Tax Provisions concerning Exempt Organizations in Obama Administration's FY 2013 Budget

February 23, 2012

Descriptions of tax provisions—including those of interest to exempt organizations and the nonprofit sector—in the Obama administration’s budget proposals for FY 2013 are summarized in a booklet prepared by KPMG’s Washington National Tax.

Among the budget proposals concerning tax-exempt organizations and the non-profit sector are measures that would:

  • Eliminate the deduction for contributions of conservation easements on golf courses
  • Impose a $5,000 penalty for tax-exempt organizations that fail to comply with a requirement to file electronic returns
  • Grant regulatory authority to the Treasury Department to require additional filing of electronic returns by reducing the current threshold of filing 250 or more returns during a calendar year
  • Change the excise tax rate imposed on the net investment income of private foundations from the current 1% or 2% to a single rate of 1.35%
  • Limit the tax rate for itemized deductions (including charitable contributions) to 28% for high-income taxpayers (i.e., income over $250,000 for taxpayers filing joint returns and over $200,000 for taxpayers filing individual returns)
  • Provide a temporary 10% tax credit for increases in wage expense, whether driven by new hires, increased wages, or both
  • Expand and simplify the tax credit provided to qualified small employers for non-elective contributions to employee health insurance by expanding the definition to include employers with up to 50 full-time equivalent employees
  • Affect tax-exempt bonds—these include provisions that would:

    • Reform and extend Build America Bonds

    • Modify tax-exempt bonds for Indian tribal governments

    • Allow current refunding of state and local governmental bonds

    • Simplify tax-exempt bonds by simplifying arbitrage investment restrictions, simplify single-family housing mortgage bond targeting requirements, and streamline private business use limits on governmental bonds

  • Extend certain expiring provisions, including:

    • Tax-free distributions from IRAs to certain public charities for individuals age 70½ or older, not to exceed $100,000 per taxpayer per year

    • Enhanced charitable contribution deductions for contributions of food inventory, book inventories to public schools, and corporate contributions of computer inventory for educational purposes

    • Special exclusion from unrelated business taxable income of certain payments from controlled organizations made under existing arrangements to controlling tax exempt organizations

To read KPMG's booklet: Tax Provisions in the Obama Administration’s FY 2013 Budget

For more information, contact Rick Speizman, National Partner-In-Charge, KPMG’s Exempt Organizations Tax Practice (ExoTax), at (202) 533-3084

This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.


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