2019 Legislation Resolves Three Important Issues for Ministries and their Employees

In December, 2019, Congress passed legislation that repealed onerous taxes and clarified the broad availability of church 403(b)(9) retirement plans to ministries. Thanks to the bipartisan support of legislators in both houses of Congress, the resources of America’s religious communities can remain focused on their mission work rather than on these taxes and questions. Specifically, the Church Alliance urged legislators to fix three issues that negatively impacted the ministries and church workers they serve.

The legislation:

  • Eliminated the 40% “Cadillac Tax” on health care coverage
  • Repealed the “Parking Lot Tax” on churches and other tax-exempt organizations
  • Clarified church retirement plan eligibility for church-affiliated organizations and their employees

Below you will find a summary of all three provisions and how they impact ministries and their employees.

Repeal of Cadillac Tax

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 eliminated this tax.

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 in reality it would have affected modest plans covering working-class church workers and their families. This tax was originally scheduled to begin in 2018 and had been delayed until 2022, but the recent legislation eliminated it from the Tax Code.

Repeal of the Parking Lot Tax

The legislation repealed a provision in the Tax Cuts and Jobs Act that went into effect January 1, 2018.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. The legislation repealed the tax back to the tax’s effective date. The Internal Revenue Service recently announced that tax-exempt organizations that have paid this tax may claim a refund.

Clarified Church Retirement Plan Eligibility for Church-Affiliated Organizations

This legislation reaffirmed current law and clarified 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. 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.

Thank You!

Church Alliance members are pleased that these burdensome issues have been favorably resolved. A sincere thank you to everyone who championed this legislation including:

Clarified Church Retirement Plan Eligibility for Church-Affiliated Organizations

  • Sen. Pat Roberts
  • Sen. Ben Cardin
  • Sen. Mike Crapo
  • Sen. Amy Klobuchar
  • Sen. David Perdue
  • Sen. Rob Portman
  • Rep. Ron Kind
  • Rep. Mike Kelly

Repeal of the Parking Lot Tax

  • Sen. Jim Lankford
  • Sen. Chris Coons
  • Sen. Ted Cruz
  • Sen. Jeanne Shaheen
  • Sen. Sherrod Brown
  • Rep. Mark Walker
  • Rep. Tom Suozzi
  • Rep. Mike Conaway

Repeal of Cadillac Tax

  • Sen. Martin Heinrich
  • Sen. Mike Rounds
  • Rep. Joe Courtney
  • Rep. Mike Kelly

Leadership:

  • Senate Majority Leader Mitch McConnell
  • Senate Minority Leader Chuck Schumer
  • Speaker Nancy Pelosi
  • House Majority Leader Steny Hoyer
  • House Majority Whip Jim Clyburn
  • House Minority Leader Kevin McCarthy
  • House Minority Whip Steve Scalise

Committee Leadership

  • Senate Finance Committee Chairman Chuck Grassley
  • Senate Finance Committee Ranking Member Ron Wyden
  • House Ways & Means Committee Chairman Richard Neal
  • House Ways & Means Committee Ranking Member Kevin Brady