KPMG report: Tax proposals for budget reconciliation legislation approved by Ways and Means

Tax incentive and benefit proposals included in the Ways and Means recommendations could affect tax-exempt organizations

Tax incentive and benefit proposals could affect tax-exempt organizations

The House Ways and Means Committee recently released, marked up, and approved legislative tax proposals as part of its consideration of recommendations for budget reconciliation legislation.

These proposals are part of a larger legislative effort by the Ways and Means Committee to contribute to the Build Back Better Act moving through the House. The Ways and Means Committee recommendations will be packaged together with recommendations from other committees for subsequent consideration by the House, with changes possible before House action.

The tax incentive and benefit proposals included in the Ways and Means recommendations include various tax credits and incentives, including a number of provisions of potential interest to colleges and universities. Read TaxNewsFlash

The tax increase proposals include corporate and business, international, and individual tax increases, and other changes, none of which is focused specifically on tax-exempt organizations but a number of which could affect tax-exempt organizations. These revenue-raising proposals include:

  • Increasing the top corporate rate to 26.5%. This rate would apply to unrelated business taxable income (UBTI) 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.  In addition, the higher rates would make the charitable contribution deduction more valuable to corporations.
  • Increasing the top marginal individual rate to 39.6% and the capital gains rate to 25%.  These rates would apply to UBTI earned by tax-exempt trusts. In addition, the higher rates would also make the charitable contribution deduction more valuable to individuals and the higher capital gains rates, in particular, could make donors more interested in donating appreciated assets.
  • Disallowing a charitable contribution deduction for contributions of conservation easements by partnerships and other pass-through entities if the amount of the contribution (and therefore the deduction) exceeds 2.5 times the sum of each partner’s adjusted basis in the partnership that relates to the donated property.

Read a September 2021 report [PDF 2.3 MB] (203 pages) that provides a summary and analysis of many of the legislative tax proposals: “Build Back Better Act” tax proposals, as approved by Ways and Means


For more information, contact a tax professional with KPMG’s Washington National Tax practice:

Ruth Madrigal | +1 202 533 8817 | ruthmadrigal@kpmg.com

Preston Quesenberry | +1 202 533 3985 | pquesenberry@kpmg.com

Carrie Garber Siegrist | +1 202 533 3056 | carriesiegrist@kpmg.com

 

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