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Exempt organization provisions in “Brady amendments” to H.R. 88

U.S. tax law proposals in H.R. 88

U.S. House Ways and Means Committee Chairman Brady (R-TX) last week released an almost 300-page amendment to H.R. 88 with a variety of tax provisions, including several technical corrections to the 2017 tax law, extensions of expired provisions, retirement and savings provisions, IRS administration provisions, “innovation” provisions, disaster relief provisions, and miscellaneous provisions.

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For more information, read TaxNewsFlash–Legislative Updates

Proposal to repeal section 512(a)(7)

Subsequently, a “Manager’s Amendment” [PDF 238 KB] to H.R. 88 was released that would repeal section 512(a)(7)—a provision added to the Code by the new U.S. tax law enacted in December 2017, that increased unrelated business taxable income by amounts paid or incurred to provide certain transportation fringe benefits to nonprofit employees. 

The Joint Committee on Taxation (JCT) has estimated that repeal of this provision would lose approximately $1.776 billion over a 10-year period. Read the JCT table with estimates of the budget effects of the revenue provisions included in the bill.

Other proposals of interest to exempt organizations

In addition to the proposed repeal of section 512(a)(7), other items of interest to exempt organizations include proposals to: 

  • Disregard certain purchases of employee-owned stock for purposes of the private foundation excess business holding rules
  • Extend the requirement to e-file to all tax-exempt organizations required to file Form 990-series returns and political organizations required to file Form 8872
  • Require the IRS to provide notice to an organization that fails to file a Form 990-series return or notice for two consecutive years prior to automatically revoking such organization’s tax-exempt status pursuant to section 6033(j) 
  • Provide temporary tax relief and incentives for victims of Hurricanes Florence and Michael, the recent California wildfires, and other disasters suffered in Hawaii and Guam (e.g., by removing penalties on certain hardship withdrawals from retirement accounts and suspending limits on charitable contributions to disaster relief efforts)

Future prospects

It is not clear whether the House will take up H.R. 88 before the current Congress adjourns later this month or, if it does, what the Senate’s response (if any) might be.  If the House does not take up H.R. 88, it is possible that some provisions in the bill might be included in other legislation (such as a government funding bill) prior to adjournment. However, it is also possible that this would not happen and that no further tax legislation would be enacted by the current Congress.

 

For technical questions about the exempt organization proposals, contact a tax professional with KPMG’s Washington National Tax practice:

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

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