Beth Medrash Govoha’s Department of Government Affairs has provided the following update on a number of provisions of interest in the final Tax Reform Bill, which is expected to be voted on today, with the caution that nothing is final until the vote takes place.
The bill makes far-reaching changes to the tax code, including changes of considerable concern to many Orthodox-Jewish families, such as the elimination of personal exemptions and limitations on the deduction of state and local taxes. With concerns such as these in mind, Congressman Chris Smith (R-4th District), who represents Lakewood, has announced that he will be voting no on the bill.
Some of the concerning provisions may be offset to some extent by the increase in the standard deduction and increases to the Child Tax Credits. Individuals are well advised to consult their accountants to understand the bottom line impacts.
There are several bright spots related to education and familiesgiven the overall outcome:
MECHANCHIM AND MOSDOS HAVE BEEN PROTECTED – DISASTROUS PROVISION REMOVED FROM FINAL BILL: The final tax bill preserved the Sec. 117(d) Qualified Tuition Reduction, a pre-tax (i.e. tax free) benefit for educators whereby schools pay tuition for an employee or that employee’s children at any K-12 or undergraduate-level educational institution, and that does not count to their federal income. The Qualified Tuition Reduction (QTR) was eliminated completely in the House Tax Reform Bill, which would have caused the loss to Rebbeim, educators, teachers and their families of hundreds of millions of dollars each year, financially devastating the North American Yeshiva system.
Had this cut gone through, mechanchim and staff receiving free or reduced tuition for their children at the schools in which they themselves teach or receiving tax-free tuition benefits that cover tuition for their children at other elementary schools, mesivtos, seminaries and bais medrash Yeshivos, would have had to pay taxes on those tuition benefits, potentially impacting their eligibility for government programs as well. B’h, after an intensive nationwide advocacy effort, QTR has been restored in full in the final deal.
CHILD TAX CREDIT BOOSTED: The Conference Agreement temporarily boosts the Child Tax Credit to $2,000 per child up to age 17 (which is the same as the current age limit). Up to $1,400 per child will be a refundable credit, which is good news for low and moderate income families. The credit is further modified to temporarily provide for a $500 nonrefundable credit for qualifying dependents other than qualifying children.
529 PROVISION TAKES A SMALL STEP IN THE RIGHT DIRECTION ON PRIVATE SCHOOL TUITION: A new provision that applies to private school tuition will probably have limited value to many frum parents, but it does represent an important step in principle towards allowing tax benefits for private school K-12 tuition. 529 Savings Plans will now be expanded to allowable use for K-12 tuition, up to $10,000 per child per year (until now they have only been allowable for college expenses.) All funds put into a 529 plan are post-tax, i.e. subject to income tax – but the investment income earned on the plan is not taxable, as long as the withdrawals are used for tuition. This benefit is mostly of use to those who can save large sums to be invested over a significant number of years.
TAX-EXEMPT BONDS IMPORTANT TO MOSDOS CAPITAL IMPROVEMENTS PRESERVED: A House provision to end the use of tax-exempt bonds by nonprofit organizations was removed. Had this succeeded, it could have significantly increased costs for mosdos embarking on capital projects, but Baruch Hashem this too did not survive in the final deal.
Rob Zucker of Winning Strategies Washington has been representing Beth Medrash Govoha in Washington, DC for more than ten years. During that time, he’s worked hand-in-hand with BMG’s Government Affairs staff to advocate on a wide-range of issues of critical importance to Yeshivos and the national Orthodox-Jewish community. Mr. Zucker reflects upon the last few weeks of frenetic advocacy: “It was incredibly inspiring to see how the nationwide Orthodox-Jewish leadership rallied to protect the front-line educators and the Yeshiva network across the country serving hundreds of thousands of Orthodox students at every level.We appreciate the staunch advocacy of this leadership group, including Dr. Irving Lebovics of California, Mr. Yoel Rosenfeld of New York, Rabbi Yechiel Kalish of Illinois and Ohio, Mr. Yaakov Polatsek of Texas, Mr. Moishe Tress of New Jersey, Mr. Jason Lyons of Florida and Mr. Yehuda Neuberger of Maryland, as well as a number of others. It’s an honor to work hand-in-hand with BMG’s Co-Chairman, Howard Tzvi Friedman, BMG’s President, Rabbi Aaron Kotler, and Mrs. Chanie Jacobowitz, BMG’s Director of Government Affairs.”