Now that the U.S. Senate has passed tax reform plan (see details below), House and Senate leaders are negotiating a final version of the bill that they hope to send to the President for his signature as soon as this Friday. While both the House and Senate plans include a variety of tax changes that are problematic for nonprofits (plus a few small changes that might benefit nonprofits), there is a big difference between the two plans.
This fall, Congress is in the process of rewriting the Internal Revenue Code with the dual goals of lowering individual and corporate income tax rates and simplifying our nation's tax laws. This tax overhaul has major implications for all 501(c)(3) nonprofits. Among other things, the tax reform proposals could reduce charitable giving, politicize 501(c)(3) nonprofits, eliminate financing options for nonprofits, and create new taxes on certain nonprofit activities.
Income Tax Cap Could Mean Unintended Burdens for Nonprofits
Charitable nonprofits across North Carolina are concerned that the proposed constitutional amendment to cap the state’s income tax rate at 5.5% (S.817) could have unintended consequences for nonprofits that provide essential services in every community in our state. If the 5.5% income tax cap passed as a constitutional amendment, it would likely lead to new taxes, fewer private contributions, and increased burdens on charitable nonprofits.
The N.C. General Assembly is considering a bill (H.B. 482) that would create new penalties for nonprofits and businesses that improperly classify their workers as independent contractors rather than employees. Nonprofits that misclassify their employees and fail to provide benefits such as workers’ compensation or unemployment insurance benefits could face fines ($1,000 per misclassified worker) and could be barred from state contracts for five years.
Download full article at bottom
Comments of David Heinen of the North Carolina Center for Nonprofits House Judiciary II Subcommittee on H.B. 482 – Tuesday, July 28, 2015
Thank you Mr. Chair.
On behalf of the North Carolina Center for Nonprofits, I wanted to bring to your attention a potential unintended consequence of the employee misclassification reform bill (H.B. 482) that could affect nonprofits. I was hoping the subcommittee would be amenable to a small clarifying change in a PCS.
The General Assembly is in the final stages of its efforts to restructure North Carolina's tax system. The House and Senate are considering different version of legislation (H.B. 998) to lower tax rates and simplify the state tax system. It is essential that tax reform not harm nonprofits. Specifically:
Download full article at bottom
Problem #1: The sales tax refund process is less efficient than a system of tax exemption
Problem #2: State law allows the IRS to arbitrarily deny sales tax refunds to some North Carolina nonprofits
Problem #3: Nonprofits are confused whether they need to collect and remit sales tax on their fundraising events
Problem #4: The exemption from sales tax on admission fees for “volunteer-only” nonprofits is confusing and unnecessary
Below is an excerpt. Download the full 2-page PDF at bottom.
Comments of David Heinen of the N.C. Center for Nonprofits House Appropriations Committee – Wednesday, July 29, 2015
Thank you Mr. Chair. While individual nonprofits have many concerns with a variety of provisions in the Senate budget, the nonprofit sector has two main concerns about the tax plan in the Senate budget:
Impact of Nonprofit Provisions in Senate Tax Proposal (2015)