One of the strange consequences of the recent changes in U.S. tax law is the imposition of an obligation to pay taxes on otherwise tax-exempt organizations. The 2017 Tax Cuts and Jobs Act requires nonprofits — including synagogues, social service agencies and day schools — to pay a business income tax on the expense the nonprofits incur to provide transportation benefits such as parking and transit passes to their employees.
What has been dubbed the “parking tax” has real-life implications.
According to Nathan J. Diament, executive director for public policy for the Orthodox Union, “a synagogue will in many cases find itself spending more money on a tax lawyer or CPA to help it comply with the new tax than the amount of the tax bill itself. After all, this synagogue has never [before] filed a form with the IRS and now must [do so], not to mention having to understand an IRS notice.”
Diament was one of several representatives of a wide range of nonprofit organizations who submitted written testimony to the oversight subcommittee of the House Ways and Means Committee last week, critical of the tax provision. The opponents focused on the modest budgets of most nonprofits, their need to raise charitable dollars to fund operations, the burden of redirecting precious dollars to comply with the new law and the irony of the government now imposing a tax record-keeping, reporting and payment obligation on institutions that already struggle to survive.
As Diament put it, “By the mere fact that a suburban church provides parking for its clergy and staff or an urban synagogue provides subsidized transit passes to its staff — these houses of worship may be compelled for the first time to file a reporting form (990-T) with the IRS.” That’s unfair, he argued, since “[a]ny funds diverted from the congregational budget are diverted from programs and services for the community.”
And lest you think the reporting burden is not significant, Emory University reported that it required more than 500 hours of labor — 12½ work weeks — just to compute the university’s tax obligation under the new law. And, according to testimony, Jewish Federations of North America paid $75,000 in taxes under the new law on transportation benefits it provided to employees, and indicated that the cumulative impact of the tax on its network of some 140 U.S.-based related charities approaches seven figures.
Taxing the tax exempt is an oxymoron. The religious, social and educational work of our nation’s network of nonprofit organizations is important, and often provides coverage where government cannot reach. We need to support that work, not burden it. As such, while government needs to monitor tax- exempt organizations for regulatory and compliance purposes, there is no need to burden those organizations with additional reporting requirements, or to make money from them, by imposing a parking and transit tax on benefits provided to their employees.
We urge repeal of the parking tax.