Tax Cuts and Jobs Act
H.R. 1
Section-by-Section Summary

After weeks of closed-door meetings, House Republicans on Nov. 2 rolled out their much-anticipated tax bill and it includes a number of provisions that should look familiar to associations, as well as some insurance and benefits provisions that are being seen for the first time that we will continue to examine.

The tax bill is, of course, complex and contains a vast number of tax changes and offsets to pay for the deep tax cuts for corporations and individuals that are at the root of the legislation. Some provisions in the bill apply directly to the tax-exempt sector and would change the tax treatment of some tax-exempt activities. For example, a provision in the bill would impose a 20% excise tax on tax-exempt organizations’ compensation in excess of $1 million paid to any of its five highest-paid employees. Another provision stipulates that tax-exempt organizations’ income from research is only excluded from UBIT if it’s made available to the public.

While these provisions will be of concern to some, the tax bill introduced this week is also notable for what is absent in the legislative text. For example, there is no attempt (at the moment) to expand the UBIT statute to tax royalty income or to change the tax treatment of certain qualified sponsorship payments. Sponsorship payments and royalties in particular were identified in the 2014 tax reform discussion draft authored by then-Ways and Means Chairman Dave Camp (R-MI). That they are not in the bill text introduced in the House is significant. Thanks to the hundreds of associations who signed onto ASAE’s letter addressing the impact of tax reform on associations that was delivered earlier this week to the tax-writing committees.

While there are not a great number of provisions in the bill impacting associations, ASAE views this tax reform effort as a process – one that does not stop with the House bill’s introduction and could evolve during markup or during negotiations with the Senate, which is preparing its own bill.

In addition to the offsets mentioned above, other provisions in the House tax bill impacting tax-exempt organizations include:

• A 1.4% excise tax on net investment income of private colleges and universities;
• A provision effectively repealing the so-called Johnson amendment, permitting churches to engage in political speech;
• A provision repealing the deduction for lobbying expenses at the local level

As stated earlier, though a tax bill has been introduced, the path to enacting an overhaul of our tax system is complicated and changes could be made to the bill along the way. The Senate tax bill could very well look substantially different than the House bill. ASAE and the association community need to be active participants in the tax reform process.

Should other tax-exempt activities become part of the tax reform conversation, the association community along with ASAE will need to mount an aggressive and immediate response. ASAE is prepared to protect those important revenue-generating activities, and we will need your involvement and support to make our case.

Stay tuned for more developments on this critical issue.