IRS reaches into the offering plate

Tax season is just around the corner, and this year, a new group of historically tax-exempt organizations could find themselves filling out paperwork for the IRS and preparing to hand over money to Uncle Sam.

A provision in the Tax Cuts and Jobs Acts of 2017 would levy a tax on churches, synagogues, mosques, and other nonprofit organizations for “fringe benefits” related to transportation and parking. In the 2017 tax overhaul, Congress cut tax breaks that for-profit companies received for providing those benefits. Under the ostensible purpose of treating employers equally, the law created a sister tax on nonprofit groups that charges them 21 percent of the value of parking and other similar employee benefits they provide. The tax would also apply to some mass transit benefits, meals, and gym memberships.

Religious and other nonprofit organizations have demanded that lawmakers strike the provision, warning that the new tax will force the groups to redirect needed resources to meet bureaucratic requirements, including filing federal Form 990-T and perhaps state income tax returns. Even worse, the unprecedented tax tramples on the fiercely guarded distinction between church and state.

“This entangles the IRS and the government with houses of worship in a way that has never been done before in our country,” said Chelsea Sobolik, a policy director with the Ethics and Religious Liberty Commission (ERLC) of the Southern Baptist Convention. “[With] nonprofits, it’s extracting billions of dollars from the charitable sector in taxes. … Those dollars are meant to be helping people.”

The provision in the law received little attention until this summer, when groups ranging from churches to large nonprofit organizations such as Goodwill Industries realized the burden it would cause and raised an outcry.

More than 2,800 organizations signed a petition from the Evangelical Council for Financial Accountability calling for repeal of the tax. Another statement from the ERLC, signed by 33 Christian, Muslim, Jewish, and Mormon leaders, argued the government should not see houses of worship as “untapped sources of tax revenue.” The group estimated the tax would pull $1.7 billion over the next 10 years from the charitable sector.

In response, Rep. Mark Walker, R-N.C., and Sen. James Lankford, R-Okla., introduced twin bills in July and August that would strike the provision, which Lankford called a “glitch.” He and Sen. Chris Coons, D-Del., also petitioned Treasury Secretary Steven Mnuchin to delay implementation of the tax.

After initially defending the provision, House Ways and Means Chairman Kevin Brady, R-Texas, one of the authors of the act, reversed course and tacked on an amendment to strike the provision’s language to a year-end tax package. But Brady’s bill stalled in the lame-duck session as lawmakers quarreled over various aspects of the 250-plus page document, including the repeal of the Johnson Amendment that prohibits churches from making political endorsements.

For now, churches and other nonprofit organizations have to brace for the tax change. President Donald Trump signed the act into law on Dec. 22, 2017, and it took effect Jan. 1, 2018. The IRS released implementation guidance last month.

Nonprofit groups have until March 31 to interpret the 24-page IRS guidance and submit their tax filings. They will have to calculate how much they spend on parking expenses, including related costs from snow or trash removal, landscaping, or security. The IRS did attempt to alleviate the burden in some ways, saying nonprofit organizations that reduced or eliminated employee parking spots—which could mean simply taking down signs in the parking lot—could be exempt from the tax. The Treasury Department also noted that if the taxable amount did not rise above $1,000, organizations would not have to pay a tax or prepare a return.

“While the tax burden on some nonprofits may be reduced, it will still redirect resources from their missions,” the National Association of Evangelicals said in a statement.

Ultimately, organizations are looking to Congress to fix the error lawmakers introduced. Sobolik said the goal is to push lawmakers to make a change before March: “This should be a bipartisan priority. There’s a lot of pressure. Every member of Congress, whether Republican or Democrat, has a church or a nonprofit in their district.”

Hats in the ring

The new year has barely begun, but Democratic presidential hopefuls are already lining up to seek the party’s presidential nomination in the 2020 general election. So far, the official field is small but expected to grow in the coming weeks, as prominent and lesser-known candidates join the fray to challenge President Donald Trump’s reelection effort.

Sen. Elizabeth Warren of Massachusetts is the best-known Democrat to take the step of forming an exploratory committee. She released a video on Monday announcing her candidacy and will spend this weekend in Iowa, beginning the long state-by-state process of wooing voters.

Warren made a name for herself advocating for progressive policies in the Senate but faced questions about her claims of Native American heritage. She will likely have to battle Sen. Bernie Sanders, I-Vt., for the support of those in the party’s left wing, and Democrats will have to decide whether to keep moving to the left or seek a more centrist candidate to win over independent and moderate voters.

Julián Castro, the former mayor of San Antonio who served as secretary of housing and urban development under President Barack Obama, formed his own exploratory committee last month and is expected to formally announce his campaign for the Democratic nomination next week.

Outgoing Rep. John Delaney of Maryland has been a declared candidate since July, when the Democrat announced he would not seek reelection to Congress.

Other Democrats reportedly considering a run for the White House include former Vice President Joe Biden, former Rep. Beto O’Rourke of Texas, Sen. Cory Booker of New Jersey, Sen. Kirsten Gillibrand of New York, former New York Mayor Michael Bloomberg, and Sen. Kamala Harris of California.

On the Republican side, Trump could face a challenge in the primaries from former GOP presidential nominee Mitt Romney. The new senator from Utah fanned speculation about another presidential bid by penning a New Year’s Day op-ed in The Washington Post blasting Trump’s character. Romney denied any plans to run for president in 2020 but told CNN’s Jake Tapper that he had not yet decided whether to endorse Trump for reelection, saying he would “wait and see what the alternatives are.”

Newly retired Sen. Bob Corker of Tennessee, another prominent Republican critic of Trump, was noncommittal last month about whether the president should face a primary challenger and said he wasn’t “focused” on making such a challenge himself. He told MSNBC that voters should remember long-standing Republican policies and called Trump “an anomaly” in the party. —Anne K. Walters

Election limbo

Members of the 116th Congress took their seats Thursday, but one chair remained empty. North Carolina’s 9th District still has no representative since fraud claims brought November’s election results into question.

Election officials are investigating allegations that an operative on Republican Mark Harris’ campaign team illegally tampered with absentee ballots to skew the race. Harris, who has denied knowledge of illegal activity, holds a 905-vote lead against Democrat Dan McCready in unofficial results, but the North Carolina Board of Elections has declined to certify the contest.

On Friday, the board disbanded due to a lawsuit challenging its composition as unconstitutional. Without its members, it can’t certify election results. Harris will have to wait until a new law reverting the board to pre-2016 rules goes into effect at the end of January. In the meantime, a Jan. 11 evidentiary hearing in the investigation will also be postponed, though elections board staff will continue the inquiry.

In a statement Wednesday, Harris said he would ask Wake County Superior Court to certify the race. If a judge refuses to do so, North Carolina’s 9th District will go unrepresented until February, when the new state elections board will decide either to approve Harris’ win or call for a new vote. —H.P.