Protecting the Association Sector Amidst Expiring Tax Provisions and Proposed Reforms

The 2017 Tax Cuts and Jobs Act (TCJA) brought sweeping changes to the tax landscape, many of which are set to expire at the end of 2025. This expiration, combined with the new administration's cost-saving and tax reform priorities, poses significant challenges to the association sector. As organizations brace for potential changes, association executives must proactively assess and address these threats.

Potential Threats from Tax Reforms

Among the reconciliation options proposed by House Budget Committee Republicans are reforms that could significantly impact tax-exempt organizations and their financial sustainability. Some of the provisions in the document target specific sectors broadly, while others raise revenue in more novel ways. Examples include:

• Elimination of Tax-Exempt Status for Certain Nonprofits: One suggestion aims to tax nonprofit hospitals and healthcare firms as for-profit entities, potentially generating $260 billion in savings over ten years.
• Elimination of Business SALT Deduction: The proposal to remove the deduction for state and local taxes for businesses could increase operating costs for associations with taxable income​.
• Expansion of the Endowment Tax: Increasing the rate from 1.4% to 14% could dramatically affect private universities and similar institutions with significant endowment assets.
• Elimination of Exemptions for Municipal Bonds: Proposals to tax income earned on municipal bonds would erode funding sources for public projects and nonprofits that rely on these bonds to finance infrastructure and development​.
• Changes to Charitable Contribution Deductions: Proposals such as removing deductions for contributions to health organizations could disincentivize donations, reducing funding for critical nonprofit activities.

If enacted, these measures would fundamentally alter how associations and nonprofits operate, threatening their ability to deliver essential services. While not everything in the document will make it into a tax bill, it underscores that Congress is not averse to tapping into the tax-exempt sector in its search for revenue.

The Expiration of TCJA Benefits

The TCJA provided temporary benefits to many associations, including deductions and exclusions that helped balance operational budgets. Without action from Congress, the expiration of these provisions could lead to:

1. Increased operating costs for associations.
2. Reduced funding for tax-exempt initiatives.
3. Stricter oversight and administrative burdens due to revised tax policies.

Joining Forces to Defend the Sector

To counter these looming challenges, the American Society of Association Executives (ASAE) has established the Community Impact Coalition. This initiative mobilizes association professionals to advocate for the sector, focusing on preventing tax policies that would undermine the ability of tax-exempt organizations to thrive.

Call to Action

Association executives are encouraged to:

• Stay Informed: Monitor legislative developments and analyze how proposed tax reforms could affect your organization.
• Engage Policymakers: Advocate for the preservation of tax-exempt benefits and policies that support the nonprofit sector.
• Join the Community Impact Coalition: Collaborate with peers and ASAE to ensure a united and powerful voice in defending the sector.

Conclusion

The expiration of the TCJA combined with the intense focus on tax reform and cost savings presents a pivotal moment for the association sector. By taking proactive steps and leveraging collective advocacy, association executives can protect the essential work and mission of our organizations.

To join the Community Impact Coalition or learn more, contact Mary Kate Cunningham, CAE, SVP of Public Policy, at mcunningham@asaecenter.org.