Bipartisan Support Demonstrated for Repeal of Tax on Nonprofit Transportation Benefits

Bipartisan Support Demonstrated for Repeal of Tax on Nonprofit Transportation Benefits

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Washington, DC – In response to the favorable recommendation by the House Ways and Means Committee of H.R. 3300, the “Economic Mobility Act of 2019,” National Council of Nonprofits Vice President of Public Policy David L. Thompson issued the following statement:

“Today was a victory for common sense and a strong show of respect for America's nonprofits. While the final vote in the House Ways and Means Committee on the overall bill was divided, there was near-universal bipartisan agreement that the new tax on nonprofits for transportation benefits they provide their employees must go. Committee members of both parties made strong statements in favor of repeal and voted that way in different acts of political theater. We urge the full House and the Senate to agree to agree for a change and take up this repeal before the next payments on this illogical tax on nonprofits, including houses of worship, come due.”

Background

New Internal Revenue Code Section 512(a)(7) imposes an unrelated business income tax on nonprofits for their expenses providing transportation benefits to their employees. Because of this provision, nonprofit employers, including houses of worship, now must pay a 21-percent tax on the amounts they spend providing transit passes to their employees. The tax also applies to the costs that charitable nonprofits, houses of worship, and other nonprofit organizations pay to provide parking for their employees. Further, these organizations must pay this new tax not only on the amount of direct expenditures they make, but also on the amount that their employees ask to have withheld from their own paychecks on a pre-tax basis, that is, voluntary salary reduction agreements made pursuant to federal law. Read more:

  • Submitted Testimony of the National Council of Nonprofits, for the hearing, “Ending the TCJA Tax on Houses of Worship, Charities, and Nonprofits,” before the House Ways and Means Subcommittee on Oversight, originally scheduled for June 19, 2019. (Hearing cancelled.)
  • Nonprofit Tax Day Is Upon Us, David L. Thompson, National Council of Nonprofits blog, May 6, 2019. (“The phrase ‘nonprofit tax day’ may sound like an oxymoron or punchline of a joke, but it’s real. Tax-exempt organizations must pay significant new taxes to the U.S. Treasury (and to some states) by May 15 if they operate on a calendar-year basis.”)
  • Letter to Chairmen Neal and Grassley, signed by more than 600 Organizations, April 9, 2019.

Strong Bipartisan Support in Congress for Repeal

Section 512(a)(7) is terrible tax policy, and there is no known support in the House or the Senate for retaining it. Late last year, the House voted to repeal Section 512(a)(7) as Section 505 of the year-end tax bill. Three current bills in the House would repeal the transportation tax on nonprofit organizations: HR 1223 sponsored by House Majority Whip Clyburn (D-SC), HR 513 sponsored by Representative Conaway (R-TX), and HR 1545 sponsored by Representatives Walker (R-NC) and Suozzi (D-NY). In the Senate. Senators Lankford (R-OK) and Coons (D-DE) introduced the LIFT for Charities Act (S.632) and Senators Cruz (R-TX) and Shaheen (D-NH) introduced the Preserve Charities and Houses of Worship Act (S.1282), each of which would repeal the tax on nonprofit transportation benefits.

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