In This Week's Edition of Snapshot...
- House Ways & Means Subcommittee Hearing on SALT
- Repeal of UBIT Fringe Benefits Provision Passes Committee
- Change in the Private Foundation Excise Tax Passes Committee
- Supreme Court Rules on Census Citizenship Question
- Wayfair and Tax-Exempt Organizations One Year Later
- Colorado Mandates Student Loan Forgiveness Awareness
On Tuesday, the House Ways and Means Select Revenue Measures Subcommittee held a hearing titled “SALT Deduction Harm Communities, Schools, First Responders, and Housing Values”. Rep. Mike Thompson (D-CA), Chairman of the subcommittee, called the hearing to explore how the state and local tax (SALT) cap has harmed communities, schools, first responders, and housing values.
The federal Tax Cuts and Jobs Act allows individuals to deduct up to $10,000 of state and local property taxes and either income or sales taxes. Before the 2017 tax overhaul, the SALT deduction was not capped. A day before the hearing, the Joint Committee on Taxation (JCT) issued a background paper that said repeal of the SALT deduction cap starting in 2019 would largely benefit high-income taxpayers.
Many Democrats on the committee, and many of the local-government officials who testified, said that people in their communities hurt by the SALT deduction cap may have high incomes, but they also have high costs of living. Several Democrats suggested that Congress could raise the top individual tax rate, which was cut from 39.6 percent to 37 percent in the 2017 tax law, while repealing the SALT deduction cap—The Hill reported. Another witness, the Tax Foundation’s Nicole Kaeding, said repealing the SALT cap on individuals would make the tax code less progressive and that raising the corporate tax rate would slow the U.S. economy.
Earlier this year, Rep. Bill Pascrell (D-NJ) introduced The Stop the Attack on Local Taxpayers (SALT)Act of2019 (H.R.1142) that would raise the top individual tax rate to 39.6 percent while restoring the full SALT deduction. His office on Tuesday released a JCT estimate finding that the increase in the top individual rate would pay for about one third of the cost of repealing the SALT deduction cap.
Legislation to undo the cap is unlikely to become law this year, since it would be opposed by the Republican-controlled Senate. But Democrats also have yet to come to a consensus on what legislation they would want to take up in the House.
At the subcommittee’s second hearing of the day, held for non-committee members to comment on the cap, 16 Representatives mostly from coastal states testified against the $10,000 deduction’s cap.
Last week the House Ways and Means Committee voted 22-19 in favor of The Economic Mobility Act of 2019 (H.R. 3300). Section 401 of this bill would repeal Section 512(a)(7) of the Internal Revenue Code, also known as the Unrelated Business Income Tax (UBIT) fringe benefits provision, enacted in the 2017 Tax Cuts and Jobs Act of 2017 (P.L. 115-97). This provision imposed a 21 percent tax on exempt organizations who offer qualified transportation fringe benefits to their employees.
The Council along with other organizations in the nonprofit sector have called for a repeal of this provision which diverts money from charitable programming and increases the cost of being an employer. Ahead of the markup, the Council submitted a letter to the Committee urging members to support section 401.
Also last week on the same markup, the House Ways and Means Committee voted 25-17 in favor of The Taxpayer Certainty and Disaster Relief Act of 2019 (H.R. 3301). Section 306 of this bill would change the Private Foundation Excise Tax from a two-tiered level of 1% and 2% to a flat 1.39%.
The Council on Foundations deems it a positive action that the Committee voted in favor of streamlining the process for calculating the private foundation excise tax and will continue to advocate for a flat 1% rate, the Council finds the Committee’s vote as a step in the right direction.
The Supreme Court has issued its ruling in U.S. Department of Commerce v. New York, the case challenging the inclusion of the citizenship question on the 2020 Census. The decision is complicated, but the bottom line is that the question is out for now! From the opinion: "we cannot ignore the disconnect between the decision made and the explanation given.... If judicial review is to be more than an empty ritual, it must demand something better than the explanation offered for the action taken in this case. In these unusual circumstances, the District Court was warranted in remanding to the agency, and we affirm that disposition."
The Council offers the following resources to help funders understand the implications of today’s SCOTUS decisions:
- Conference call TODAY – 2 p.m. ET RSVP here
Hosted by the Funders Census Initiative for any interested stakeholders to discuss this Supreme Court decision, nonprofit sector responses, and ways to take action with the Leadership Conference on Civil and Human Rights, ACLU, FIRM, Color of Change, NALEO Educational Fund, and MALDEF.
- Funder Debrief call - July 1, 4 p.m. ET. RSVP here
Hosted by the Funders Census Initiative, Democracy Funders Collaborative Census Subgroup, and United Philanthropy Forum for a special funder debrief on the decision. Representatives from the Census Counts Campaign, NALEO, and AAJC will join to review what the decision means for philanthropic collective efforts moving forward.
- Decision Day Funder Resources - from the Census Funders Initiative
Exclusive from our colleagues at the National Council of Nonprofits.
One year after the landmark decision in South Dakota v Wayfair recognizing the power of states to impose sales taxes on sellers outside their jurisdictions, most states with a sales tax have taken action to extend their taxto reap the new source of revenue. Of the states with a sales tax, all but three (Florida, Kansas, and Missouri) have now set some economic nexus standard to require out-of-state sellers to collect and remit sales tax. Nonprofits and foundations selling goods and services, such as books, or event tickets for conferences out of state may be required to collect and remit these taxes, depending on how state laws are structured. Additionally, states are beginning to pass and implement marketplace facilitator or provider requirements for online marketplaces like Amazon, Etsy, and eBay, that nonprofits and foundations often use to purchase goods. Nonprofits buying goods and services from marketplace sellers or other out-of-state retailers may see an increase in costs as these taxes are imposed.
A new law in Colorado requires state agencies to notify, educate, and promote the benefits of student loan forgiveness programs and repayment plans, including Public Service Loan Forgiveness (PSLF), to teachers, public servants, and the public. Beginning in 2020, and annually thereafter, the State “shall develop informational materials” and provide that information to key government departments for distribution to state employees, so they may take advantage of programs that provide borrowers loan forgiveness after making qualifying repayment plans. The information will also be made publicly available online so employees at charitable nonprofits and other public service organizations may also learn about and benefit from the programs. Access to public student loan forgiveness can be a key inducement for nonprofit and foundation employers to emphasize when recruiting employees to join in advancing their missions of serving the public.