Want to stay up to date, but need the short version? We’ve got you covered! Here are the major federal policy updates from Washington, DC that may impact nonprofit work this month.
Johnson Amendment
Before August recess the House of Representatives passed multiple appropriations bills, which contained language that would block enforcement of the Johnson Amendment for churches. The Senate version does not contain any anti-Johnson Amendment language, and these bills will be going to conference committee, where differences will need to be reconciled. The conferees who will make those decisions could be named as early as next week, but preliminary discussions have likely begun already. Urge your legislators to fully protect the Johnson Amendment in any appropriations package.
Unrelated Business Income Tax (UBIT)
The Treasury Department released guidance this month on how organizations can comply with the changes to UBIT while they await further clarity. Information provided stated, “There is no general statutory or regulatory definition defining what constitutes a ‘trade or business’ for purposes of the Internal Revenue Code.” It makes clear that in the interim period between when the Tax Cuts and Jobs Act (TCJA) passed and the issuance of final regulations in 2019, nonprofits may rely on a reasonable, good faith interpretation of the UBIT statutes in determining whether their organizations have more than one “trade or business.” Learn more.
Capital Gains
The Trump Administration and Treasury Department are currently considering making substantial changes to the indexing of capital gains. Proposals have included that capital gains taxes would not include the cost of inflation on assets – which would erase $100 billion in tax liability. When individuals have potentially large capital gains tax bills, they often will donate their proceeds to charity to lower the tax burden. If this proposal goes through, it could negatively impact the number of dollars being donated to charity. Learn more.
State and Local Taxes (SALT)
Proposed changes to SALT regulations by the Treasury Department last week are likely to make SALT work-around efforts difficult – specifically those promoted by high-tax blue states. Workarounds have been proposed by some states, allowing contributions to government charities in place of taxes. This affects states like New York, New Jersey, and Connecticut by preventing those who are trying to get around the $10,000 cap by using tax payments as charitable contributions. Democrats in these states have pushed back as the draft regulations only appear to affect programs in 32 states (and the District of Columbia). If adopted after the 45-day public comment period and review, the value of a state tax credit would be subtracted from a taxpayer’s charitable deduction.
