On October 23, 2019, Governor Andrew M. Cuomo, signed legislation incorporating the federal Johnson Amendment into New York law. As previously described, the Johnson Amendment denies tax-exempt status under section 501(c)(3) of the Internal Revenue Code (the “Code”) to (and imposes excise taxes on) any organization that engages in political campaign activities. The new legislation amended section 1116 of New York Tax Law, which will now deny tax-exempt status for N.Y tax purposes to any organization that engages in political campaign activities, either on behalf or in opposition of any candidate for public office.

As part of a series of papers outlining tax reform options for the Senate Finance Committee (SFC), the SFC staff recently published a paper on tax reform options for tax-exempt organizations and charitable giving.  Like the other staff papers on tax reform options, the exempt organizations paper compiles suggestions that have been made by witnesses at SFC hearings, by policy experts, by bipartisan commissions, and elsewhere.  Thus, the paper does not set forth new proposals, but gathers in one place numerous proposals that have been made, with links to sources of those proposals where available.  For exempt organizations, the proposals range from taxing all commercial activities of tax-exempt organizations, to revising the unrelated business income tax rules for organizations conducting commercial activities, to requiring specified payout levels from endowments, to limiting executive compensation that tax-exempt organizations may pay.  With respect to the tax deduction for charitable contributions, the proposals range from repealing the deduction, to fundamentally changing the deduction, to incrementally reforming the deduction in a variety of ways.

IRS Exempt Organizations group has sent out more than 1,300 questionnaires to self-declared Section 501(c)(4) social welfare organizations; 501(c)(5) labor, agricultural or horticultural organizations; or 501(c)(6) business leagues.  The questionnaires are part of IRS efforts to increase voluntary compliance, learn more about self-declared exempt organizations, and determine whether self-declared exempt organizations are complying with applicable tax-exempt law.  The questionnaires are directed to organizations that are not recognized by the IRS as tax-exempt, but claim exemption under Section 501(c)(4), (5) or (6) and filed a Form 990 for tax years beginning in 2010 or 2011.  Unlike most Section 501(c)(3) organizations, these types of exempt organizations are not required to apply to the IRS for recognition of exemption.