The Senate Finance Committee continues its markup of the Tax Cuts and Jobs Act today with an eye toward advancing a bill to the Senate floor this week and holding a floor vote just after Thanksgiving.
As Finance Committee Chairman Orrin Hatch (R-UT) continues the markup, ASAE weighed in yesterday with a letter urging Hatch and congressional tax-writers to remove a provision in the Senate bill that would tax royalty income derived from the licensing of an organization’s name or logo.
“As you continue to modify the tax bill to create more certainty for America’s job creators, we respectfully ask you to remove this provision to tax royalty income that helps associations and other tax-exempt organizations fulfill their exempt purpose, or at the very least, modify the provision to ensure that royalties of a tax-exempt entity will not be taxed when 1) there is insubstantial service offered by the tax-exempt organization in return for the payment, and 2) when income generated from royalty agreements does not comprise greater than 20% of an organization’s gross income,” ASAE President and CEO John Graham said in the letter.
ASAE urged associations that are concerned about the provision targeting royalty income to use its letter as a model for their own comments to Senate tax-writers.
Earlier in the week, ASAE was pleased to note that Hatch modified his chairman’s mark to eliminate a provision dealing with nonqualified deferred compensation plans. ASAE and many other groups had made the case that eliminating these deferred compensation plans would hurt nonprofit employees who in good faith entered into contractual agreements with their employers, and are counting on this benefit as part of their retirement planning. The provision would also hurt nonprofit employers in attracting and retaining top talent, ASAE said. While ASAE is pleased that this provision has been removed from the Senate bill (and was removed from the House bill as well), we will need to stay vigilant as the tax bill advances to ensure it doesn’t resurface.
While the House passed its tax bill easily today, Senate passage is more tenuous. Hatch made a decision earlier this week to include repeal of the Affordable Care Act’s individual mandate in the bill, and announced that the individual tax cuts in the plan would be temporary, expiring at the end of 2025 to comply with Senate rules limiting the impact of legislation on the federal deficit. Corporate tax cuts would be left permanent.
Senate leaders can ill afford any Republican defections from the tax effort but on Wednesday learned that Sen. Ron Johnson (R-WI) won’t support the bill. Sens. Susan Collins (R-ME), Bob Corker (R-TN), Lisa Murkowski (R-AK) and John McCain (R-AZ) are other Republican senators who are considered on the bubble when it comes to the Senate tax bill.