Jewish groups fight tax hike on nonprofits
The IRS building in Washington, D.C. (Flickr/Tim Evanson)
The Internal Revenue Service (IRS) and the Treasury Department issued interim guidance yesterday aimed at easing a provision in the Tax Cuts and Jobs Act of 2017. Jewish and other religious groups are now working to repeal the provision imposing a 21 percent tax on nonprofits, synagogues, religious institutions, and universities providing benefits for their employees, such as parking, transportation and meals. The imposition of this tax could cost the charitable sector $1.7 billion over the next decade.
“This is an issue that could have a serious impact on almost every charitable institution in the Jewish community — our shuls, our schools and every kind of institution that we have — and cost them thousands of dollars a year,” Nathan Diament, Executive Director of the Orthodox Union Advocacy Center, told Jewish Insider.
According to Rabbi Abba Cohen, Washington Director and Counsel for Agudath Israel of America, the added tax is not only a dollars and cents burden, but it’s also an administrative one. “It is especially painful because we’re living in a time where, as the government pulls back from providing services to certain communities, they are expecting nonprofits, including religious institutions, to step up to fill that gap,” he explained. “Now’s the time where the government should be supporting these institutions and making it easier for them and giving them the resources to do it, rather than cutting back on their resources.”
“The other issue is that that this is an unprecedented tax on religious institutions,” Cohen asserted. “One of the basic fundamentals of tax law has been to maintain the independence of religious institutions and not have them be entangled with government intrusion. There have been over the years many people that have sought to increase the tax burden on religious institutions. The concern is here, that if this sustains as law, then it will gain some traction and we might be facing the slippery slope of other kinds of past burdens that will be placed on nonprofits in general.”
House Ways and Means Committee Chairman Kevin Brady (R-TX) reintroduced legislation yesterday that would repeal the provision in a revised year-end tax package. “We want those nonprofit organizations to focus on their core missions,” Brady told reporters on Capitol Hill. “Repealing this allows them the certainty to do that.” The House is expected to consider the bill later this week.
The IRS guidance, which would retroactively reduce the amount of nonprofits’ nondeductible parking expenses, did not satisfy these Jewish organizations.
“We appreciate the responsiveness of the Treasury Department leadership to our concerns,” Diament stated. “But Congress must still act and repeal the tax since there are still other charities that this guidance is not going to help. Not to mention that a future administration could decide to issue a different guidance and put them back on the hook.”
“While this provides guidance and clarifications that will assist institutions and taxpayers in knowing how to better comply with the law, it ultimately only serves to further enshrine this new tax burden on nonprofits,” added Cohen.
William Daroff, Director of the Washington Office of the Jewish Federations of North America, told Jewish Insider, “While JFNA welcomes the Treasury/IRS notice clarifications, we remained opposed to the tax on other qualified transportation benefits. This tax will be yet another burden, especially for large or urban charities who have traditionally offered such tax-free benefits to their employees. We urge Congress to repeal the tax before they adjourn at the end of this year.”