The Republican tax reform passed in December is requiring churches, hospitals, colleges and other historically tax-exempt organizations to begin paying a 21 percent tax on some types of fringe benefits they give their employees, Politico reported on Tuesday.
Many non-profit organizations are stunned to learn of the tax, which has been little noticed and could cost them tens of thousands of dollars. Many of the groups say it will be a significant financial burden, as well as an administrative one, as they previously did not have to deal with the IRS.
With midterms approaching it could also prove to be harmful politically for Republicans, as the tax-exempt status of churches in particular has long been considered sacrosanct.
Even though many are still unaware of the change, more than 600 churches and other groups have already signed a petition demanding the change be repealed.
"A lot of people are just finding out about it and the more people find out about it, the more pressure there will be on Treasury and Congress to either delay implementation or consider changing this," Steven Woolf, who is senior tax policy counsel for the Jewish Federations of North America, told Politico.
The main benefits affected are transportation-related, like free parking in a garage and subway and bus passes, as well as targeting meals provided to workers.
"What we're talking about is an income tax on the church for providing parking to its employees," said Mike Batts, chairman of the board of the Evangelical Council for Financial Accountability, which is circulating the petition criticizing the tax. "It's absurd."
Many nonprofits say they are confused over how exactly the tax works, with churches, for example, asking how they are supposed to calculate the value of parking spaces for employees.
WDEL pointed out that this is another example of massive legislation before Congress in which even the lawmakers can't immediately comprehend all the ramifications of it at the time they vote.
The Treasury is now working on regulations detailing how the tax will work, even though the groups are supposed to have already been paying the tax every quarter since it went into effect on Jan. 1, according to Politico.
Meanwhile, Republican Texas Rep. Michael Conaway introduced a bill earlier this month to rescind this particular tax provision.
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