Finance

Brady amends his tax package to help nonprofits

Greg Nash

House Ways and Means Committee Chairman Kevin Brady (R-Texas) is putting forth an amendment to his new tax package that would repeal a portion of the 2017 tax-cut law that imposes a tax on nonprofits for certain benefits they offer employees.

The repeal of the tax is a part of Brady’s “manager’s amendment” to his bill, which the House Rules Committee proposed to be considered as adopted. The legislation is expected to be considered in the House this week, but it looks unlikely to pass the Senate.

The 2017 tax law instructs nonprofits for the first time to pay an unrelated business income tax of 21 percent on expenses they incur for providing employees with benefits such as transit passes and parking spaces. Nonprofits have been pushing for the provision to be repealed, arguing that it would result in them having less money to further their charitable missions.

{mosads}Brady had defended the provision earlier in the year, arguing that the tax on nonprofits’ transportation benefits provides parity with for-profit companies. But now he’s calling for it to be repealed, saying that he wants to avoid uncertainty for nonprofits.

“We are proactively eliminating any potential uncertainty for our churches and community organizations so nothing distracts them from their core mission,” Brady said in a statement.

While Brady’s bill may not ultimately become law, there has been bipartisan criticism of the tax on nonprofits’ expenses for transportation benefits.

Sens. James Lankford (R-Okla.) and Chris Coons (D-Del.), the leaders of the Senate Appropriations subcommittee with jurisdiction over the IRS, sent a letter to Treasury Secretary Steven Mnuchin earlier this week urging him to delay implementation of the tax until one year after regulations were issued on it.

“We’re encouraged by the bipartisan recognition of the damage that a new 21 percent tax would have on nonprofits’ ability to serve their communities – forcing them to make an impossible choice between diverting resources from their mission to pay a new tax or cutting benefits for employees who are essential to their work,” David L. Thompson, vice president of public policy at the National Council of Nonprofits, said in a statement.

Others criticized Brady’s move.

Kyle Pomerleau, director of the center for quantitative analysis at the right-leaning Tax Foundation, said on Twitter that the move to repeal the tax was “unfortunate.”

He said that the provision in the 2017 tax law “broadened the income tax to include a greater share of worker compensation.”

Updated at 11:26 a.m.

Tags Chris Coons James Lankford Kevin Brady Steven Mnuchin
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