Public Policy Briefs – June 2019

Periodically, SECF will provide members with updates on state and federal legislation that affects philanthropy. If you have questions related to public policy, or know of legislation at the federal or state level you would like SECF to know about, please contact Matthew L. Evans, director of public policy and special projects, at or (404) 524-0911.

House Committee to Hold Hearing on UBIT Next Week

House Ways and Means Oversight Subcommittee Chairman John Lewis (D-GA) has scheduled a hearing for next week on changes to the Unrelated Business Income Tax (UBIT) that could affect foundations and the nonprofits they support.

The hearing, taking place Wednesday, June 19, will focus on the 21 percent tax on transportation-related fringe benefits that was applied to tax-exempt organizations as part the 2017 tax bill. This tax has received significant scrutiny and criticism from the charitable sector, leading many lawmakers on both sides of the aisle to call for its elimination, with several members in both chambers introducing repeal legislation.

SECF has called for the repeal of these provisions, and Lewis’s office has reached out asking for specific examples and/or member concerns about the effect of UBIT changes on organizations within the 11-state footprint. If you would like to share an example about how UBIT is affecting your foundation or grantees, please contact Matthew L. Evans, director of public policy and special projects.

Final Ruling on SALT Workarounds Released

On Tuesday, the Department of Treasury released final regulations addressing state and local tax (SALT) deduction cap workarounds. Following the 2017 tax bill, which implemented a $10,000 cap on the SALT deduction, several states created programs to which residents could contribute, receive a credit against their state tax liability, and take a charitable deduction at the federal level, thereby avoiding the cap.

The final regulations limit the deductibility of contributions to these programs and only allow individual taxpayers to claim a charitable deduction for the amount of their donation that exceeds whatever tax credit they receive. In short, they can no longer mask their SALT payments as charitable contributions. SECF submitted a comment letter regarding the proposed rule last October.

In addition to that rule, the Treasury Department also released a Notice to provide a safe harbor to taxpayers to still claim SALT deductions up to the $10,000 cap, which is largely intended to incentivize taxpayers to continue to donate to programs that are encouraged through state tax credits, such as scholarship granting organizations. The department is now expected to release proposed regulations in the coming months on both the Notice and a Revenue Procedure published last December that provides a similar safe harbor for corporations, as well as guidance for passthrough entities.

Matthew L. Evans is SECF's director of public policy and special projects.


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