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senate Bill S. 3332

Restoring Nonprofits’ Federal Tax Deduction for Employee Benefits

Argument in favor

Nonprofit organizations don’t have the budgets or staff to handle the new tax rule requiring them to pay federal taxes on employee benefits. Moreover, imposing taxes on “nonprofit” organizations makes it harder for them to lift up their communities.

Laura's Opinion
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09/08/2018
I support this for non-profits but not churches.
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Kelli's Opinion
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09/08/2018
The vast majority of churches run on a bare minimum budget. The showy ones with mansions and airplanes are a very small minority. Please don’t throw all churches under the bus for the sins of the few. Same goes for nonprofits that provide social services, they operate on bare bones budgets. One-size-fits-all assumptions about anything, when based on hearsay, are not solid foundations. A few minutes of sincere research is worth everyone’s effort.
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JTJ's Opinion
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09/08/2018
This is an unintended consequence of the new tax law that needs to be rectified.
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Argument opposed

The new tax rules create greater parity between nonprofit and for-profit organizations in order to simply the tax code for all organizations. Rolling back the new rules in pieces defeats the purpose of the new, simpler tax code.

Thelma's Opinion
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09/08/2018
Religious entities should pay taxes, period. If they are going to wade into political battles, they should pay taxes. If their leadership is going to buy mansions, airplanes, and give political contributions, they should pay taxes. Taxes pay for the roads they drive on, the emergency systems they count on, the infrastructure they need. Enough is enough. They bring in money, they should pay taxes on it.
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Lexpost's Opinion
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09/08/2018
Not all nonprofits are beneficial to our country and civil society. Political Action Committees (PAC’s) are also created under the guise of being non profit, but it would seem that, in order to create favorable conditions for their candidates, they spend inordinate amounts of money sowing discord, enmity among the citizenry, suspicions of treasonous intents fracturing the electorate and, I suspect, are the true targets of this legislation. It seems to me that this is overly broad and I can’t support it as is.
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burrkitty's Opinion
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09/08/2018
Tax churches. The whole concept of what a non-profit is needs to be redefined. It shouldn’t include faith-based organizations, religious schools, missions or missionary organizations. It also shouldn’t include political organizations like pacs and superfund organizations. Basically, if it files anything other than a 990-N, it should be paying taxes.
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bill Progress


  • Not enacted
    The President has not signed this bill
  • The house has not voted
  • The senate has not voted
      senate Committees
      Committee on Finance
    IntroducedAugust 1st, 2018

What is Senate Bill S. 3332?

This bill — known as the Lessening Impediments from Taxes (LIFT) for Charities Act — would eliminate a tax provision that requires charities, churches, and other traditionally tax-exempt organizations to pay federal taxes on employee benefits. It’d amend the Internal Revenue Code to modify how the unrelated business taxable income of tax-exempt organizations is determined, so that certain fringe benefits for which a tax deduction isn’t currently allowed -- such as transportation benefits, parking, or an on-premises athletic facility -- would no longer be taxed

Impact

Nonprofit organizations; churches; International Revenue Code; and the Treasury Department.

Cost of Senate Bill S. 3332

A CBO cost estimate for this bill is unavailable.

More Information

In-DepthSen. James Lankford (R-OK), introduced this bill to protect churches, charities, and other non-profit organizations from a provision in the new tax law that would tax some employee benefits for the first time. The LIFT Act would repeal a section in the tax code that would require some tax-exempt organizations to pay federal taxes on employee benefits such as parking, meals, or transportation benefits for the first time by filling out IRS Form 990s (which many churches have never had to fill out before):

“Tax reform was designed to simplify tax filing, not make it more complicated or burdensome. By definition, tax-exempt organizations do not typically file tax returns. But, a glitch in last year’s tax reform bill would become a huge burden to churches, charities, and non-profit organizations. Most churches and non-profits… especially in rural locations, are not equipped to handle major tax code changes. Non-profit, tax-exempt entities are designed to better our communities and our nation. I look forward to joining my colleagues to find ways to address this unfortunate situation. [This bill is a] common-sense solution that protects the non-profit backbone of our society, as they give back to our communities in ways that are invaluable to us as a nation.”

House Ways and Means Chairman Kevin Brady (R-TX) — one of the architects of the Tax Cuts and Jobs Act that created this new rule — defended the change, arguing that it will simplify the tax code when it comes to how workers are compensated. Through his spokesman, Rob Damschen, Rep. Brady states:

“The Tax Cuts and Jobs Act included provisions that provided greater parity in the tax treatment of different types of employee compensation. These provisions apply to both employers that are taxable entities and those that are tax-exempt entities. Providing this greater parity helps to reduce the extent to which decisions about the elements included in the employee compensation package are driven by tax consideration.”

In response to Rep. Brady’s claims, Mike Batts, chairman of the board of the ECFA, says:

“The whole idea of tax exemption for nonprofit organizations that are doing charitable, religious and educational work is for them not to be on the same playing field as for-profit businesses when it comes to taxes, in order to incentivize the good work they do to make our society better.”

