On February 26, 2014, U.S. House of Representatives Ways and Means Committee Chairman Dave Camp released "The Tax Reform Act of 2014," a 979-page sweeping federal tax reform package that, among many other things, addresses a number of rules and laws applicable to tax-exempt organizations, and could impose significant new tax liabilities on nonprofits. While not expected to even be voted on this year, many of the proposals could well find their way into law as part of any future federal tax legislation and many of the exempt-organization-related proposals would fundamentally change the tax obligations of nonprofits.
The legislation proposes changes that impact both tax-exempt organizations and contributors to exempt organizations. The Act would amend which activities and organizations are subject to unrelated business income tax and would impose a variety of new excise taxes and modifications of current excise taxes on certain nonprofit organizations and activities. The legislation also proposes changing the tax-exempt status of certain organizations and seeks to increase the penalties related to IRS Forms 990 and underpayment of unrelated business income tax. Finally, it would introduce a 2% floor on individual charitable contributions.
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