Monday, March 13, 2017

Legislation Update: ACA Repeal, Johnson Amendment, and Tax Reform

CongressCongress is attempting to advance legislation in at least three major areas that could directly impact tax-exempt nonprofit organizations.

Affordable Care Act Repeal (and Replace?)

The effort to repeal (and replace?) the Affordable Care Act would almost certainly have major effects on nonprofit health care providers, particularly hospitals, as well as likely every nonprofit that provides health insurance or health care to its employees or beneficiaries. The Nonprofit Quarterly provides a good summary of the current version of the repeal and replace legislation, including its likely effect on nonprofits. The full text of the current bill is available here.

"Johnson Amendment" Repeal or Modification

OpEds and lobbying letters continue to proliferate even as it is unclear when legislation removing or modifying the political campaign intervention prohibition for charities will advance. Pending bills include:

  • The Free Speech Fairness Act (H.R. 781 and S. 264), which would modify the prohibition so as not to apply to "any statement which (A) is made in the ordinary course of the organization's regular and customary activities in carrying out its exempt purpose, and (B) results in the organization incurring not more than de minimis incremental expenses."
  • H.R. 172, which would remove the prohibition entirely but, in an apparent oversight, only from Internal Revenue Code section 501(c)(3) and so not from  section 170(c)(2) and other sections relating to charitable contribution deductions.

The two House bills have been referred to the House Ways and Means Committee, while the Senate bill has been referred to the Senate Finance Committee.

Recently expressed views on the legislation including statements from Douglas Laycock (UVA), Edward Zelinsky (Cardozo), the Council on Foundations, a community letter campaign launched by the National Council of Nonprofits and others, a letter from 86, mostly progressive groups (including the National Council of Churches), and a published debate in U.S. News & World Report featuring Doug Bandow (Cato Institute), Alan Brownstein (U.C. Davis), Roger Colinvaux (Catholic University), Barry Lynn (Americans United for Separation of Church and State), and Matthew Schmalz (College of Holy Cross).

Tax Reform

The year began with fears that tax reform could sharply limit the availability of the charitable contribution deduction through such measures as limits on itemized deductions and estate tax repeal (see, for example, this Forbes piece). There are, however some recent indications that Congress is moving away from measures that would limit the deduction for at least income tax purposes, and even considering expanding the income tax deduction in several ways (see, for example, this report from the Council on Foundations on recent comments by members of Congress). The Trump administration  has yet to release its tax reform proposals, however, and tax reform generally is a moving target as this story from The Hill underlines.

Lloyd Mayer

http://lawprofessors.typepad.com/nonprofit/2017/03/legislation-update-aca-repeal-johnson-amendment-and-tax-reform.html

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