FY 2017 budget: Tax provisions concerning exempt organizations

Tax proposals for exempt organizations

The Obama Administration’s FY 2017 budget includes provisions that concern or would affect exempt organizations and the non-profit sector.

Related content

Read KPMG’s description and observations of tax provisions in the FY 2017 budget: Tax provisions in the administration’s FY 2017 budget [PDF 1.3 MB]

Read KPMG’s description and observations of tax provisions in the FY 2017 budget specifically relating to charitable deductions and exempt organizations [PDF 1.01 MB]

Proposals related to exempt organization in FY 2017 budget

Among the proposed measures in the FY 2017 budget are provisions that would:

  • Require that all Forms 8872 and Form 990 series tax and information returns be filed electronically, and require the IRS to make the electronically filed Forms 8872 and Form 990 series returns publicly available in a machine readable format in a timely manner
  • Impose a $5,000 penalty for tax-exempt organizations that fail to comply with a requirement to file electronic returns
  • Change the excise tax rate imposed on the net investment income of private foundations from the current 1% or 2% to a single rate of 1.35%
  • Require any entity issuing a scholarship or grant in excess of $500 (indexed for inflation after 2017) that is not processed or administered by an institution of higher learning to report the amount on Form 1098-T
  • Enhance and heighten substantiation, eligibility, and reporting requirements for conservation easement deductions, and introduce a pilot of an allocable credit for donations of conservation easements
  • Limit the charitable credit to 28% of itemized charitable contributions allowed after the Pease limitation in computing the “Fair Share Tax” (under the “Buffett rule”)
  • Expand and simplify the tax credit provided to qualified small employers for non-elective contributions to employee health insurance by expanding the definition to include employers with up to 50 full-time equivalent employees
  • Increase the standard mileage rate for automobile use by volunteers to the same rate used for purposes of the medical and moving expense deduction
  • Disallow the deduction for charitable contributions that are a prerequisite for purchasing tickets to college sporting events
  • Consolidate contribution limitations for charitable deductions to a 50% limitation for contributions of cash to public charities and replacing the deduction limit for all other contributions with a 30% limitation
  • Extend the carryforward period for excess charitable contribution deduction amounts from five years to 15 years.

Provisions concerning tax-exempt bonds include proposals that would:

  • Create a new, permanent America Fast Forward Bond program that would include as an “eligible use” financing for section 501(c)(3) nonprofit entities and all qualified private activity bond categories
  • Create a new category of tax-exempt qualified private activity bonds called “Qualified Public Infrastructure Bonds”
  • Modify tax-exempt private activity bond financing for “Qualified Public Educational Facilities”
  • Modify tax-exempt bonds for Indian tribal governments
  • Modify treatment of banks investing in tax-exempt bonds
  • Repeal tax-exempt bond financing of professional sports facilities
  • Allow current refunding of state and local governmental bonds
  • Repeal the $150 million non-hospital bond limitation on qualified section 501(c)(3) bonds
  • Streamline private activity limits on governmental bonds
  • Simplify arbitrage investment restrictions for tax-exempt bonds

 

For more information, contact the Managing Director-in-Charge of KPMG's Washington National Tax Exempt Organizations Tax group

D. Greg Goller |  +1 (703) 286- 8391 | greggoller@kpmg.com

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