To offset proposed business tax cuts, the Senate and House tax reform bills seek to raise revenue from tax-exempt organizations. The House passed its version of the Tax Cuts and Jobs Act on November 16, and the Senate passed its version on December 2. Listed below are some of the major changes still under consideration as the bills head to conference committee:

Tax-exempt organizations as employers. Under both bills, tax-exempt employers would incur a 20 percent excise tax on compensation of more than $1 million paid to any of its five highest-paid employees and on any “parachute” payments that exceed three times the employee’s base salary.

Under the House bill, exempt employers also would pay unrelated business income tax on the value of transportation fringe benefits and on-premises gyms and other athletic facilities that employees generally exclude from taxable income.

Private foundations. Although both bills would permit private foundations to own for-profit businesses without violating the excess business holdings rules, the House bill would subject the net income of all private foundations to a uniform excise tax rate of 1.4 percent.

Unrelated Business Income Tax (UBIT). The House bill would confirm all Internal Revenue Code section 501 exempt organizations are subject to tax on unrelated business income, including those that are also exempt under section 115 (state and local governments, including school districts). The legislation would tax all income from research not made available to the public for free.

The Senate bill would prohibit exempt organizations from offsetting income from one unrelated business activity with losses from another unrelated business activity.

Colleges and Universities. Both bills would prohibit individual deductions for amounts paid for the right to purchase tickets to college athletic events. Both would also impose a 1.4 percent excise tax on net investment income from the endowment of any private college or university with at least 500 students and investment assets valued at $250,000 or more (House) or $500,000 or more (Senate) per full-time student.

Financing for Exempt Organizations. Both proposals would impose income tax on interest from advance refunding bonds issued after 2017.

Under the House bill, private activity bonds issued by state and local governments to finance private projects would no longer be exempt from income tax. Governments and other entities would no longer be able to issue tax credit bonds, which generate federal tax credits fully or partially in lieu of interest payments.

Political Campaign Intervention. Under the House bill, religious organizations would be permitted to formally endorse political candidates, so long as related expenses are de minimis. This provision would become effect on January 1, 2019 and sunset on December 31, 2023.