Tax Reform Legislation Signed Into Law

• Date: 01 February 2018
• DOI: http://doi.org/10.1002/npc.30424
• Published date: 01 February 2018

THE LAW OF TAX-EXEMPT ORGANIZATIONS MONTHLY

TAX REFORM

LEGISLATION SIGNED

INTO LAW

Congress, on December 20, completed its work on the tax-reform legisla-

tion (H.R. 1). President Trump signed the measure into law on December 22 (Pub.

L. 115-97).

The act contains 14 provisions directly applicable with respect to the law of

tax-exempt organizations and charitable giving. Notable are the number of provi-

sions in the House and/or Senate bills that did not survive the act’s enactment;

there are 15 of them.

Overall Summary of Act

The act retains the seven income tax brackets, albeit lowering the top bracket

to 37 percent; reduces the corporate tax rate to 21 percent; nearly doubles the

standard deduction; provides income tax deduction for state and local income,

sales, and property taxes, capped at $10,000; provides a deduction of 20 percent

for qualified business income from pass-through entities; increases the estate and

gift tax unified credit exclusion amount to $10 million; increases the generation-

skipping tax exemption amount to $10 million; repeals the corporate alternative

minimum tax; increases the alternative minimum tax exemption amount for indi-

viduals; and repeals the Patient Protection and Affordable Care Act’s individual

shared responsibility payment (aka, the individual mandate).

Tax-Exempt Organizations Law Changes

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

are the following:

• An excise tax of 21 percent on exempt organizations paying compensation

in excess of $1 million, and/or paying excess separation amounts, where the

employee is one of the five highest-compensated employees (new IRC § 4960;

Act § 13602). An exception was added during the conference process for the

portion of compensation paid for the performance of medical or veterinary

services. This provision took effect for years beginning after 2017. (See the

article beginning on p. 8 [or 7].)

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

and universities, where the institution has at least 500 students (where more

than 50 percent of them live in the United States) and the fair market value

of its investment assets, and those of related entities, is at least $500,000 per © 2018 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 35 Number 2

February 2018

Also in This issue...

Joint Committee Estimates

Budget Effects of Tax Cuts and

Jobs Act 4

Ninth Circuit Affirms

Parks

Case 4

Treasury, IRS Seeking Comments

on Proposed Donor-Advised

Fund Rules 4

Still Another Way to Lose an

Easement Contribution Deduction 5

Court Summarizes Fiduciary

Duties Involving Supporting

Organizations 6

Particular Services Rule Defeats

Tax Exemptions 7

Other Recent IRS Private Letter

Rulings 7

A Look at the Tax for Paying

“Excessive” Compensation 8

Other Development 8