May 16, 2025
The House Ways and Means Committee advanced the GOP Tax Bill, called “The One Big Beautiful Bill,” early on May 14, 2025, on a party line vote. The 389-page bill could be considered by the House as early as next week. If passed by the House, it will be taken up by the Senate. Treasury Secretary Scott Bessent has said July 4 is the target date to get the bill to Trump’s desk.
Provisions Affecting Tax-Exempt Organizations
The Ways and Means Committee and the Joint Committee on Tax have provided explanations of the bill. The following is a summary of some of the provisions directly affecting tax-exempt organizations. Unless otherwise noted, these provisions, if enacted, would apply to taxable years beginning after December 31, 2025.
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- “Parking Tax” – reintroduction of the previously repealed IRC 512(a)(7) “parking tax” which treats as unrelated business income (UBI) certain employer provided transportation fringe benefits
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- Tax on royalty income – amends IRC sections 512 and 513 to include the income from any sale or licensing of an exempt organization’s name or logo as UBI
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- Increase in IRC Section 4940 excise tax rate on the net investment income of private foundations, depending on the size of the foundation’s assets.
See below:
- Increase in IRC Section 4940 excise tax rate on the net investment income of private foundations, depending on the size of the foundation’s assets.
| Asset Range | Rate |
|---|---|
| Up to $49,999,999 | 1.39% (current rate) |
| $50,000,000 – $249,999,999 | 2.78% |
| $250,000,000 – $4,999,999,999 | 5% |
| $5,000,000,000+ | 10% |
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- Increase in IRC Section 4968 College and University Endowment Tax for schools with over $750,000 student-adjusted endowment (with a carveout for qualified religious institutions) from 1.4%, depending on the size of the per-student endowment, as set forth below:
| Endowment Range | Rate |
|---|---|
| Over $500,000 – $750,000 | 4% (current rate) |
| Over $750,000 – $1,250,000 | 7% |
| Over $1,250,000 – $2,000,000 | 14% |
| Over $2,000,000 | 21% |
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- Expansion of IRC Section 501(p), granting the Secretary of the Treasury authority to suspend the tax-exempt status of any organization that provided more than a minor amount of material support or resources to a listed terrorist organization. This provision is similar to the one contained in HR 9495 that passed the House late last year.
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- Executive compensation – amends section 4960 to expand its scope, to include all current and former employees of an applicable tax-exempt organization (ATEO) and of its related entities, as covered employees. This amendment, as currently written: (i) eliminates the limitation on the applicability of the tax to an employee that is one of the five highest compensated employees; and (ii) applies the tax to employees of the ATEO and related organizations (even if the employee is not an employee of the ATEO). While public companies are excluded, this development could impact non-public companies, family offices, and law firms with affiliated nonprofits, potentially taxing high-earning employees who provide no services to the ATEO.
Next Steps
While the draft tax bill includes a wide range of provisions impacting individuals, and businesses, tax-exempt organizations need to be aware of those provisions being considered that may impact them. There are several nonprofit groups that are advocating on behalf of tax-exempt organizations on these issues, including National Council of Nonprofits, the American Society of Association Executives (ASAE), Philanthropy Roundtable, and Council on Foundations.
GRF will continue to monitor developments and provide updates as warranted. For questions, please contact GRF’s nonprofit tax team.
