ASAE Focuses on Royalties in Senate Tax Bill

As the tax bill makes its way to the full Senate after Thanksgiving, ASAE is urging tax-writers to remove a provision that would tax royalty income derived from the licensing of an organization’s name or logo.

Following four days of debate, the Senate Finance Committee voted Thursday night to approve its version of the Tax Cuts and Jobs Act. The party-line approval clears the way for the full Senate to consider the bill just after Thanksgiving.

As the committee marked up the bill this week, ASAE weighed in on Wednesday with a letter [Word doc] urging committee Chairman Orrin Hatch (R-UT) and congressional tax-writers to remove a provision in the bill that would tax royalty income derived from the licensing of an organization’s name or logo.

“As you continue to modify the tax bill to create more certainty for America’s job creators, we respectfully ask you to remove this provision to tax royalty income that helps associations and other tax-exempt organizations fulfill their exempt purpose, or at the very least, modify the provision to ensure that royalties of a tax-exempt entity will not be taxed when 1) there is insubstantial service offered by the tax-exempt organization in return for the payment, and 2) when income generated from royalty agreements does not comprise greater than 20 percent of an organization’s gross income,” said ASAE President and CEO John H. Graham IV, CAE, in the letter.

ASAE urged associations that are concerned about the provision targeting royalty income to use its letter as a model for their own comments to Senate tax-writers.

Earlier in the week, Hatch eliminated a provision dealing with nonqualified deferred compensation plans. ASAE and many other organizations had made the case that eliminating these plans would hurt nonprofit employees who in good faith entered into contractual agreements with their employers and who are counting on this benefit as part of their retirement planning. The provision would also hinder nonprofit employers in attracting and retaining top talent, ASAE said.

While the House passed its tax bill easily on Thursday, Senate passage is more tenuous. Hatch made a decision earlier this week to include repeal of the Affordable Care Act’s individual mandate in the bill. He also announced that the individual tax cuts in the plan would be temporary, expiring at the end of 2025 to comply with Senate rules limiting the impact of legislation on the federal deficit. Corporate tax cuts would be permanent.

Senate leaders can ill afford any Republican defections from the tax effort, but on Wednesday, they learned that Sen. Ron Johnson (R-WI) won’t support the bill. Sens. Susan Collins (R-ME), Bob Corker (R-TN), Lisa Murkowski (R-AK), and John McCain (R-AZ) are other Republican senators whose support is considered uncertain.

(malerapaso/iStock/Getty Images Plus)

Chris Vest, CAE

By Chris Vest, CAE

Chris Vest, CAE is vice president, corporate communications and public relations at ASAE. MORE

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