Nonprofits Want in on Tax Savings
The Nonprofit Relief Act: ‘Nonprofits employ 10 percent of the American workforce, and deserve the same tax credits that corporations get’
Congresswoman Carolyn B. Maloney (D-NY) and Majority Whip James E. Clyburn today introduced the Nonprofit Relief Act of 2019 to repeal provisions of the 2017 Republican tax law that are hurting nonprofit organizations.
“Nonprofits are one of our nation’s most precious resources — providing invaluable services to our communities and stepping in where we fall short. Our country should be doing everything we can to support nonprofits and but instead the exact opposite is happening thanks to the Republican Tax Scam,” said Rep. Maloney. “I am proud today to join Majority Whip Clyburn in introducing the Nonprofit Relief Act of 2019 to right this wrong so that nonprofits can continue doing the work of the people, bolstering our communities and helping the most vulnerable among us.”
“I am proud to join Congresswoman Maloney in introducing this bill to lift these misplaced tax burdens off non-profits so they can direct these resources to the invaluable community services they provide,” said Whip Clyburn. “Along with Stop the Tax Hike on Charities and Places of Worship Act, my bill to repeal a separate tax that the 2017 Republican tax bill imposed on nonprofits, the Nonprofit Relief Act of 2019 will enable organizations through the country to better serve those in great need.”
“The Nonprofit Relief Act would fix new and longstanding tax law policies that hurt the ability of charitable nonprofits to advance their missions in communities throughout America,” said Tim Delaney, President & CEO of the National Council of Nonprofits. “We appreciate the respect that Congresswoman Maloney and Majority Whip Clyburn have for the work nonprofits perform daily in every congressional district. Her bill recognizes that nonprofits simply can’t afford to divert scarce resources away from serving others to pay an unfair tax on tax-exempt organizations that results in higher taxes than what for-profit businesses pay. We also applaud her for recognizing that nonprofits employ 10 percent of the American workforce and deserve to have the same access to the paid leave tax credit that for-profit businesses already enjoy — something else her legislation fixes.”
“Volunteers are the lifeblood of Meals on Wheels programs nationwide and are truly the ‘wheels’ behind the ‘meals,’ in some cases driving more than 100 miles on a single route,” said Ellie Hollander, President & CEO, Meals on Wheels America.
“Representative Maloney and Majority Whip Clyburn’s legislation is more than a tax bill — it embodies the fair treatment of those serving our communities to support our nation’s most vulnerable citizens, addressing some of our most pressing problems in a cost-effective manner. We are particularly glad to see the provision in the Nonprofit Relief Act removing the unfair tax penalty that treats mileage reimbursement above 14 cents per mile driven as taxable income for the volunteers upon which countless programs like Meals on Wheels rely to operate and serve millions of individuals in need.”
“We thank Congresswoman Maloney for introducing a bill that allows nonprofits to focus on serving their communities,’ said Sharon Stapel, president and executive director of Nonprofit New York. “This bill provides much-needed relief for tax-exempt organizations, encourages volunteerism, and provides important benefits to workers. We are grateful for Congresswoman Maloney’s leadership and support for all the good work the nonprofit sector does.”
“Citymeals supports Representative Maloney’s efforts and stands behind the Nonprofit Relief Bill,” said Beth Shapiro, Executive Director of Citymeals on Wheels, a nonprofit organization that delivers two million meals to over 18,000 homebound elderly across New York City each year. “For the first time in decades, we have seen a decrease in donations from supporters and are faced with taxes on benefits to our staff,” she added. “This comes at a time when the city’s senior population is growing at an unprecedented rate. Older New Yorkers are facing increased levels of poverty and hunger. And every $7 donation that doesn’t come in, or is diverted to taxes, is a meal we cannot deliver to someone in need.”
The legislation would repeal the new tax that requires nonprofits to treat every unrelated business revenue stream as a separate “trade or business” that may not be aggregated with other profits and losses in calculating tax liabilities. The bill also extends the paid leave tax credit to tax-exempt organizations and changes the tax treatment of mileage reimbursements to volunteers, so they are not subject to federal and state income taxes.
- “Silo” Unrelated Business Income Tax (UBIT): The Nonprofit Relief Act repeals Section 512(a)(6) of the Internal Revenue Code that prevents nonprofits from aggregating profits and losses of unrelated businesses. For-profit businesses can use losses in one business unit to cancel out profits in another, thereby reducing their tax bills. In contrast, nonprofits are forced to break down their expenses and revenues into separate silos for each “trade or business.” As a result, nonprofits must pay 21 cents on every dollar of net income brought in through alternative means, such as gift shops, even if they suffer losses on other ventures.
- Paid Leave Tax Credit: Through an oversight, the 2017 tax law failed to extend the paid leave tax credit to tax-exempt organizations. The Nonprofit Relief Act corrects this by allowing these organizations to apply the credit to payroll taxes. Internal Revenue Code Section 45S provides a tax credit for employers who provide paid family and medical leave to their employees. An eligible employer may claim a 12.5 percent income tax credit if it covers 50 percent of an employee’s salary when taking family and medical leave — the income credit increases to 25 percent for covering 100 percent of the salary. The Nonprofit Relief Act enables nonprofit employers and employees to benefit from the 2017 tax policy.
- Volunteer Mileage Reimbursement: Under current law, employees of nonprofit and for-profit entities may be reimbursed for the work-related use of their vehicles at the standard business rate (currently 58¢/mile) with no tax consequence to the individual. However, volunteers may only deduct their mileage at 14¢/mile. Furthermore, in an instance when nonprofits reimburse volunteers for their mileage, current tax law treats every penny above the 14¢ volunteer mileage rate as taxable income. The Nonprofit Relief Act corrects this unfair treatment, making any mileage reimbursement to volunteers nontaxable up to 58¢/mile.