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Memorandum of Disapproval of Bill Amending the Internal Revenue Code of 1954.

August 12, 1955

I HAVE WITHHELD my approval from the bill H.R. 6887, "To extend for one year the application of section 108 (b) and to amend section 2053 of the Internal Revenue Code of 1954." This bill would extend for one year a section of the Revenue Code designed to facilitate certain railroad reorganizations. In addition, it would safeguard certain bequests to charity from the pyramiding effect of State and Federal inheritance and estate taxes.

Federal law properly exempts bequests to charity from estate taxation. In some situations, however, the intent of the Federal law is negated by the imposition of State taxes on charitable bequests. As a result of a provision of Federal law designed to prevent tax avoidance, such State taxes in turn give rise to increased Federal tax liabilities. H.R. 6887 is intended to relieve charitable bequests in these situations to the extent that Federal legislation can do so.

I am sympathetic with the objectives of both portions of the bill. However, I am informed that there are three defects in the part of the bill dealing with the estate tax, which are sufficiently serious to require my disapproval.

First, this legislation would often increase Federal tax liabilities on estates containing bequests to charity.

Second, the legislation would, in certain situations, accrue not to the benefit of charity but to other heirs.

Third, it would disturb existing well established relationships between Federal and State inheritance and estate tax liabilities based on the credit against Federal tax liability allowed for taxes paid to States since 1926. Since the State tax on the charitable bequest is deductible under the bill, it would no longer be counted in determining the amount which may be claimed by the estate as a credit for State taxes paid against the Federal tax liability. However, the tax imposed under the so-called State pick-up laws, which are designed to absorb the full credit allowable against the Federal estate tax, is based upon the total State tax otherwise levied (including the tax on the charitable bequest). Consequently, many State pick-up laws would not pick up the full amount allowable as a credit. Enactment of this bill would probably stimulate State legislation to enlarge the credit for taxes paid to States.

In view of these defects in the legislation, I must reluctantly withhold my approval from the bill, H.R. 6887.

My reluctance would be greater, however, had I not been advised that the defects in section 2 of the bill can be remedied and that section 1 and section 2, appropriately remedied, can be enacted so as to apply retroactively without any serious difficulty.


Dwight D. Eisenhower, Memorandum of Disapproval of Bill Amending the Internal Revenue Code of 1954. Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/233467

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