Rep. Maloney Unveils Major New Nonprofit Relief Bill to Reverse Burdensome New Costs Hitting the Charitable Sector

Mar 29, 2019
Press Release
Leaders from New York’s nonprofit sector joined Rep. Carolyn Maloney to detail how the 2017 Tax Act diverts money away from nonprofit missions and to show their support for her new legislation

New York, NY – Today, Congresswoman Carolyn B. Maloney (D-NY), Vice Chair of the U.S. Congress Joint Economic Committee (JEC), unveiled new legislation, the Nonprofit Relief Act of 2019, to undo damage caused by the 2017 Tax Act. Provisions in the law divert money away from charitable missions through higher costs and unfair tax treatment.

Along with her new bill, Rep. Maloney unveiled a new report by her Joint Economic Committee staff, detailing the harmful new costs that nonprofits are now incurring due to the 2017 Tax Act. Rep. Maloney was joined by leaders from New York’s nonprofit sector at today’s event.

“I’m proud to introduce the Nonprofit Relief Act of 2019 to undo the costly new burdens nonprofits are facing as a result of the 2017 GOP tax scam so that more money is spent on nonprofits’ core charitable missions,” said Rep. Maloney. “As this new report and these nonprofit leaders make clear, the 2017 Tax Act is causing considerable harm to the nonprofit sector by increasing administrative costs and creating unfair tax situations. Congress needs to correct this soon or many nonprofits will be forced to cut back services or close altogether. That would be a disaster.”

“I also want to applaud House Majority Whip Jim Clyburn (D-SC) for his bill, the Stop the Tax Hike on Charities and Places of Worship Act (H.R. 1223), which would repeal the 21 percent tax charities must now pay for employee benefits such as mass-transit subsidies, parking and meals,” Rep. Maloney added. “Together, our two bills will do much to reverse the harm the 2017 Tax Act is causing nonprofits.”

"In two weeks, nonprofits will be writing a check to the IRS, taking critical support away from the programs and services that help all New Yorkers. NPCC applauds Congresswoman Maloney for her leadership in reversing provisions of the 2017 tax reform law that levied unexpected and unfair taxes on nonprofits," said Sharon Stapel, President & Executive Director of the Nonprofit Coordinating Committee of New York. "Congresswoman Maloney's bill goes a long way to allowing tax-exempt organizations to focus on their communities and not on the IRS."

"Imposing an unrelated income business tax on the compensation paid to the human services workforce, including transportation benefits, is tantamount to the government revoking vital resources directly serving local communities," said Allison Sesso, Executive Director of the Human Services Council of New York. "The labor performed by a nonprofits' workforce and the compensation they receive is an undeniable component of an organization's mission and function. It is urgent that our elected officials move quickly to fix this issue and we are grateful to Congresswoman Maloney for her support and leadership."

“UJA-Federation of New York stands with Congresswoman Maloney as she works to safeguard and strengthen nonprofit organizations by rolling back new taxes that were included in the Federal tax legislation of 2017,” said Louisa Chafee, Senior Vice President of External Relations and Public Policy, UJA-Federation of New York.

“Citymeals supports Representative Maloney’s efforts with the Nonprofit Relief Bill,” said Beth Shapiro, Executive Director of Citymeals on Wheels, a nonprofit organization that prepares and delivers meals to over 18,000 homebound elderly across the five boroughs. “For the first time in decades, we have seen a decrease in donations from supporters and are faced with taxes on benefits to our staff,” she added. “This comes at a time when the city’s senior population is growing at an unprecedented rate. Older New Yorkers are facing increased levels of poverty and hunger. And every $7 donation that doesn’t come in, or is diverted to taxes, is a meal we cannot deliver to someone in need.”

“CPC serves over 60,000 Asian American and Pacific Islander, immigrant, and low income New Yorkers each year, and an unrelated business income tax to provide our dedicated, hardworking staff with commuter benefits would cost us over $56,000 yearly. This is money that is pulled directly from meeting urgent needs and better serving our community members. We are grateful to Congressmember Maloney for her leadership on this issue,” said Carlyn Cowen, Chief Policy and Public Affairs Officer at the Chinese-American Planning Council (CPC).

Background on the Rep. Maloney’s Nonprofit Relief Act of 2019

The bill has three parts:

  1. Reverses Higher Taxes, along with New Administration and Accounting Costs, Created by the 2017 Tax Act by repealing the provision that requires nonprofits to calculate separately the taxes on each “separate” unrelated business income “trade or business.”
    • Many charities have multiple business activities that generate revenue, some of which can be taxable, to support their charitable mission. Before the 2017 Tax Act, charities could combine the profits and losses of these different activities and file their taxes on the aggregate amount. The 2017 Tax Act requires nonprofits to file taxes for each individual business activity; this is known as “siloing.” This additional reporting is dramatically increasing administrative costs. Siloing also forces charities to pay more in taxes because they are prevented from offsetting the profits from one business with the losses of another.
  2. Updates the Mileage Reimbursement Rate by increasing the charitable mileage rate for nonprofit volunteers from 14 cents per mile to 58 cents per mile, matching the reimbursement rate that applies to employees of for-profit companies. The bill also indexes the reimbursement rate to inflation, matching the policy enjoyed by for-profit entities.
    • The tax-deductible mileage reimbursement rate for nonprofit volunteers has been stuck at 14 cents per mile since 1998. As a result, volunteers must pay income taxes on the additional reimbursement amount. Increasing the rate to 58 cents per mile and indexing it for inflation puts the rate at parity with the for-profit sector.
  3. Fixes the Unfair Treatment of Paid Leave for Nonprofit Employees by extending to nonprofits the 2017 Tax Act’s new paid family and medical leave tax credit, which were excluded in the original law.
    • The 2017 Tax Act created a new tax credit to partially reimburse certain employers that paid wages to qualifying employees under the Family and Medical Leave Act (FMLA). The law, however, did not extend this credit to nonprofit organizations, even though they also paid wages to employees taking FMLA leave.

The Maloney bill complements legislation introduced by House Majority Whip Jim Clyburn (D-SC), the Stop the Tax Hike on Charities and Places of Worship Act (H.R. 1223). The Clyburn bill repeals the 2017 Tax Act provision that imposed a new 21 percent tax on nonprofits for so-called fringe benefits provided to employees. These include mass-transit subsidies, parking and occasional meals.

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