Tuesday, March 4, 2014
Last week Chairman of the U.S. House of Representatives Ways and Means Committee, Dave Camp, released the “Tax Reform Act of 2014.” The tax reform package “addresses a number of rules and laws applicable to tax-exempt organizations” and is described as having the potential to “impose significant new tax liabilities on nonprofits.”
The key aspects of the proposed legislation includes making changes to the Unrelated Business Income Tax, royalties, corporate sponsorships, UBIT deductions, excise taxes and intermediate sanctions, and penalties.
Another key aspect of the Act is that it would change the tax-exempt status of different types of nonprofits. For example, in addition to repealing tax-exempt status for professional sports leagues like the NFL, the proposed legislation would also repeal public charity status for Type II and Type III supporting organizations. Thus, supporting organizations would be limited to those organizations “operated, supervised, or controlled by their supporting organizations.”
What are the implications of proposing to repeal public charity status for Type II and Type III organizations? What are the arguments in support of and against this proposed change?