Swift-moving tax legislation in the U.S. House is receiving mixed reviews from the charitable sector. For example, while ECFA and other nonprofit leaders are welcoming the reinstatement of a charitable deduction for non-itemizing taxpayers—a policy with proven success—other provisions could have significant negative effects for ministries. Not the least of these is the revival of the infamous “nonprofit parking tax.”

Among those cheering the tax package is House Ways and Means Committee Chairman Jason Smith (R-Mo.). Just before his panel’s marathon session to advance it on Tuesday, he said, “The bill delivers what Americans voted for, tax policies that put working families first and kick starts a new golden era of American prosperity and strength.” In addition, numerous groups are pleased with elements of the bill, such as an expansion of the Child Tax Credit, an allowance for 529 education savings accounts to cover certain home education and other school expenses, and enhancements to childcare and adoption credits.

ECFA is particularly pleased with the House committee’s move to restore a nonitemizer charitable deduction. The bill would enact a $150 above-the-line benefit for donations ($300 for married couples filing jointly) for such taxpayers from 2025 through 2028. While only half the value of a pandemic-era provision that expired in 2021 and far less robust than the Charitable Act’s call for a nonitemizer deduction worth up to one-third the standard deduction, the inclusion of the provision is a testament to its importance nonetheless. 

“The charitable deduction sends a powerful message that America wants to honor and encourage open-handed generosity,” said ECFA President & CEO Michael Martin. “We should further democratize this proven incentive and support habits of giving for all taxpayers—regardless of whether they itemize on their tax forms or not.” 

Martin added, “I thank the House Ways and Means Committee for including this important nonitemizer charitable deduction in its bill, and I encourage the Senate and the House to strengthen it before final passage of this tax legislation.” 

On the other hand, the committee-passed bill has also raised concerns among some nonprofits. For example, the bill would increase excise tax rates on the investment income of some private foundations, and it would institute a new one-percent-of-taxable-income floor for corporations before they can claim a charitable deduction. Also, while eliminating the old “Pease limitation” on itemized deductions, the bill would generally cap the value of itemized deductions at 35 percent, potentially affecting givers in the highest tax bracket. Moreover, among other concerns, some nonprofit leaders have expressed that, by being silent on the matter, the bill would allow the limit for cash donations to charities to drop from 60 to 50 percent of Adjusted Gross Income (AGI).  

Most alarming, however, is the return of the “nonprofit parking tax” — a policy considered such a failure after the 2017 Tax Cuts & Jobs Act (TCJA) that Congress purposefully repealed it two years later. While this year’s bill differs from the 2017 act by exempting eligible church organizations from the parking tax, it generally directs nonprofits to add their employees’ qualified transportation fringe benefits, such as mass transit or parking arrangements, to their unrelated business income tax (UBIT) liability. As a result, many tax-exempt ministries could soon be subject to rules requiring them to calculate the cost of providing employee parking for Form 990-T. Members of Congress anticipate federal coffers will take in more than $2.6 billion over ten years from nonprofits if this policy is enacted. 

“Reviving the parking tax is an egregious mistake,” said ECFA President Martin. “Imposing a new tax on a nonprofit’s expense makes no sense, nor does subjecting ministries serving their communities to new accounting and regulatory compliance costs to deal with such a burden.” 

Martin added, “Congress should make sure the parking tax is back in its coffin before this tax legislation is enacted.” 

ECFA will continue to monitor this tax legislation and be a voice for charitable giving incentives and public policies that do no harm to the important work of ECFA members.