt.
B. Tax Treatment of Proposed National Fish and Wildlife
Foundation 1. Establishment of National Fish and Wildlife Foundation
H.R. 2809, as passed by the House of Representatives on July 12, 1983, would establish a National Fish and Wildlife Foundation (“Foundation") as a charitable, not-for-profit organization.5 The Foundation would not be considered an agency or establishment of the United States Government.
The general purposes of the Foundation would be to encourage, accept, and manage private donations (including gifts of property) for the benefit of, or in connection with, the activities and services of the U.S. Fish and Wildlife Service, and to conduct such other activities as further the conservation and management of fish and wildlife resources of the United States, and its territories and possessions.
Under that bill, an amount not to exceed $1 million over a 10year period, would be authorized to be made available from general revenues to the Foundation for administrative expenses and for a one-for-one matching program with private contributions for use in carrying out its exempt purpose.
H.R. 2809 has been referred to the Senate Committee on Environment and Public Works. 2. Tax Treatment of the Foundation
Present Law Tar treatment of charitable organizations
Under present law, certain charitable, religious, and educational organizations generally are not subject to Federal income tax (sec. 501). Generally, these organizations are not enumerated individually in the statute. Rather, an organization generally must apply to the Internal Revenue Service for a determination of exempt status (sec. 508).
Organizations otherwise exempt from tax are nonetheless subject to tax on their unrelated business income (secs. 511-514). The tax on unrelated business income generally is determined as if the organization were a taxable corporation. In general, the term unrelated business income is defined as income from a trade or business which is regularly carried on by the organization and is not substantially related to the exempt purpose of the organization.
Exempt charitable organizations are of two broad types, public charities and private foundations. Private foundations are subject to special rules governing their operation and investments. For example, in the case of a private foundation, excise taxes are imposed on acts of self-dealing (sec. 4941), on failure to distribute specified minimum amounts, (sec. 4942), on excess business holdings (sec. 4943), for making investments that jeopardize the organization's charitable purpose (sec. 4944), and on certain prohibited expenditures (sec. 4945). Also, private foundations are subject to a 2-percent excise tax on net investment income. Tax treatment of donations to exempt organizations
5 See H. Rep. No. 98-134, Part 2 (July 1, 1983).
Valuation rules and types of eligible property interests In general, donors of property are entitled to claim a deduction for the fair market value of property donated to charitable organizations, the United States, or a State or local government. The deduction is available in determining income, estate, and gift taxes (secs. 170, 2055, and 2522).
Certain types of gifts are subject to special restrictions, either as to the amount deductible or as to the types of property interests for which a deduction is permitted. For example, one of these restrictions provides that the amount of gain that would be taxed as ordinary income if the donated property were sold cannot be deducted (sec. 170(e)(1). Additionally, a contribution of less than the donor's entire interest in the property generally does not give rise to a deduction (income, estate, or gift tax) unless the gift takes the form of an interest in a unitrust, annuity trust, or a pooled income fund (sec. 170(f)(3)). Exceptions to this partial interest rule are provided for remainder interests in farms or personal residences, gifts of undivided portions of the donor's entire interest in the property, and gifts of qualified conservation easements.
Qualified conservation easements are real property interests donated in perpetuity for
a. The preservation of land areas for outdoor recreation by, or for the education of, the general public;
b. The protection of a natural habitat of fish, wildlife, plants, or a similar ecosystem;
c. The preservation of open space (including farmland and forest land) where such preservation is
(1) For the scenic enjoyment of the general public, or
(2) Pursuant to a clearly delineated Federal, State, or local governmental conservation policy, and will yield a
significant public benefit; or d. The preservation of an historically important land area or a certified historic structure (sec. 170(h)).
Percentage limitations on aggregate gifts Present law also imposes percentage limitations on the income tax deduction allowable to an individual in any year for charitable contributions.
In the case of gifts to private foundations, the maximum annual deduction generally is 20 percent of the individual's adjusted gross income; in the case of gifts to other qualified charitable organizations the limitations generally are 50 percent (cash gifts) and 30 percent (capital-gain property). Corporations may deduct contributions up to 10 percent of taxable income (determined with certain modifications) in the year (sec. 170(b)(2)).