December 21, 2019
Political Advocacy Pays Off for Churches and Affiliated Organizations
After more than a dozen visits to Capitol Hill over the past six years, Portico President and CEO Rev. Jeff Thiemann along with fellow Church Alliance partners can ring the victory bell. With the passage of the 2020 Year-End Spending Package on Friday, Dec. 20, three bills — each including pieces of long-battled, pro-church legislation — have become law.
“We’ve partnered with other denominational benefit organizations to represent the needs of the ministries we serve. After years of work on these issues, we are thrilled to see these concerns set into law,” Rev. Thiemann said.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act, the Middle Class Health Benefits Tax Repeal Act, and the Economic Mobility Act were included in the spending package, reflecting negotiation efforts to avoid any negative impact on churches and church-affiliated organizations.
What It All Means
The following act segments had the potential to cause significant financial and administrative burden on religious organizations. Below, you’ll find a summary of the issues and their resulting impact as stated by the Church Alliance:
Issue: Repeal of Cadillac Tax on health care coverage [H.R. 748 – Middle Class Health Benefits Tax Repeal Act]
Impact: Ministries and their employees no longer will need to worry about or plan for this onerous tax, which would have driven up the cost of health care coverage. Congress’ recent action eliminates this 40% tax.
Summary: The 40% Cadillac tax would have been imposed on health care coverage that exceeded certain government-imposed thresholds. The name “Cadillac” implied it only would have applied to extravagant coverage, but it would have affected modest plans covering church workers and their families. The tax would have disproportionately affected the health care coverage of women, early retirees, those in rural communities, the sick, and the disabled. This tax was originally scheduled to begin in 2018 and had been delayed until 2022, but this legislation eliminates it from the Tax Code.
Issue: Clarified church retirement plan eligibility for church-affiliated organizations [Sec. 111 of H.R. 1994 – SECURE Act]
Impact: A broad spectrum of church-affiliated organizations can continue to offer church retirement “403(b)(9)” plans to their employees.
Summary: This legislation reaffirms current law and clarifies that a broad scope of church-affiliated organizations remains eligible to participate in church retirement plans offered under section 403(b)(9) of the Tax Code. Recently, the IRS took a position that would have eliminated the eligibility of many church-related nursing homes, daycare centers, summer camps, colleges, universities, hospitals, and social service organizations to participate in these plans. The legislation has preserved access to the unique benefits of these church plans and eliminated significant costs that otherwise would have been incurred by these church-affiliated organizations and their employees.
Issue: Repeal of the Parking Lot Tax [Sec. 401 of H.R. 3300 – Economic Mobility Act]
Impact: Tax-exempt organizations, including churches, no longer will be taxed on the costs of their parking lots and other transportation-related benefits provided to or used by their employees.
Summary: The legislation repeals a provision in the Tax Cuts and Jobs Act that went into effect January 1, 2018. That provision subjected tax-exempt organizations, including churches, to tax liability and reporting requirements on amounts spent to provide parking, public transit passes and other transportation benefits to employees. This tax was illogically imposed on expenses incurred by many ministries primarily to provide parking for those they serve, which only incidentally was used by employees. The legislation repeals the tax back to the tax’s effective date. While not entirely clear yet, and likely dependent upon guidance from the IRS, ministries that have paid this tax for 2018 might be able to apply for a refund.
The Church Alliance
A coalition of 38 church benefit providers, the Church Alliance was formed to support the unique needs of religious institutions and affiliated organizations through legislative and regulatory advocacy. Thiemann currently serves at the Vice Chair of the Alliance, acting as a voice for the ELCA community in the political arena.