Small nonprofits would gain access to retirement plan tax credits under HR 4548

What does this do?

HR 4548 allows eligible small nonprofit organizations to claim existing federal tax credits for setting up retirement plans and automatically enrolling employees, applied against payroll taxes rather than income taxes. Currently, tax-exempt organizations cannot use these credits because they do not owe income taxes. The bill also requires the federal general treasury to transfer equivalent funds into Social Security and disability trust funds to offset any reduction in payroll tax revenue.

Who does it affect?

The bill directly affects small nonprofit organizations with 100 or fewer employees, including local charities, community groups, and other tax-exempt organizations. Employees of those nonprofits are also affected, as the credits are intended to encourage employers to establish and expand retirement savings options.

Why does it matter?

Under current law, a small nonprofit and a comparable small for-profit business are treated differently when it comes to these retirement plan credits. Extending the credits to nonprofits would reduce payroll tax revenue collected by the federal government, which is why the trust fund transfer provision is included.

What does it cost, and who pays?

• Credits offset against payroll taxes
• General treasury reimburses trust funds
• Social Security and disability funds protected

Where does it stand?