House Tax Reform Bill Unveiled

• DOI: http://doi.org/10.1002/npc.30399
• Published date: 01 December 2017
• Date: 01 December 2017

THE LAW OF TAX-EXEMPT ORGANIZATIONS MONTHLY

HOUSE TAX REFORM

BILL UNVEILED

The House Committee on Ways and Means, on November 2, made public

its tax reform legislation, the proposed Tax Cuts and Jobs Act (H.R. 1).

Overall Summary

This legislation would lower the individual tax brackets to 12, 25, and 35 per-

cent, while maintaining the 36.9 percent top bracket; reduce the highest corporate

tax rate to 20 percent; nearly double the standard deduction; eliminate the deduc-

tion for state and local income and sales taxes; cap the deduction for state property

taxes at $10,000; repeal the alternative minimum tax; and double the estate tax

exemption and repeals the estate tax on a six-year phase-out basis. Conventional

wisdom has it that some of these law changes would reduce charitable giving.

The retirement savings programs would not be changed. The home mortgage

interest deduction would be preserved for existing mortgages; the deduction for

newly purchased homes would be capped at $500,000. Higher education benefits

would be streamlined.

Tax-Exempt Organizations Law Changes

The proposed alterations and additions to the federal law of tax-exempt orga-

nizations are the following:

• An excise tax of 20 percent on exempt organizations paying compensation in

excess of $1 million, where the employee is one of five highest-compensated

employees (proposed IRC § 4960; Act § 3803).

• An excise tax of 1.4 percent on the investment income of private colleges and

universities, where the institution has at least 500 students and the fair market

value of its investment assets is at least $250,000 per student (proposed IRC

§ 4969; Act § 5103).

• Additional reporting requirements for sponsoring organizations, consisting of

the average amount of grants made from donor-advised funds expressed as a

percentage of asset value and a statement as to whether the organization has

a policy as to the frequency and minimum level of distributions (proposed IRC

§ 6033(k)(4); Act § 5202).

• A rule allowing churches to make statements relating to political campaigns in

the ordinary course of religious services and activities, where the expenses are

de minimis (proposed IRC § 501(s); Act § 5201). (See the Quote of the Month.) © 2017 Wiley Periodicals, Inc.

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DOI:10.1002/npc

Analysis of current developments in tax

and related law for nonprofit organiza-

tions and their professional advisors.

Volume 34 Number 12

December 2017

Also in This issue...

Court Rules Ministers’ Rental

Allowance Is Violation

of Establishment Clause 2

2017–2018 Priority Guidance

Plan Released 3

FY 2018 TE/GE Work Plan Issued 4

$33 Million Charitable Deduction

Lost Because Mortgages Not

Fully Subordinated to Easement 4

IRS and Dissolution Clauses

for Charitable Organizations 5

Foundation’s Involvement

in Rezoning Agreement Held to

Not Give Rise to Indebtedness;

Rental Income Held Not UBI 5

IRS Developing New Application

for Social Welfare Organizations 6

TIGTA Issues Updated Report

on Processing of Certain

Applications 6

Treasury Recommending

Elimination or Mitigation

of Certain Proposals 6

Administration Issues Interim

Final Rules on Insurance

Coverage Religious Exemption 7

Other Recent IRS Private Letter

Rulings 7

IRS Updates Tax Rates, Inflation

Adjustments for 2018 7

Other Developments 8