ASAE Sends Comments to Senate Tax Reform Working Groups
The association community wants to be sure its voice is heard as five Senate working groups get busy drafting tax reform legislation. A top priority: maintaining the royalty income exception of the UBIT statute.
ASAE submitted comments last week to the Senate Finance Committee’s bipartisan tax reform working groups charged with reviewing ideas from stakeholders on how best to overhaul the nation’s complex tax code.
The goal of the five working groups, named by Senate Finance Committee Chairman Orrin Hatch (R-UT) earlier this year, is to analyze existing tax law and come up with specific legislative recommendations for tax reform by the end of May. Hatch has said the working group recommendations will serve as the foundation for the development of bipartisan tax reform legislation.
ASAE’s comments were submitted to the Business Income Tax Working Group, chaired by Sens. John Thune (R-SD) and Ben Cardin (D-MD), and focus on how potential changes to the tax treatment of associations’ revenue-generating activities would affect their ability to carry out their core purposes.
For example, the discussion draft released last year [PDF] by then-House Ways and Means Committee Chairman Dave Camp (R-MI) included dozens of policy prescriptions that would apply to tax-exempt organizations, including proposals to tax associations’ royalty income and certain qualified sponsorship payments. Royalties (where an organization enters into a licensing arrangement for use of its name or logo) have always been treated as passive income as long as the organization is not directly involved in the marketing of products or services connected with the arrangement.
ASAE is actively working to maintain the exception for royalty income in the unrelated business income tax (UBIT) statute and has also opposed the Camp proposal to tax income received from an event or program sponsor if the acknowledgement of support refers to any of the business sponsor’s product lines or if certain sponsors are acknowledged differently than others.
ASAE agrees that associations choosing to expand into more entrepreneurial business endeavors should pay taxes like any other business, but it opposes any further expansion of the UBIT statute to include other non-dues-revenue activities.
“Non-dues revenue can help associations weather economic downturns when memberships may be the first budgetary items to be cut and can help keep dues costs down so members feel they are getting good value for their affiliation,” ASAE said in its comments. “The reality is that there is more competition for members’ time and financial commitment than ever before, and associations need to create programs and services that enhance the value proposition for their members.”
Tax reform remains a complex challenge for Congress this session, particularly with the White House prioritizing corporate-only reform as a first step toward a comprehensive overhaul of the tax code. But both Hatch and House Ways and Means Committee Chairman Paul Ryan (R-WI) have committed to advancing tax reform proposals this year.