The Union of Orthodox Jewish Congregations of AmericaCal Nonprofits, and the Evangelical Council for Financial Accountability (ECFA) support this bill. EFCA has circulated a position statement that has been signed by over 2,600 churches and nonprofits, advocating for the provisions’ repeal by either legislation or action by the Treasury Department. In this position statement, ECFA states:

“This new tax was purportedly added to the law to put tax‐exempt employers on the same footing as taxable employers with respect to employer‐provided parking. (Taxable employers are no longer able to deduct the cost of certain parking benefits provided to their employees.) This premise is flawed at its core. The very purpose of tax exemption for nonprofit organizations is not to have their charitable, religious, and educational activities on the same footing as taxable businesses because of their important work and the inherent challenges associated with raising money to support such work. Furthermore, the federal income tax on unrelated business income is intended to apply to income generated from unrelated commercial activities conducted by tax‐exempt organizations. Providing parking to employees does not constitute generating income from an unrelated commercial activity and there is no sound policy basis for applying a tax intended for commercial activity to the essential element of parking by employees of tax‐exempt organizations. The idea that tax‐exempt organizations should be taxed on parking they provide to their employees is highly inappropriate and must be stopped. [emphasis original]”

There are no cosponsors of this bill.


Of NoteCurrently, the new tax code will require churches and nonprofits to begin paying a 21% tax on employee benefits such as parking, transportation, and other related benefits. This provision will cause nonprofit organizations to file federal income tax returns and pay unrelated business income tax on the benefits they provide to employees. Additionally, many nonprofit employers affected by this new law will also be required to file state income tax returns, possibly incurring a state income tax as a result of the new federal income tax.

Compliance with this new rule could cost churches’ and nonprofits’ somewhere in the tens of millions of dollars annually.

A range of nonprofits, including the Boys & Girls Clubs of America, Goodwill Industries, the YMCA, and the National Council of Nonprofits have requested that the new tax obligation on employee benefits at least be delayed, arguing that it is unfair to ask them to pay a levy many of them still don’t fully understand.


Media:

Summary by Lorelei Yang

(Photo Credit: iStock.com / Roman Tirapolsky)

AKA

Lessen Impediments From Taxes for Charities Act

Official Title

A bill to amend the Internal Revenue Code of 1986 to repeal the inclusion of certain fringe benefit expenses for which a deduction is disallowed in unrelated business taxable income.

    I support this for non-profits but not churches.
    Like (86)
    Follow
    Share
    Religious entities should pay taxes, period. If they are going to wade into political battles, they should pay taxes. If their leadership is going to buy mansions, airplanes, and give political contributions, they should pay taxes. Taxes pay for the roads they drive on, the emergency systems they count on, the infrastructure they need. Enough is enough. They bring in money, they should pay taxes on it.
    Like (111)
    Follow
    Share
    Not all nonprofits are beneficial to our country and civil society. Political Action Committees (PAC’s) are also created under the guise of being non profit, but it would seem that, in order to create favorable conditions for their candidates, they spend inordinate amounts of money sowing discord, enmity among the citizenry, suspicions of treasonous intents fracturing the electorate and, I suspect, are the true targets of this legislation. It seems to me that this is overly broad and I can’t support it as is.
    Like (99)
    Follow
    Share
    Tax churches. The whole concept of what a non-profit is needs to be redefined. It shouldn’t include faith-based organizations, religious schools, missions or missionary organizations. It also shouldn’t include political organizations like pacs and superfund organizations. Basically, if it files anything other than a 990-N, it should be paying taxes.
    Like (75)
    Follow
    Share
    The vast majority of churches run on a bare minimum budget. The showy ones with mansions and airplanes are a very small minority. Please don’t throw all churches under the bus for the sins of the few. Same goes for nonprofits that provide social services, they operate on bare bones budgets. One-size-fits-all assumptions about anything, when based on hearsay, are not solid foundations. A few minutes of sincere research is worth everyone’s effort.
    Like (40)
    Follow
    Share
    This is an unintended consequence of the new tax law that needs to be rectified.
    Like (20)
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    Share
    The notion that all non profit organizations are cash strapped is ridiculous.
    Like (17)
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    PACs operate under the guise of being non profit organizations. Some church leader get involved in politics. The evangelicals do not understand what separation of Church and State mean. All Americans should not be forced to follow their beliefs.
    Like (16)
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    Let's get this done.
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    "Simplifying the tax code" is not a sufficient reason to take money away from organizations that often don't have enough of it to begin with.
    Like (6)
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    This is a great way for "non/profits," that are really small businesses, from being responsible. A great example are the super large multi- million dollar churches. Of course it hurts real non-profits.
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    Churches want to play politics they need to pay the price
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    Because non profits are who bridge the gap that is left when for-profit Enterprises get stingy selfish and refuse to pay taxes, and we have sure seen a lot of that in the last 40 years do not overburden nonprofits or nobody will be there to save your children
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    Give unto Caesar what is Caesar’s. Pay your share or forfeit the benefits of our republic.
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    The new tax bills are for wallstreet and 1%ers...only.. the working class really getting royally screwed
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    Remove PACs from being nonprofit. Repeal Citizens United.
    Like (3)
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    I would vote in favor of this bill if it clarified that super PACs are excluded from this tax deduction.
    Like (3)
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    Taxation is theft. The more we can reduce or eliminate it, the better.
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    No, until someone can explain the logic behind how large corporations such as the Catholic Church, Church of Scientology, and non-profit hospitals like UPMC in Pittsburgh are allowed to operate and not pay taxes such as this one. Everyone, even non-profits, should have to pay their fair share.
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    The republicans tax plan to aid the wealthiest Americans was not well thought out and just rushed into place. Kinda like how children act when opening presents on Christmas morning.
    Like (2)
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