In September, Congress and the White House agreed on FY19 spending for a number of federal agencies (including funding for education and research), but they have not yet come to agreement on the budget for other government programs. Those agencies are currently operating under a temporary measure but could face a shutdown if lawmakers do not come to agreement by Dec. 21.
At the center of the negotiations is President Donald Trump’s $5 billion request for construction of a border wall, which Democrats do not want to concede; House Minority Leader Nancy Pelosi (D-CA) stated on Dec. 6 that even a deal on the Deferred Action for Childhood Arrivals (DACA) program would not be enough to garner Democratic support for wall funding.
Also in question is whether the lame-duck Congress can make a deal on a number of tax items, including the new tax on transportation fringe benefits that affects all nonprofits including colleges and universities.
Chairman of the House Ways and Means Committee Kevin Brady (R-TX) hoped to start the negotiations by passing H.R. 88, legislation with retirement, savings, and other tax relief provisions, but Republican leaders were forced to cancel the vote when it became apparent that dozens of lawmakers had not returned to the Capitol after Election Day. At least 60 current representatives will not be in Congress in January, either because they did not seek re-election or lost their seat, and some did not return to Washington in December for the remaining legislative days of their term. Without those members present, Republicans would likely not have had enough votes to proceed.
Brady Introduces Repeal of New Tax on Transportation Fringe Benefits
While the vote was never called, Brady had also introduced a manager’s amendment to H.R. 88 repealing Section 512(a)(7), the new unrelated business income tax on employee transportation fringe benefits. This was a significant step forward for the nonprofit advocacy community, which has been working to see the onerous Tax Cuts and Jobs Act provision repealed.
NACUBO is fully supportive of repeal of 512(a)(7) and communicated support for amendment with key congressional offices. Additional information can be found here, and NACUBO urges business officers to work with their government relations colleagues to weigh in on this issue with their federal elected officials.
H.R. 88 also included other notable provisions:
- Extension (but not expansion) of Section 179(D), the Commercial Buildings Energy Efficiency Tax Deduction. It was originally enacted in 2005 with the goal of encouraging energy conservation within governmental entities, including public colleges and universities, by tying the value of the deduction to energy savings generated by a building when it was built or improved upon in an energy-efficient way.
- Extension of the above-the-line deduction for tuition and related expenses for higher education.
- Treat certain taxable non-tuition fellowship and stipend payments as compensation for IRA purposes. Any fellowship grants, scholarships, or other amounts paid to an individual to help in the pursuit of graduate or postdoctoral study or research and that are includable in his or her taxable income would be treated as compensation for IRA-contribution purposes.
Outlook Remains Murky
NACUBO urges institutions not to assume the new UBIT fringe benefit tax will be repealed. Until there is further news, all nonprofits should fully comply with Section 512(a)(7).
While repeal remains possible, it will take significant effort for Democrats and Republicans to strike a deal this late in the year. Congress delayed formal business the week of Dec. 3 due to the passing of President George H. W. Bush. Further, as House chamber leadership transitions from Republicans to Democrats, it is unclear whether lawmakers with already-strained relationships will want to punt outstanding concerns to the new Congress—or broker a deal in the lame-duck session to clear the decks for those sworn in on Capitol Hill in 2019.