Congressional Bills have been
introduced in both the U.S. House and Senate that would repeal a provision in
the country’s new tax law that makes churches and other non-profits vulnerable
to having to pay new taxes.
Sen. James Lankford (OK-R) and Sen.
Ted Cruz (TX-R) last week introduced separate bills designed to eliminate new
tax burdens that many churches and non-profits have been concerned about since
the passing of the Republican-backed tax law last year.
Lankford’s bill, which was introduced
in the House by Rep. Mark Walker (NC-R) is called the Lessening Impediments
from Taxes for Charities Act. The
legislation would repeal the provision that requires some tax-exempt organizations
to pay federal taxes on employee fringe benefits such as parking, meals and
transportation for the first time. The
provision requires churches that have never had to fill out an IRS Form 990 to
begin filing the form. “Tax reform was
designed to simplify tax filing, not make it more complicated or burdensome,”
Lankford said in a statement. “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
in Oklahoma, especially in rural locations, are not equipped to handle major
tax code changes,” he added. “Non-profit,
tax-exempt entities are designed to better our communities and our nation.” A representative from Lankford’s office told Christian Post that they are hopeful
that the bill will receive a vote on the floor of the Senate, but added that no
date for a vote has been set.
Cruz introduced the Protect Charities
and Houses of Worship Act. “Last year,
Congress passed historic tax cuts which are expanding opportunity and allowing
hardworking men and women to keep more of their hard-earned money in their
pockets,” Cruz said in a statement. “While
millions of middle-class Americans have seen significant tax relief, charities,
churches, and other tax-exempt organizations have been required to pay federal
taxes on employee fringe benefits. My
bill would repeal this requirement, and allow these charitable organizations to
allocate funds and donations for their intended purpose of helping people,
rather than for paying taxes to the federal government.”
A review of the two bills shows that
the Cruz bill repeals paragraphs six and seven of Section 512 of the IRS Code,
while the Lankford/Walker bill only specifically repeals paragraph seven.
Paragraph six creates the special tax
reporting rule for unrelated business taxable income and paragraph seven goes
into detailing what constitutes unrelated business taxable that is “disallowed
fringe,” such as parking and transportation.
Paragraph seven has the specific language that states that “unrelated
business taxable income of an organization shall be increased by any amount for
which a deduction is not allowable.” Repealing paragraph seven could render the
threat from paragraph six moot because the rule as explained in paragraph seven
won’t be imposed.
House Ways and Means Chairman Kevin
Brady (TX-R) has defended the provision to tax fringe benefits, saying that it
is a matter of fairness. “It is about
treating a non-profit hospital the same as you treat a for-profit hospital,” Brady
was quoted as saying recently. “We think
the parity issue, the fairness issue is right.”
The non-profit accrediting agency
Evangelical Council for Financial Accountability (ECFA) has spoken out against the
provision and has told lawmakers that the provision is “flawed to its core.” “The very purpose of tax exemption for non-profit
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,” a July 11 ECFA letter to members of Congress states. “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.”
Rev.
Dr. Kenneth L. Beale, Jr.
Chaplain
(Colonel-Ret), U.S. Army
Pastor, Ft. Snelling Memorial Chapel
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