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Overview of Possible New Revenue Raising Legislation

March 13, 2014

UPDATE: How proposed new legislation could impact NPO’s

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.

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