ISSUE

Congress keeps stumbling around in vain attempts to “help undo the harm the 2017 tax law is causing nonprofits.”  Bills continue to be introduced to repeal the “Parking Tax,” silo-ing, and other foibles.

 

SITUATION

Marathon Bible College (MBC) is a private college exempt under Internal Revenue Code section 501(c)(3) and 170(b)(1)(A)(ii).  They are required to file Form 990 annually.

In working with the accounting team at MBC on their audit and Form 990 prep lists, we held a recent video meeting with them and they asked about where Congress was on potentially repealing the “Parking Tax” and fixing other broken areas of the new tax law.

We replied that there remain several bills that warrant some optimism.  Two of those bills are the “Stop the Tax Hike on Charities and Places of Worship” (H.R. 1223) – which would repeal the “Parking Tax” and “The Nonprofit Relief Act of 2019” (H.R. 3323) – which would repeal the “Silo-ing” provision, extend the paid family and medical leave tax credit to not-for-profits, and fix the 14 cents per mile charitable mileage reimbursement provision.

 

RULES

From a “Dear Colleague” letter from Representatives Clyburn and Maloney (7/12/19):

The Stop the Tax Hike on Charities and Places of Worship Act (H.R. 1223) would repeal the 21 percent tax charities must pay for employee benefits such as mass-transit subsidies and parking. Repeal of this tax was also included in H.R. 3300, the Economic Mobility Act of 2019, which was marked up by the Ways and Means Committee on June 20.

The Nonprofit Relief Act of 2019 (H.R. 3323):

•  Repeals the provision in the 2017 tax that requires nonprofits to calculate separately the taxes on each “separate” unrelated business income “trade or business.” This is commonly referred to as “siloing.” Siloing means a deficit on one business cannot be applied to cancel out a profit on another.

•  Extends to nonprofits the 2017 Tax Act’s new paid family and medical leave tax credit. Nonprofits were left out of the law.

•  Corrects a problem not addressed in the 2017 Tax Act — that volunteers reimbursed by nonprofits for their mileage must pay income tax on the reimbursement on amounts over 14 cents per mile. The bill removes this penalty by allowing reimbursement up to the business mileage rate, currently set at 58 cents per mile.

The two bills complement each other and together help undo the harm the 2017 tax law is causing nonprofits. Attached please find a report prepared by the JEC Democratic staff detailing the economic impact on charities of the 2017 Tax Act. Both bills are fully paid for by paring back the 2017 law’s corporate tax cut by a fraction of a percentage point.

 

BOTTOM LINE

  • There remain several active bills in Congress that would repeal some of the “anti-Nonprofit” provisions of the TCJA.
  • On June 20, 2019 a provision to repeal the “Parking Tax” was “marked up” in the House as part of the “Economic Mobility Act of 2019.”
  • Keep an eye on two bills – currently in the House – the ““Stop the Tax Hike on Charities and Places of Worship” (H.R. 1223) and “The Nonprofit Relief Act of 2019” (H.R. 3323).
  • For now, we all need to ensure that we are properly navigating the rules for the “Parking Tax,” UBIT “Silo-ing,” and reimbursing Board members for mileage.

 

Specific questions? Email Dave Moja

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

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