Maloney Unveils Major New Nonprofit Relief Bill
n March 29th Congress Member Carolyn B. Maloney (D-NY), vice chair of the US Congress Joint Economic Committee (JEC), unveiled new legislation, the Nonprofit Relief Act of 2019, to undo damage caused by the 2017 Tax Act. Provisions in the law divert money away from charitable missions through higher costs and unfair tax treatment, Maloney explained.
Along with her new bill, Maloney unveiled a new report by her Joint Economic Committee staff, detailing the harmful new costs that nonprofits are now incurring due to the 2017 Tax Act. Maloney was joined by leaders from New York’s nonprofit sector during the announcement.
“I’m proud to introduce the Nonprofit Relief Act of 2019 to undo the costly new burdens nonprofits are facing as a result of the 2017 GOP tax scam so that more money is spent on nonprofits’ core charitable missions,” said Rep. Maloney. “As this new report and these nonprofit leaders make clear, the 2017 Tax Act is causing considerable harm to the nonprofit sector by increasing administrative costs and creating unfair tax situations. Congress needs to correct this soon or many nonprofits will be forced to cut back services or close altogether. That would be a disaster.
“I also want to applaud House Majority Whip Jim Clyburn (D-SC) for his bill, the Stop the Tax Hike on Charities and Places of Worship Act (HR.1223), which would repeal the 21% tax charities must now pay for employee benefits such as mass transit subsidies, parking and meals. Together, our two bills will do much to reverse the harm the 2017 Tax Act is causing nonprofits.”
The following charity administrators made statements applauding Maloney’s announcement: Sharon Stapel, president & executive director of the Nonprofit Coordinating Committee of New York; Allison Sesso, executive director of the Human Services Council of New York; Louisa Chafee, senior vice president of External Relations and Public Policy, UJA-Federation of New York; Beth Shapiro, executive director of Citymeals on Wheels; and Carlyn Cowen, chief policy and public affairs officer at the Chinese-American Planning Council (CPC).
Maloney’s Nonprofit Relief Act of 2019 has three parts:
1. Reverses higher taxes, along with new administration and accounting costs, created by the 2017 Tax Act by repealing the provision that requires nonprofits to calculate separately the taxes on each “separate” unrelated business income “trade or business.” Many charities have multiple business activities that generate revenue, some of which can be taxable, to support their charitable mission. Before the 2017 Tax Act, charities could combine the profits and losses of these different activities and file their taxes on the aggregate amount. The 2017 Tax Act requires nonprofits to file taxes for each individual business activity; this is known as “siloing.” This additional reporting is dramatically increasing administrative costs. Siloing also forces charities to pay more in taxes because they are prevented from offsetting the profits from one business with the losses of another.
2. Updates the mileage reimbursement rate by increasing the charitable mileage rate for nonprofit volunteers from 14 cents per mile to 58 cents per mile, matching the reimbursement rate that applies to employees of for-profit companies. The bill also indexes the reimbursement rate to inflation, matching the policy enjoyed by for-profit entities. The tax-deductible mileage reimbursement rate for nonprofit volunteers has been stuck at 14 cents per mile since 1998. As a result, volunteers must pay income taxes on the additional reimbursement amount. Increasing the rate to 58 cents per mile and indexing it for inflation puts the rate at parity with the for-profit sector.
3. Fixes the unfair treatment of paid leave for nonprofit employees by extending to nonprofits the 2017 Tax Act’s new paid family and medical leave tax credit, which were excluded in the original law. The 2017 Tax Act created a new tax credit to partially reimburse certain employers that paid wages to qualifying employees under the Family and Medical Leave Act (FMLA). The law, however, did not extend this credit to nonprofit organizations, even though they also paid wages to employees taking FMLA leave.
The Maloney bill complements the Clyburn bill which repeals the 2017 Tax Act provision that imposed a new 21% tax on nonprofits for so-called fringe benefits provided to employees. These include mass-transit subsidies, parking and occasional meals.