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House Bill
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Senate Finance Committee
Legislative Text
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Provisions that Impact Most Tax-Exempt Entities
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The bill modified two provisions related to unrelated business taxable income: 1) reinstated the “parking tax,” i.e., required expenses for qualified transportation fringe benefits to be included in UBTI and 2) excluded income from scientific research from UBTI only if the research is publicly available.
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This provision is omitted in its entirety.
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The group of individuals covered by the excise tax on compensation above $1 million paid by certain tax-exempt organizations would be expanded to include all employees and former employees of the organization, and not just the top five most highly compensated employees of the organization in the current year and prior years. Please see this link for additional information.
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This provision is carried over in identical form.
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Provisions that Impact Private Foundations
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The bill created a tiered excise tax system based on the foundation’s assets.
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This provision is omitted in its entirety.
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The bill changed the excess business holdings rule to allow certain voting stock repurchased by a business enterprise to be considered as outstanding stock when calculating a private foundation’s present and permitted holdings in the business enterprise under the excess business holdings rule.
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This provision is omitted in its entirety.
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Provisions that Impact Charitable Contributions
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Under current law, corporations can deduct their charitable contributions, up to a maximum of 10% of their taxable income. The bill created a 1% floor for deductions made by corporations, in addition to the 10% cap, meaning that corporations would have to contribute at least 1% of their taxable income to charities in order for any contribution to qualify as a deductible charitable contribution. The bill also allows such corporations to carry forward the tax benefit of such contributions, if the deductions are disallowed under this rule, for 5 years.
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This provision is carried over in nearly identical form; minor changes do not impact the substance of the provision.
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The bill created a nonitemizer tax deduction up to $150 for individuals and $300 for married couples, regardless of whether the tax filers claim an itemized deduction, not including contributions to donor-advised funds.
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This provision is modified to create a permanent deduction for nonitemizers, capped at $1,000 ($2,000 for joint filers), not including contributions to donor-advised funds.
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The legislative text would create a 0.5% floor on charitable contributions for itemizers, meaning that individuals who itemize would be entitled to claim a charitable contribution deduction only if they contribute in excess of 0.5% of their charitable contribution base (i.e., their AGI calculated without taking into account any charitable giving).
The legislative text would also make permanent the TCJA’s increased contribution limit of 60% for cash gifts made to qualified charities for taxpayers who itemize.
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The bill capped the tax benefit of all itemized deductions for taxpayers in the highest tax bracket at $0.35 per dollar rather than the full $0.37 per dollar.
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This provision is carried over in identical form.
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The bill provided a nonrefundable tax credit that will not exceed the greater of $5,000 or 10% of the taxpayer’s adjusted gross income for contributions made to organizations that grant scholarships to attend private or religious elementary and secondary schools, regardless of whether the taxpayer itemizes.
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This provision is carried over in nearly identical form; minor changes do not impact the substance of the provision.
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Provisions that Impact Colleges and Universities
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The bill established a four-tiered rate structure for the excise tax imposed on an educational institution’s investment income, with the applicable rate based on a school’s “student adjusted endowment” (a new term that effectively equals the school’s investment assets per eligible student), with larger per-student endowments subject to a higher rate of tax.
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This provision is tweaked to establish a three-tiered structure under which the highest tax rate is 8% (whereas in the House bill, the highest tax rate was 21%).
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