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House vs Senate Tax Reform Comparison

House vs Senate Tax Reform Comparison


Dec 11, 2017

The Senate has released its version of comprehensive tax reform. The 479-page bill, like the House tax reform bill, proposes massive changes for tax-exempt organizations. Following is a summary of the key provisions that highlight the differences between the two versions. Now the bills are headed to conference committee to work out any differences. The information below will change as the bill progresses. The descriptions below are current as of December 2, 2017.

Proposal

House Tax Reform

Senate Tax Reform

Contributions

Increase the adjusted gross income limitation for cash contributions to public charities from 50% to 60%.

Same as House provision.

Eliminate the special rule that provides a charitable deduction of 80% of the amount paid for the right to purchase tickets for athletic events.

Same as House provision.

Index the charitable standard mileage rate for inflation.

Not addressed.

Unrelated Business Income Tax

Tax-exempt entities will be required to include the amounts and value provided to their employees for transportation fringe benefits and on-premises gyms and other athletic facilities as unrelated business income items.

Not addressed.

All entities, including Code Section 115 government-sponsored entities, would be subject to unrelated business income tax rules.

Not addressed.

Fundamental research income will only be excluded from unrelated business income when the results are freely made available to the public.

Not addressed.

No provision.

Organizations that carry on more than one unrelated trade or business would need to separately calculate unrelated business taxable income, including determination and use of any net operating loss, for each trade or business.

Excise Tax

A tax-exempt organization would be subject to a 20% excise tax on compensation in excess of $1 million paid to any of its five highest paid employees for the tax year.

Same as House provision.

For private foundations, the excise tax rate on net investment income would be streamlined to a single rate of 1.4%.

Not addressed.

An art museum claiming private operating foundation status would not be recognized as such unless it is open to the public for at least 1,000 hours per year.

Not addressed.

Certain private colleges and universities would be subject to a 1.4% excise tax on net investment income. This provision would only apply to private colleges and universities that have at least 500 students and assets valued at the close of the preceding tax year of at least $250,000 per full-time student.

Same as House provision with slightly different thresholds.

Private foundations would be exempt from the business holdings excise tax under certain conditions.

Not addressed.

Bond Reforms

Interest on newly issued private activity bonds would be included in income and therefore subject to tax.

Not addressed.

Advance refunding bonds (refunding bonds issued more than 90 days before the redemption of the refunded bonds) would be taxable. Interest on current refunding bonds would continue to be tax-exempt.

Same as House provision.

Miscellaneous

Churches, after the date of enactment, would be permitted to make statements relating to political campaigns as long as the speech is in the ordinary course of the organization’s business and its expenses are de minimis.

Not addressed.

Donor-advised funds would be required to disclose annually their policies on inactive donor-advised funds as well as the average amount of grants made from their donor-advised funds.

Not addressed.

                                                                                                                                                                                                                                                                                                                 

If you would like to discuss these proposed tax changes and how they may impact your nonprofit organization, please contact Wipfli’s Tax Team today.

Author(s)

Terri Rexrode
Terri Rexrode, CPA
Director
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