Association Agenda: Tax Target
Tax reform could take aim at association revenues.
With the elections behind us, it’s not too early to consider how a new Congress might prioritize policy issues when it convenes in January. Perhaps no issue holds greater implications for the association community than tax reform.
While there is broad agreement that the current tax system is broken, there are dramatic differences over what a simpler, fairer tax code should look like. Generally, Republicans support a revenue-neutral overhaul of the tax code, while most Democrats believe that meaningful tax reform must include additional tax revenue. Lawmakers are coalescing, however, around the idea that tax reform should reduce the size and number of tax expenditures in the code—tax subsidies that amount to $1.1 trillion a year—and use those savings in part to lower marginal tax rates for individuals and corporations.
That means some of the tax preferences associations enjoy could be targeted either as revenue offsets or as a way of simplifying the code.
The tax code contains a number of exclusions and exceptions to the unrelated business income tax (UBIT) statute, which dictates which association activities are taxable. Those exceptions exist because there is a connection between the advancement of an organization’s tax-exempt purpose and the business activity in question. Any expansion of the UBIT statute to include activities that are currently excluded could harm an association’s bottom line and impair its ability to carry out its mission.
As Congress works next year to produce specific recommendations to achieve the goal of a simpler, fairer tax code, ASAE will ask lawmakers to consider how potential changes to the tax treatment of associations’ revenue-generating activities would affect their ability to carry out their core purposes.