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Senate passage of tax bill brings reform one step closer…

December 4, 2017
Despite some last-minute hand-wringing and because of some last-minute horse-trading, the Senate did what most pundits thought they would do – and what most GOP leaders felt they had to do – and passed a bill enacting sweeping reforms to the U.S. Tax Code on a 51-49 party line vote. The House passed its version of tax reform several weeks earlier. The differences between the two measures will be reconciled by a joint House and Senate Conference Committee. The final version will then be approved by both the House and Senate before being sent to the President’s desk for signature. The Administration is pushing for this process to be completed by the Christmas break. And right now, we wouldn’t bet against that. The good news for fraternals, of course, is that the long-standing fraternal tax exemption is not included in either bill. As we said previously, this is not a “happy accident” but rather the result of literally years of effective advocacy by the Alliance and its members to educate Members of Congress about the value and viability of the fraternal model and, by extension, the tax exemption that allows us to fulfill our unique financial and community service missions. So, presuming a tax reform measure that maintains the fraternal exemption is signed into law by year-end, we can all rest easy knowing that Congress won’t want to deal with an issue this complex for another decade or more, right? Not quite… No matter what the final provisions of the tax reform bill that eventually gets signed into law contain, the measure is almost certain to increase the federal deficit by $1 trillion or more. That is an anathema to the deficit hawks within the GOP – a few of which tried to amend, if not outright derail, the Senate’s tax reform bill – which means that for the foreseeable future we’re almost certain to see this group try to break the federal government’s addiction to spending. I’m guessing that proposals to limit spending on entitlements – Medicare, Medicaid, and Social Security – will get the most attention because of the sheer size of these programs. But, I have a hunch that next year federal lawmakers will take closer look at ways to generate additional tax revenue to offset some of the income lost as a result of the individual and corporate tax cuts that will almost certainly be enacted this year. I wouldn’t put the fraternal exemption in the center of the target for these efforts. The fact is, taxing fraternals would simply not generate a significant amount of money for the Treasury and, on the flip side, would undermine the incredible amount of non-governmentally funded social good we do in communities across the country. That said, I think we – and every other entity with a tax exemption or preference – need to prepare for a close examination of what our exemption is worth to members and taxpayers. One of the most effective ways we’ll accomplish this is by bringing our member society CEOs and senior executives to Washington, DC, on April 23-25 for the Alliance’s Executive Summit. This conference combines educational programs and networking opportunities with an afternoon of Capitol Hill visits for members with key congressional leaders and their staff. We have traditionally held this meeting in Washington every other year. But under the Alliance’s new operating model, we will conduct this event in Washington every year, signifying the importance of our advocacy activities to member societies and Members of Congress alike. The fact of the matter is that our advocacy work – on the tax issue at the federal level and on regulatory issues in the states and at NAIC – is never done. We deal with issues that are “evergreen” (like the tax exemption) and “emerging” (like the PBR small company exemption) because we know these are critically important to you, your society, and the future of the fraternal movement.  We can – and do – take great pride in our advocacy accomplishments this year. But we will wake up tomorrow keenly aware that our work on your behalf never stops.