With Democrats in control of the U.S. House and Jim Clyburn wielding influence as majority whip, the S.C. congressman is pushing to repeal a law that imposes, for the first time, taxes on nonprofits — including places of worship.
How Clyburn, the third most powerful House Democrat, approaches his legislation could determine whether he is able to deliver a solution to the taxing problem.
Clyburn will have allies in some Republicans, who are coming around to reversing the nonprofit tax they included in their 2017 tax law. Still, there are worries that Clyburn, rather than work across the aisle, could introduce a more partisan bill that alienates Republicans and won’t win support in the GOP-controlled Senate.
“It’s great that they are going to introduce this bill, but this particular bill isn’t the most bipartisan way to do it,” said Galen Carey, vice president of government relations at the National Council of Evangelicals, who met Monday with members of Clyburn’s staff.
“We encouraged them to think of maybe talking to (Republicans) and seeing if they can work out something bipartisan. But I don’t think that’s how it’s going to go down.”
The “Stop the Tax Hike on Charities and Places of Worship Act,” which Clyburn put forward last summer and plans to reintroduce as early as next week, would overturn a little-known provision in 2017’s “Tax Cuts and Jobs Act,” which Republicans passed without Democratic support.
That provision requires nonprofits, charities and religious centers to pay a 21 percent tax on certain “fringe” benefits they offer employees, most commonly parking spaces.
Nonprofits long have been exempt from having to pay any taxes, so the requirement caught the organizations by surprise. Many of the groups were not prepared when they discovered they suddenly owed the government money.
Lawmakers also were alarmed to find out about the new tax: It was included in the massive tax reform legislation at the 11th hour to help offset the overall bill’s estimated $1.5 trillion price tag, with no debate or widespread consultation with members or stakeholders prior to the bill being signed into law.
“I am responding to the tremendous outcry I have heard from non-profits and places of worship to provide relief from this onerous and unexpected tax burden,” Clyburn said in a statement Tuesday. “Our solution needs to be as responsible in fixing this problem as Republicans were irresponsible in creating it.”
The Democrat also tweeted Monday “this tax hike on places of worship and nonprofits is one of the many inexcusable consequences of the GOP tax scam.”
Clyburn’s rhetorical flourishes are irking Republicans, who have defended the tax bill as the crowning achievement of the first two years of President Donald Trump’s administration.
“Starting a conversation about a ‘GOP tax scam’ is sort of like not starting a conversation at all,” said U.S. Sen. Tim Scott, R-South Carolina, one of the architects of the 2017 tax bill who said he supported a “resolution” to the tax crisis facing nonprofits, either through legislation or further guidance from the Treasury Department.
The version of the bill Clyburn put forward in the previous Congress also called for raising the corporate tax rate to 22 percent from 21 percent to offset revenue that would be lost in repealing the nonprofit tax. The Joint Committee on Taxation estimated last year that reversing the nonprofit tax would add an additional $1.7 billion to the debt over 10 years.
While most House Democrats would have no problem supporting the corporate tax increase, that would be a nonstarter for Republicans who control the Senate and largely oppose raising taxes.
If the corporate tax hike remains in Clyburn’s bill, that could be problem, said Evangelical Council for Financial Accountability president Dan Busby.
“We’d probably get by with the rhetoric,” Busby said. “The bigger concern would be the attachment of a pay-for in any repeal legislation.”
A spokesperson for Clyburn said Tuesday the congressman was exploring whether a repeal of the nonprofit tax could be paid for by increasing the corporate tax rate by less than 1 percent.
Clyburn is seeking to overturn the nonprofit tax in a responsible way, said the spokesperson, as opposed to Republicans whose own proposals to repeal the provision did not include offsetting tax hikes but instead “shift(ed) that burden to our children and grandchildren.”