A study conducted by the economic and business consulting firm IHS for the National Association of Health and Educational Facilities Finance Authorities (NAHEFFA) found that the United States would lose 105,000 jobs, $5.5 billion of labor income, and $8.3 billion in Gross Domestic Product (GDP) annually if Congress limited the tax exemption to 28 percent for municipal bonds that finance health, educational, and other charitable projects. Based on average spending in the past decade, a complete elimination of 501(c)(3) tax-exempt financing would reduce GDP by $8.3 billion and lead to a loss of 300,000 jobs that would have generated $15.6 billion annually in labor income.
"This study demonstrates in national terms the enormous economic burdens and job loss that will be suffered by charities and hundreds of thousands of others if the tax exemption is curtailed or eliminated," says Pamela Lenane, NAHEFFA President, who is Vice President and Acting General Counsel of the Illinois Finance Authority.
The tax exemption has been under consideration for limitation or elimination. The Simpson-Bowles plan called for its total elimination, while President Obama has asked Congress to limit to 28 percent the exclusion of tax-exempt interest for municipal bonds. In support of its proposal, the administration argues in the "Green Book" that, "Increasing the income tax liability of higher-income taxpayers would reduce the deficit, make the income tax system more progressive, and distribute the cost of government more fairly among taxpayers of various income levels."
Earlier this year, NACUBO led a joint effort to respond to proposals to alter tax-exempt bond financing. Together with 11 associations representing thousands of U.S. colleges, universities, and hospitals—as well as the finance authorities dedicated to providing capital financing for not-for-profit healthcare and higher education institutions—NACUBO submitted this statement to the House Ways and Means Committee. The document states, "Together, we urge Congress to protect tax-exempt bond financing, including qualified 501(c)(3) private-activity bonds, which contribute to the financial health of hospitals, colleges, universities and other charitable organizations."
Here are other key findings from the "IHS Study on the Economic Impact to Propose Restrictions on Tax Exempt Bonds for Nonprofit Organizations":
- Nonprofit health and education investment is critical for maintenance of the nation's welfare, productivity, and economic growth. The wide range of projects funded includes general acute care hospitals, critical access hospitals, children's hospitals, higher education and private school facilities, libraries, museums, cultural and performing arts centers, and senior assisted living facilities.
- Higher interest expenses will limit nonprofits' ability to fund important capital projects for hospitals and schools that demonstrably generate long-term economic value for communities across the nation.