Tax Policy Shuffle: A December Tradition

If you thought that last year’s December tax bill was a one-time realignment in how nonprofits do our work, think again. The annual December tax policy pandemonium is a Washington, DC tradition more sacred than holiday decorations and barely missed snowstorms. This year, our field is grappling with both new legislation and agency guidance.

Posturing on Capitol Hill, Key Charitable Issues in Play

Members of Congress have a long to-do list between now and the end of the year, although there is not universal agreement about which issues are on that list. Earlier this week, House Ways and Means Chairman Kevin Brady introduced legislation that would provide disaster assistance for many recently impacted areas, address retirement and savings policy, make technical corrections to the 2017 tax law, and reform the IRS. The legislation contains two provisions that are of tremendous importance to the charitable sector and the people it serves:

  1. Section 405 repeals the onerous tax on transportation fringe benefits created by the 2017 tax law. The mere introduction of this repeal by the legislator who initially authored the provision is a significant victory for our efforts. Please use our Action Center to ask your legislators to repeal the tax increases on nonprofits in any year-end tax legislation.
  2. Section 407 effectively repeals the Johnson Amendment, the bedrock protection of nonpartisanship upon which our sector’s public trust rests. Please use our Action Center to ask your legislators to protect the Johnson Amendment.

While we do not expect this legislation to be enacted in its current form, these issues will be on the table in any final negotiations, and it is essential that legislators hear from the charitable organizations they represent. Independent Sector will be joining other national nonprofit organizations in telling Congress that we are not willing to trade the correction of one legislative mistake in exchange for our sector’s integrity and public trust. We hope you will do the same.

Treasury Guidance on Transportation Fringe Benefits

Earlier this week, the U.S. Department of the Treasury released long-awaited interim guidance regarding the new tax that nonprofit organizations are required to pay on employee transportation fringe benefits. While the guidance does provide some additional information and flexibility for affected organizations, we are disappointed that it does not delay implementation of this provision entirely. Independent Sector and many allies have urged Treasury to delay implementation and firmly believe they have the authority to do so.

The guidance contains a few other highlights:

  • UBIT liability is not determined by the value of the parking provided, rather by the expenses incurred, including maintenance, property taxes, security, cleaning, and more.
  • Until proposed regulations are published, organizations may use any reasonable method to determine their expenses, including a four-part equation based on how parking spaces are used and for whom they are reserved.
  • Certain reserved parking arrangements that are adjusted by March 31, 2019 may be considered retroactive to the beginning of 2018.
  • Organizations with less than $1,000 of income subject to UBIT are exempt from paying this tax and from filing Form 990-T.
  • The Treasury Department and IRS are welcoming public comments, due by February 22, 2019.

Although it is still our top priority to render this guidance moot by repealing the provision entirely, please do not hesitate to contact Independent Sector public policy staff with comments or questions about this issue.

Donor Disclosure Vote Forthcoming

Congressional Democrats have voiced displeasure for months about a July announcement from the Treasury Department that it will no longer require certain nonprofits to disclose information about their top donors to the IRS. At press time, the U.S. Senate was preparing to vote on a resolution of disapproval that would negate this announcement. Although that vote is largely symbolic, the issue bears watching as legislators and regulators continue to debate appropriate oversight of our sector.

Types: Blog, Policy Update
Global Topics: Administration, Congress, Public Policy
Policy Issues: IRS Oversight, Lobbying & Political Activity, Nonprofit Operations, Political Activity Rules, Tax & Fiscal Policy, UBIT