Tuesday, February 13, 2018

Exempt Organization Goodies in the Bipartisan Budget Act of 2018

I’m scrolling through the Bipartisan Budget Act of 2018 (the “BBA”)(P.L. No. 15-123 signed on February 9, 2018 – enrolled bill from Thomas.gov here) in my leisure time.   It appears that there are two provisions that directly impact exempt organizations, as follows:

  • Section 41109 of the BBA clarifies the application of the investment income excise tax for private colleges and universities. As you may recall, Section 13701 of the legislation formerly known as the Tax Cuts and Jobs Act (TCJA) added new Section 4968, which imposes an excise tax on the investment income of certain private colleges and universities.  This new excise tax only applies to private colleges and universities that have at least 500 students, more than 50% of which are located in the U.S.   The BBA clarifies that this refers to “tuition paying” students only – but of course, it didn't actually give us a statutory definition of “tuition paying.”   Full tuition? External scholarship?  Internal scholarship?  Tuition waiver?  Work study?  Have fun with the counting, university admin types.
  • Section 41110 of the BBA contains the Newman’s Own provisions by adding Code Section 4943(g) (h/t to Evelyn Brody for the CT Mirror article). These provisions were originally in the TCJA but were struck by the Senate Parliamentarian for having insufficient budget impact.   I will have more to say about Section 4943(g) in another post.

Unless I missed it (let me  know if I did!), absent from the BBA are the following: (1) the Johnson Amendment provisions that were also struck from the TCJA by the Senate Parliamentarian, and (2) the technical fix to the exempt organization excess compensation excise tax found in new Code Section 4960 that would actually make it applicable public universities - as apparently was originally intended but, as discussed by Professor Ellen Aprill, there was a significant drafting fail.  (I heard a rumor that someone from the IRS agreed at the ABA Tax meeting that the technical fix was, in fact, necessary - can anyone confirm?)   If only there were a process by which Congress could talk to experts like Ellen before it finalized draft legislation…

EWW

http://lawprofessors.typepad.com/nonprofit/2018/02/exempt-organization-goodies-in-the-bipartisan-budget-act-of-2018.html

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