13 July 2018

ACR News 7.13.18 – Tax Reform 2.0, UBIT More Than Charities Can Chew

>> Federal: Washington Roundup
>> Federal: AEI Report
>> Federal: State-Level SALT Workarounds
>> Federal: UBIT on Parking Benefits for Employees
>> Federal: Universal Charitable Deduction
>> Consider This: Tax Reform 2.0
>> Top Reads: Charity Groups Fret Over Upcoming SALT-Deduction Rules

Washington Roundup

This month, House Ways and Means Chairman Kevin Brady (R-TX) and House Republican tax writers are drafting new tax legislation known as “Tax Reform 2.0.” The package is expected to focus on making permanent individual tax cuts, which are currently set to expire in 2025, as well as lots of other goodies for members. The lawmakers are expected to release an outline of their proposal next month and schedule votes before elections. Read more in this week’s Consider This.

In other news, House Ways and Means Member and Democratic Caucus Chairman Rep. Joe Crowley (D-NY) lost a primary last month in an unexpected upset by former Bernie Sanders campaign staffer Alexandria Ocasio-Cortez. His primary defeat rivals that of Majority Leader Eric Cantor’s a few years back. Crowley was seen as a promising successor to Minority Leader Nancy Pelosi (D-CA) should Democrats win control of the House in November. He’s not expected to leave Congress before the end of his term.

On Thursday, the White House announced that Shahira Knight, President Trump’s top economic advisor will take on the role of White House legislative affairs director in the coming weeks. President Trump’s current legislative liaison, Marc Short, is set to step down later this month.

AEI Report

The American Enterprise Institute (AEI) released a report in June on Charitable Giving and the Tax Cuts and Jobs Act, which analyzes the impact the recently enacted tax law will have on charitable giving. The authors estimate the changes to the code will reduce charitable giving by $17.2 billion (4 percent) in 2018. They also estimate the cost of a universal charitable deduction with no limits, a universal charitable deductions with a floor, and a universal charitable tax credit of 25 percent.

State-level SALT Workarounds

The Treasury Department and Internal Revenue Service announced in May their plan to propose regulations addressing the state workarounds of the new cap on the state and local tax (SALT) deduction. So far, New York, New Jersey and Connecticut have passed legislation that would side-step the cap by allowing residents to contribute to a charitable fund in lieu of paying state and local taxes, thus enabling the taxpayer to take a federal charitable deduction for their state taxes.

ACR sent a letter to Treasury Secretary Steven Mnuchin this week about the workarounds, which can be read here. We’re circulating a copy on the Hill as well.

UBIT on Parking Benefits for Employees

As you may know, a provision in the tax bill would expand UBIT to include a number of fringe benefits offered to employees, including transportation benefits and parking. The change could lead many nonprofits to pay UBIT for the first time, and it has raised alarms in the sector. Last week, a group of more than 2,300 churches and nonprofit groups sent a petition to Congress’ tax writing committees to repeal the tax on employee fringe benefits, and Rep. Michael Conaway (R-TX) introduced legislation to eliminate the provision.

Universal Charitable Deduction

ACR is continuing to work with Council on Foundations, Independent Sector and other colleagues in the sector to coordinate in-district events with members of Congress to educate lawmakers and gain support for a universal charitable deduction. This month, ACR hosted an in-district meeting with Rep. Vern Buchanan (R-FL). Rep. Buchanan is the chair of the Ways and Means Tax Policy Subcommittee and is an active philanthropist, making him a key player on charitable tax issues. The meeting was very positive, and a key discussion point was that the charitable deduction drives additional charitable giving. We look forward to working with Rep. Buchanan on future efforts.

As you may recall, there are two current bills that would create respective universal charitable deductions, the Universal Charitable Giving Act and the Charitable Giving Tax Deduction Act.

The Universal Charitable Giving Act, sponsored by Rep. Mark Walker (R-NC) in the House and Sen. James Lankford (R-OK) in the Senate, would create an above-the-line charitable deduction that would be capped at one-third of the standard deduction ($4,000 for individuals and $8,000 for couples filing jointly).

The Charitable Giving Tax Deduction Act, led by Reps. Chris Smith (R-NJ) and Henry Cuellar (D-TX), would create an above-the-line charitable deduction with no additional caps.

Consider This – Tax Reform 2.0

Over the past several weeks, you probably heard about the “Tax Reform 2.0” effort in the House. House Ways and Means Chairman Kevin Brady (R-TX) has been working with his Republican colleagues to put together a blueprint of the plan that’s expected to be released near the end of this month.

What can we really expect in this process? On the legislative side of the effort, there’s a host of provisions that could be included: technical corrections to last year’s tax bill; expiring provisions in the tax bill that need to be made permanent; extenders; and other issues members want to talk about when they’re back home in their districts. For us, that means provisions like the increased AGI limit, UBIT, and others that were addressed in tax reform could be tackled again.

Then there’s the politics of the effort. The Senate has made it clear it doesn’t intend to carry out a similar exercise, and skeptics see a lot of the provisions as “for election purposes only,” with no real possibility of ever making it through the upper chamber. So, while the policy ideas may be live, the chances of them being enacted this year are slim.

Regardless of the chance of passage though, the blueprint of the plan will stick around, which means most provisions put on the table become fair game for the future. We hope there aren’t any surprises for the sector, but we’re keeping an eye on the effort and weighing in where appropriate. Stay tuned.

Top Reads

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