Editor's note: This article has been updated to reflect the release of the Senate plan and the response of NBOA and associated organizations to both GOP plans.
In a joint letter sent November 10 to more than 400 House tax staffers, NBOA and NAIS expressed particular concern about four elements of the House bill (H.R. 1), calling on Congress to act as follows:
- Reject section 3601, which would eliminate private activity bonds and raise borrowing costs for nonprofits.
- Protect the tuition remission benefit by rejecting section 1204.
- Preserve employer-provided housing benefits by rejecting section 1401.
- Protect charitable giving (the bill calls to double the standard deduction, which could lead to a drop in donations to nonprofits).
The Senate plan was released November 9. On November 14, NBOA and NAIS sent a related joint letter to 100 targeted Senate tax staffers.
In comparing the two plans, NBOA and RSM noted the Senate's silence on these items of concern in the House version:
- Calculation of the housing allowance.
- Repeal of the tuition reduction plans under section 117(d).
- Repeal of education assistance plans under section 127.
- Repeal of the medical expense deduction.
- Applicability of the unrelated business income tax for tax exempt entities tax exempt under both 501(a) and 115(1).
- Repeal of private activity bonds (although the repeal of refunding bonds are included in the Senate version).
- Treatment as unrelated business income certain benefits provided to employees.
- Additional reporting requirements for sponsoring organization of donor advised funds.
This could mean that the Senate version keeps intact existing treatments of tuition remission and other education or housing incentives, along with the medical expense deduction.
Additionally, the House Ways and Means Committee amended the proposal to keep non-qualified deferred compensation plans in place as structured. This is a "win" for 457 plans, but it should be monitored as both the House and Senate proposals progress.
On the question of private activity bonds, the Senate proposal appears to grandfather in drawdowns on already-issued bonds as tax-exempt.
Finally, not already discussed in NBOA's previous alerts is the proposed taxation of royalty income for the licensing of school names and logos. Additionally, unrelated business income would be calculated separately for each activity unrelated to the school’s exempt mission (meaning that a loss from one activity cannot be used to offset revenue from another).
Numerous discussions on NBOA Connect (NBOA members only) point to additional areas of concern in the Republican tax proposals.
See NBOA's analysis of the House bill, and download the joint NBOA-NAIS advisory on the House plan.
Download the joint NBOA-NAIS advisory on the Senate plan.
Other helpful articles about the GOP tax legislation:
