How the Two Tax Bills Differ on Political and Exempt Organizations

How the Two Tax Bills Differ on Political and Exempt Organizations

The House of Representatives and Senate are working quickly to enact tax reform legislation, some of which affects political and tax-exempt organizations. Quarles & Brady, from Chicago, has a nice chart showing the differences between the House and Senate bills on tax-exempt organizations.

[UPDATE: And Jones Day has an even better one1503238683_2_House-Senate Tax Bill Comparison Chart December 4 2017 with revenue scores. Thanks to Cathy Livingston.]

In brief, the House bill now contains many more provisions dealing with exempt organizations’ speech, while many of the exempt organizations-related provisions in the Senate bill were removed in the final deliberations, including the major revisions making Section 4958 “intermediate sanctions” provisions much more complicated and onerous.

Not mentioned in the Quarles chart is that Section 13602 of the Senate bill and Section 3803 of the House bill (the language of both versions is identical), subjecting compensation of over $1 million to an additional Section “4960,” described as a tax on excess tax-exempt organization executive compensation, also covers political organizations exempt from tax under Section 527. In other words, PACs and other organizations described under Section 527 are taxed if they pay compensation of more than $1 million.

One additional point  is section 3305 of the House bill and section 13308 of the Senate bill (the language of both versions is the same) which amends IRC § 162(e) to deny business deductions for lobbying expenditures to local government lobbying; state and federal lobbying has long been non-deductible, but local lobbying had previously been deductible under § 162(e)(2) and (7).

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