Congress is Now Taxing Churches.

Erick Erickson aided in this article. 

An unnoticed provision of the GOP’s tax plan will impose an income tax on churches.

An unnoticed provision in the Republicans’ tax reform plan is about to cause all sorts of problems for nonprofits in America, particularly for churches.

The question by some is should Congress repeal this provision  as part of its overall end of year budgeting. This provision imposes an income tax on churches.

The newly added Section 512(a)(7) of the Internal Revenue Code states, in part: “Unrelated business taxable income of an organization shall be increased by any amount for which a deduction is not allowable under this chapter by reason of section 274 and which is paid or incurred by such organization for any qualified transportation fringe, any parking facility used in connection with qualified parking, or any on-premises. . . The [Treasury] Secretary shall issue such regulations or other guidance as may be necessary or appropriate…”

What does this mean in English? As the Ethics and Religious Liberty Commission points out, the law “requires tax-exempt organizations to file federal income tax returns and pay unrelated business income tax (UBIT) on the cost of parking provided to employees. Filing a return is required even if the organizations do not actually conduct any unrelated business activities. This is a significant change in the treatment of charitable organizations.”

But it is not just the cost of parking that will be treated as income to churches. If churches and other nonprofits cover the costs of mass transit for their employees, they will get taxes on that as well. In other words, if a church encourages its employees to use a metro system, the church will have to pay an income tax on the benefit it provides its employees.

It not only effectively imposes an income tax on non-profits, but does so for incentivizing their employees’ use of public mass transit system, etc.

Should Congress decide to not impose an income tax on churches and other nonprofits. They would have to repeal this provision.

They could do so by passing H.R. 6460, the LIFT for Charities Act, authored by Rep. Meadows in the House and Senator Lankford in the Senate. This bill amends the Internal Revenue Code to modify the requirements for determining the unrelated business taxable income of tax-exempt organizations. The bill repeals a provision that requires unrelated business taxable income to be increased by the amount of expenses paid or incurred by a tax-exempt organization for certain fringe benefits for which a tax deduction is not allowed, including benefits relating to transportation, parking, or an on-premises athletic facility.

%d bloggers like this: