At the beginning of March, the House Ways and Means Committee introduced new legislation that gives us some insight on how politicians view not-for-profit organizations. Below is an overview of the proposed legislation and how, if passed, it would impact NPOs.

The first proposal is to impose a tax on nonprofits that pay employees $1-million or more in compensation. The tax would be 25% of the excess compensation for the five highest paid employees. Congress has estimated that this tax would bring in $4-billion over the next 10 years.

The next proposal is to require that money deposited into donor-advised funds be paid out to the charity within 5 years. That means that the donor-advised fund will have a life of 5 years or less. If the money is not paid out to the charity after 5 years, there would be a 20-percent excise tax on the money remaining in the donor-advised fund. The National Philanthropic Trust estimates that there is currently more than $45-billion in donor advised funds.

There would be a 1-percent tax on private colleges and universities investment income. It would apply only to institutions with more than $100,000 per enrolled student.

The last item is a requirement that all not-for-profit organizations file their Form 990 tax return electronically. This is certainly aimed at getting all of that data contained on the Form 990 into the IRS system in a format that is easily accessible and able to be analyzed.

Although many believe this legislation will never become law, we will keep you posted on further, if any, developments.