Nonprofit Finance and Tax Reform Issues

Finance and Tax Reform

“ASAE opposes any increased or additional federal income tax burden on associations. ASAE supports the “relatedness test” — continuation of the present system for determining areas of tax-exempt organization activity that are taxable because they are not related to the purposes for which exempt status was granted. Association activities, which benefit not only association members but also the entire United States economy and society, include education, publications, government affairs, conventions, trade shows, standards-setting, credentialing, research, joint marketing, charitable and community service, and other products and services. Any new tax for associations would threaten those activities and might require replacement of the programs by tax-supported government programs.” – ASAE Board Approved Position Statement #5a

Tax Reform

Congressional leaders maintain there is no hope of advancing comprehensive tax reform until after the 2016 presidential election, but they are laying a foundation for overhauling the tax code next year when a new administration will take office. In late June, House Republicans unveiled their blueprint for enacting tax reform, a key piece of the Republicans’ “Better Way” policy platform touted by Speaker Paul Ryan (R-WI). The GOP tax blueprint is consistent with Republican calls for lowering rates for individuals and corporations and moving to a business consumption tax instead of an income tax-based system. The Republican plan would lower top rates to 20 percent for corporations and 33 percent for individuals. It would also lower rates for small businesses organized as pass-through entities to 25 percent. Ways and Means Committee Chairman Kevin Brady (R-TX) and other House Republicans have been pushing for lower rates that discourage U.S. businesses from moving their operations (and profits) overseas.

A huge range of stakeholders, including many associations, are interested to see how Republicans would treat some of the revenue-generating activities of tax-exempt organizations. The GOP blueprint doesn’t mention unrelated business income tax (UBIT) exclusions in the current tax code. ASAE opposed provisions in a 2014 discussion draft authored by former Ways and Means Chairman Dave Camp (R-MI) that would have changed the tax treatment of royalty income and certain qualified sponsorship payments, which many associations rely upon to carry out their tax-exempt purpose.

Charitable Deduction

An issue within tax reform that ASAE has been working diligently on is protecting the charitable deduction. President Obama’s Fiscal Year 2016 budget proposed a cap on all tax deductions for wealthy taxpayers, including the charitable deduction. President Obama argues this change will only impact taxpayers in the top 3 percent. This is the seventh year that the Obama administration budget has moved to cap the charitable deduction.

ASAE has signed on to multiple letters from the Charitable Giving Coalition to Congress at each step of the tax reform process in order to explain the value of the charitable deduction to society. ASAE will continue to monitor this issue closely.