WASHINGTON—CUNA said it is continuing to press lawmakers to fix aspects of an excise tax contained in the Tax Cuts and Jobs Act of 2017 (TCJA).
The new law requires tax-exempt entities to pay a 21% excise tax on the five highest-paid employees’ compensation that individually exceed $1 million annually, effective Jan. 1, 2018.
The provision was designed to create parity between not-for-profit entities and for-profit entities, which can only deduct the first $1 million of each individual employee’s compensation.
CUNA said it believes the law creates a major parity problem between existing for-profit and not-for-profit employee contracts. The new law exempts from deductibility limits existing corporate executive compensation contracts by “grandfathering” in “for- profit” executive contracts in effect on or before Nov. 2, 2017.
“No such provision was included for not-for-profit employee contracts, amounting to a retroactive tax on the nonprofit sector as these contracts were agreed upon with certain tax considerations assumed,” CUNA said.
Parity is Sought
CUNA has been lobbying Congress to create parity by grandfathering the not-for-profit sector’s contracts that were in effect on or before Nov. 2, 2017.
As Congress works on a potential technical corrections and tax extender bill, CUNA said it is actively advocating for not-for-profit parity with for-profit businesses regarding employee contract parity and the "grandfathering" of existing contracts.
“A tax technical corrections bill would be an appropriate vehicle,” CUNA stated.