NAICU Washington Update

House Committee Repeals the “Parking Tax” and Extends the Tuition Deduction

June 24, 2019

The House Ways and Means Committee passed the Economic Mobility Act, which includes language that repeals the new tax on nonprofit employers that offer parking and other mass transit benefits to their employees mandated in the Tax Cuts and Jobs Act of 2017.  The committee also voted to extend the tuition reduction through 2020.

The parking tax has been an onerous new tax on all nonprofits, including colleges and universities.  It imposes not only a new tax but also requires complex calculations to be filed with the IRS as Unrelated Business Income (UBIT) for churches and other charities that previously never had to report that information.

While the repeal of the parking tax has bipartisan support in the House and Senate, the cost of the Act is precluding swift movement to the House floor for consideration.  The bill, which is primarily focused on enhancing the earned income and dependent care credits, is estimated to cost $100 billion over ten years.  While Ways and Means Chairman Richard Neal (D-MA) is said to be considering an increase in the corporate tax rate as a possible pay-for, there are not enough Democrats or Republicans in the House who would support it.  Legislation that increases the corporate tax rate would also have no chance of being taken up by the Senate.

The Ways and Means Committee approved a second bill the same day that would extend a host of expired or expiring tax provisions.  Included in that bill is an extension of the above-the-line tuition deduction through 2020.  The tuition deduction is not as generous a tuition benefit as the American Opportunity Tax Credit (AOTC), but is available to graduate students and others incurring tuition expenses after the AOTC limit of four years.

Neither piece of legislation has offsets yet, which would allow consideration on the House floor and by the Senate.  Chairman Neal, and Senate Finance Chairman Chuck Grassley (R-IA), will need to work toward a compromise, which could easily push any further consideration into the fall, or later.

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