Dozens of South Carolina churches and nonprofits are beginning to voice concern that parts of the recently enacted federal tax reform could hurt them, and even make many of them pay taxes for the first time.
The tax-code rewrite calls for churches, hospitals, colleges and other traditionally tax-exempt groups to begin paying a 21 percent tax on some fringe benefits, such as parking spaces or moving expenses, that they provide their employees.
The changes were designed to rid the code of tax breaks for employee benefits, such as parking, meals and moving expenses.
Meanwhile, there's also the larger concern that the new tax code's larger personal deductions could reduce giving across the country. An estimate from the Urban-Brookings Tax Policy Center predicted that impact could reduce charitable deductions by between $12 billion and $20 billion this year.
Nate Gibson, director of business operations at Mt. Horeb United Methodist Church in Lexington, was trained as a certified public accountant and has been keeping a watchful eye on the changes.
"There are going to be a lot of people happy with the new tax code. Big business gets cuts," Gibson said. "The nonprofit organizations that are being held to the same standards, we don't get the tax cuts. It's only a net negative for us. There's a reason we're nonprofit. We're doing things on the skinny. That is a big highlighting concern."
And there are more specific concerns, as well.
The Evangelical Council for Financial Accountability has circulated a petition calling attention to the change, specifically noting that the Tax Cuts and Jobs Act would require churches and nonprofits to be taxed on parking that they provide to their employees.
"The very purpose of tax exemption for nonprofit organizations is not to have their charitable, religious and educational activities on the same footing as taxable businesses because of their important work and the inherent challenges associated with raising money to support that work," their petition said.
The ECFA was formed in 1979, and its members include churches, denominations, educational institutions, rescue missions, camps and other tax-exempt groups. Taken together, they represent more than $26 billion in annual revenue.
At least 39 groups from South Carolina have signed the petition. Lowcountry groups that signed include Water Missions International of North Charleston, The Protestant Episcopal Church in the Diocese of South Carolina and the Lowcountry Pregnancy Center of North Charleston.
Others, including the Charleston Diocese of the Catholic Church, are taking a wait-and-see approach.
“The impact and interpretation of the new tax law is unclear," the diocese said in a statement. "We are currently consulting with attorneys at the United States Conference of Catholic Bishops regarding next steps.”
The law calls for the U.S. Treasury Department to provide guidance on the complex issue of how cost is to be determined for this purpose, the EFCA petition notes, adding, "In addition to filing federal income tax returns, many nonprofit employers affected by the new law will also be required to file state income tax returns and possibly pay a state income tax as a result of the new federal income tax."
Gibson said Methodist churches also could be hurt because they often change pastors. The associated moving costs used to be deductible.
"If the church does pay for it, we have to add that as taxable to the pastors' W-2 (income forms). Before, that was not the case," he said. "If pastor pays for it instead, in the past it was deductible as moving expense, and now it's not."
U.S. Sen. Lindsey Graham has seen news reports of the tax impact but has not heard from South Carolinians about it, at least not yet, spokesman Kevin Bishop said. U.S. Sen Tim Scott's spokesman said Scott would be willing to fix provisions of the new law if charitable groups are hurt.
"The Tax Cuts and Jobs Act continues to accomplish many things, including lowering taxes for millions of American families and simplifying the tax code as it relates to small businesses and nonprofits," Scott's spokesman Ken Farnaso said. "As the Treasury Department works to finalize the rules around this provision, should Senator Scott see any evidence these provisions are not being implemented as intended, he will certainly take steps to rectify the situation."
As the situation become more clear, those with the most at stake might be smaller churches, Gibson said.
His current church, Mt. Horeb, has about 4,000 members, making it the largest United Methodist church in South Carolina. Gibson said the church is growing and has financial flexibility, but smaller churches and nonprofits would be harder hit.
"I sit on three different nonprofit boards," he added. "Ninety-five percent of nonprofits, everything is tight. These are people taking less money for something they believe in because it benefits the community and it benefits the nation. They're going to be really hurt by this."