Tax proposals in Biden Administration’s FY 2022 budget, only indirect impact for exempt organizations
Tax proposals in the Biden Administration’s FY 2022 budget include no proposals specifically focused on tax-exempt organizations.
No proposals specifically focused on tax-exempt organizations
The tax proposals in the Biden Administration’s fiscal year (FY) 2022 budget include no proposals specifically focused on tax-exempt organizations, but do include several proposals that could affect them indirectly.
Specifically, the “Green Book” [PDF 884 KB]—General Explanations of the Administration’s Fiscal Year 2022 Revenue Proposals—contains proposals that would:
- Increase the statutory corporate tax rate to 28%. This rate would apply to unrelated business taxable income earned by tax-exempt corporations and would also be the rate for the excise tax under section 4960 on compensation over $1 million paid by tax-exempt employers to certain covered employees.
- Treat certain transfers of appreciated property upon death or by gift as realization events. Importantly, this proposal contains an exclusion for charitable donations, meaning transfers to charity would not generate taxable capital gain for the donor/decedent, and charities would take a carryover basis in the contributed assets.
- Create a new federal subsidy to encourage private investment in renovation and construction of school facilities (including by tax-exempt investors). The proposal would create Qualified School Infrastructure Bonds (QSIBs) that would allocate $50 million in bond authority over three years among states, based on the proportion of funds that each state receives under the Elementary and Secondary Education Act. Analogous to the operation of Build America Bonds, interest on QSIBs would be taxable, but either the bondholders’ interest would take the form of a tax credit equal to the interest on a QSIB, or the bondholders would receive cash from the bond issuer, and the federal government would make corresponding direct payments to the bond issuer.
- Repeal the “base erosion anti-abuse tax” (BEAT). While relatively few tax-exempt organizations actually have to pay the BEAT, repeal of the tax would relieve some tax-exempt organizations of the compliance burden of completing the Form 8991, Tax on Base Erosion Payments of Taxpayers With Substantial Gross Receipts.
The Green Book does not include any proposals relating to the charitable contribution deduction under section 170—neither enhancing nor limiting the value of the deduction for taxpayers.
For a fuller discussion of tax proposals contained in the Green Book, read KPMG report: Analysis and observations of tax proposals in Biden Administration’s FY 2022 budget [PDF 1.4 MB] (117 pages)
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