Orthodox Advocates Say Treasury Guidance on Non-Profit Tax Law Still Leaves Issues Unaddressed

The Treasury Department building on Pennsylvania Avenue in Washington, D.C.

Guidance on how to apply a controversial clause of Congress’ 2017 tax overhaul that could make houses of worship, private schools and other institutions liable to pay taxes on some employee benefits was released by the Treasury. Though the department’s stated intention was to ease the potential tax burden on non-profits, advocates for the Orthodox community joined a chorus of voices from other faith groups saying that the matter still needs to be addressed through legislation.

The clause went largely unnoticed for several months after passage of the major tax overhaul, but raised a hue and cry from religious groups once it was analyzed since, if applied at face value, the law would require shuls and other houses of worship to file tax returns for the first time in recent American history.

Bipartisan bills have been introduced in both houses of Congress to undo the statute and have found broad support, but these have yet to advance to committee hearings.

Rabbi Abba Cohen, Vice President for Federal Affairs for Agudath Israel of America, said that while the Treasury Department’s guidelines were given in good faith, in a way, they only compound the problem.

“While the IRS is providing guidance and clarifications that will assist institutions in knowing how to better comply with the law, it ultimately only serves to further enshrine this new tax burden on nonprofits,” he told Hamodia. “That is not the ideal outcome that we are looking for. Congress must act to repeal this unprecedented tax, and eliminate its widespread negative consequences.”

A statement from the Treasury Department on the guidance released last week says that it will allow non-profits to use “any reasonable method” to compute their income and provides a “safe harbor that should minimize the burden on affected employers.” Additionally, it says that organizations with incomes of less than $1,000 will not be required to file.

“Treasury is sensitive to the concerns of the tax-exempt community, and hopes this guidance can significantly limit the impact on non-profit groups,” said Secretary Steven T. Mnuchin. “Treasury is offering tax-exempt organizations a roadmap for navigating their responsibilities. The guidance issued today aims to provide flexibility, while minimizing the burden on non-profit groups that provide employee parking.”

The Department’s guidance was released some three weeks after a broad base of faith groups issued a letter calling for the clause’s repeal. Treasury officials told media sources that they could do no more to minimize the clause’s effect, since it was a clearly stated part of the law.

“The guidance shows that the Treasury is trying to be responsive, but there are limits to what they can do since Congress did pass the law, but it only partially addresses the problem,” Nathan Diament, the Orthodox Union’s executive director for public policy told Hamodia. “There is still a lot more that needs to be done to mitigate its effects, and that can only really be done through passing legislation — which we hope will be forthcoming.”