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The Only Certainties of Life

Benjamin Franklin is given credit for coining the phrase that the only certainties in life are death and taxes. While for most of us, (hopefully) death is a long way off, taxes are ever present and last week the U.S. Tax Code once again took center stage. On February 21, 2014, the U.S. House Ways and Means Committee issued draft legislation that would provide the first major overhaul of the U.S. Tax Code since 1986. The proposed “Tax Reform Act of 2014” would modify a wide range of tax provisions impacting individuals, corporations, partnerships and tax-exempt entities.

In an  Op-Ed written by Ways and Means Committee Chair, Rep. Dave Camp (R-MI), for The Wall Street Journal, Dave CAmpCamp glibly pointed out that there have been so many changes to the tax code over the past decade that it is now 10 times the size of the Bible, but with none of the Good News. As a Forbes article points out, ironically, given our current Byzantine tax code, even this new proposal for “simplification” stretches to nearly 1,000 pages. Fear not friends, the Alliance is here to cut through the legislative “double speak” and tell you the facts that you need to know.

As most of you are aware, the Alliance invests an enormous amount of time, energy and effort into working the halls of Congress promoting the value of the fraternal tax exemption. To assist us in this effort, we have a maintained a close working relationship with our lobbying firm, McBee Strategic. Their team is working for us every day on Capitol Hill. In addition, I am in D.C. on a regular basis spreading the fraternal gospel to politicos, staffers, trade groups, etc. and frequently partner with member society CEOs to assist with home district and state appeals on this issue. Lastly, every two years we bring the mountain to Mohammed by holding a lobby day during the Presidents Mid-Year Meeting. We know this issue is important to you and we never let our guard down for a minute.  Moreover, in the past five years we’ve gone from a “lay-low” defensive strategy to a “shout our story from the mountain tops” strategy.

While the Alliance can’t measure the impact and value of our investment in advocacy the way a company measures profit and loss, it does appear that our hard work has indeed provided us with some “Good News” in the proposal. In short, based on the tax reform draft issued by Chairman Camp last week, our efforts are paying off – mainly because we’re not in it. The folks at McBee have done a preliminary analysis and tell us that, at least on the fraternal exemption, we are in the clear for now. But there are other portions of the legislation that could affect us as financial services organizations. For example, Title V of the proposed legislation addresses proposed changes to current tax provisions impacting tax-exempt entities, and addresses several areas that may be of concern for tax-exempt entities, including:

  • Unrelated business income tax (UBIT) – Subtitle A
  • Penalties – Subtitle B
  • Excise Taxes – Subtitle C
  • Requirements for Organizations Exempt from Tax – Subtitle D

Click here for a section-by-section summary prepared by Ways and Means Committee staff. (The table of contents lists all the page numbers for the articles. Simply use the scroll bar to navigate to the correct page in the document.)

We also encourage you to educate yourself on the proposal by taking a look at the articles linked here, here, here and here.

Unfortunately once you’ve done your homework on this issue, it seems that it might have been an exercise in futility. For better or for worse, the prospects for advancing this proposal are murky at best. A Washington Post editorial calls the proposal “dead on arrival” and scolds that “In a properly functioning Washington, the tax reform plan …would kick off a major debate over how to fix the federal government’s inefficient system of revenue collection.” But the article goes on to point out that, “In the actual Washington, alas, Mr. Camp’s proposal has basically no chance of passage, or even of being acted upon this year. Much of the blame for that belongs with the leaders of his party, who smell victory in the November elections and don’t want to do anything controversial – that might put that prospect at risk.” Additionally, Camp’s tenure as Chair of Ways and Means is up in 2014 and a new chair of the Senate Finance Committee has just been named (Ron Wyden, D-OR). Given these and other obstacles, the fact is that it may be years before we see any action on tax reform.

In spite of all of the D.C. politics beyond our control, let’s be proud of the fact that our efforts have kept us out the discussion so far. Let’s also pledge to continue working to spread the word to public policy makers by supporting Alliance advocacy efforts.

If you have any questions or concerns, or if you would like more information on Washington tax reform activities, please feel free to contact the Alliance at any time at info@fraternalalliance.org.

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