Updated December 17, 2014 - When the Senate adjourned on the evening of Tuesday, December 16, bringing an official end to the 113th Congress, it approved tax extender legislation, sending it to President Obama for his signature. However, senators failed to pass legislation extending the Terrorism Risk Insurance Program (TRIA). Despite significant bipartisan support, retiring Sen. Tom Coburn (R-OK) was successful in his effort to block a vote on the legislation based on an objection to an unrelated provision that had been included in the measure. TRIA may be revived again next year, however it is likely to be altered significantly under the new leadership in the next Congress.
On December 3, the House voted 378-46 to pass the Tax Increase Prevention Act of 2014 (H.R. 5771) that will retroactively extend a slate of more than 50 expired tax provisions—a number of which impact students and institutions—for one year, from Jan. 1, 2014 through Dec. 31, 2014. The Senate has yet to act on the measure, although it is expected to pass it and send to President Obama before the end of the week. A Senate vote to renew the Terrorism Risk Insurance Act (TRIA) is expected to follow shortly therafter.
Over the past several months, Senate Finance Chairman Ron Wyden (D-OR) and retiring House Ways and Means Chairman Dave Camp (D-MI) entered negotiations on a two-year package, with an effort to make some of the expired provisions permanent. Partisan impasses, year-end bickering over unrelated issues, and, later, a veto threat from the White House, caused the discussions to fall flat. Ultimately, lawmakers would only agree to a temporary, but straightforward, one-year extension of all of the expired provisions.
Early in 2014, Camp announced intensions of, "going policy by policy to determine which extenders should be made permanent." In the end, there was no real legislative action on comprehensive tax reform in 2014 (neither individual nor corporate).
NACUBO has been following several of the expired provisions, in particular:
- Tax-Free Distributions from Individual Retirement Accounts for Charitable Purposes. The IRA charitable rollover allows individuals aged 70½ and older to donate up to $100,000 from their IRAs and Roth IRAs to public charities, including colleges and universities, without having to count the distributions as taxable income.
- Modification of Tax Treatment of Certain Payments to Controlling Exempt Organizations. Also known as 512(b)13(E), this provision quantifies as UBIT only the portion of payments to the controlling exempt organization from interest, annuities, rents, and royalties by a controlled organization that exceed fair market value.
- Above-the-Line Deduction for Qualified Tuition and Related Expenses. This deduction allows eligible taxpayers to deduct up to $4,000 in tuition expenses as an above-the-line exclusion from income.
- Tax Credit for Research and Experimentation Expenses. Current law allows companies to claim this business tax credit for research and development activities conducted at universities or other qualifying organizations, including research consortiums that may include universities.
- Energy Efficient Commercial Building Deduction. Section 179D permits a government building owner (e.g., public institutions of higher education) to allocate the 179D deduction to one or more persons "primarily responsible for designing the property." This party can include architects, engineers, contractors, environmental consultants, or energy services providers.
Current law does not permit such allocations by nonprofit hospitals, colleges, universities, and other community organizations that embark on energy efficient construction projects. However, NACUBO supported efforts to provide nonprofits the same benefit of Section 179D when their buildings meet a certain threshold of energy savings (new construction or renovation). Wyden's two-year tax extender legislation included a provision to this effect, but Congress failed to come to an agreement on the overall package.
- Mass Transit Commuter Tax Parity. This provision would equalize the tax breaks available to commuters who drive and those who use public transportation. On January 1, 2014, employers could offer, pretax, a $250 a month benefit for qualified parking, but the benefit for public transportation fell to $130 per month.
Unfortunately, the one-year retroactive tax package will come too late in the year for several provisions to provide any significant benefit. Individuals and organizations have little time to arrange, for example, tax-free distributions from individual retirement accounts for charitable purposes and it is virtually impossible for employers to provide employees with the benefits of the mass transit tax break.
Last week, charitable giving advocates were pleased with the announcement that Camp had introduced a bill (H.R. 5806) that would modify and make permanent certain expired tax incentives for charitable giving. The bill addresses the special rule for qualified conservation contributions, the deduction for contributions of food inventory, and certain tax-free distributions from individual retirement accounts for charitable purposes. The White House, however, issued a veto threat stating, "The Administration supports measures that enhance non-profits, philanthropic organizations, and faith-based and other community organizations in their many roles." However, objecting with a view that, "Republicans are imposing a double standard by adding to the deficit to continue tax breaks."
Terrorism Risk Insurance Act Renewal Likely, But Controversial
The House voted on December 10 to renew the Terrorism Risk Insurance Act (TRIA), which expires at the end of this month. TRIA established a federal reinsurance backstop program that allows a public-private risk sharing structure.
The measure, as passed by the House, extends the program for another six years and modifies the program by raising the threshold of insured losses at which federal assistance kicks in and reducing the share of losses that the federal government will cover in the event of major terrorist attack.
Complicating action in the Senate is a provision in the House-passed measure that Senate Democrats claim weaken a certain Dodd-Frank Wall Street reform bill related to the use of derivatives. The White House has indicated it is displeased with the provision, but has not threated to veto the legislation.
NACUBO, together with the American Council on Education and eight other associations representing colleges and universities, wrote to congressional leaders on April 24 in support of reauthorization of TRIA.