Austin, TX – The Texas Municipal Police Association and the Texas State Lodge of the Fraternal Order of Police sent a letter to Chairman Brady and Senator Cornyn today regarding our strong opposition of section 5001 of H.R. 1.
Below is the text of the letter:
On behalf of more than 26,000 members of the Texas Municipal Police Association (TMPA) and the 4,800 members of the Texas State Lodge of the Fraternal Order of Police (FOP), we write to relay serious concerns our membership has with Section 5001 of the House-passed Tax Cuts and Jobs Act (H.R. 1). These proposed changes would make our efforts to attract and retain qualified personnel exponentially more difficult. As you are no doubt aware, we are already experiencing a critical shortfall in staffing. We are convinced that inclusion of this provision would further exacerbate the shortage of officers in Texas.
This House provision would subject certain investments of state and local governments’ retirement systems to the unrelated business income tax (UBIT). As a Conferee on the Tax Cuts and Jobs Act, we strongly urge you to ensure this provision is excluded from the final conference agreement. UBIT represents a new tax on public pension plan earnings, which would be nearly double the new corporate rate under tax reform, and is not a clarification or updating of existing law. It overturns a 40- year-old position by the Internal Revenue Service to not apply UBIT to governmental plans – a precedent on which public plans have relied in good faith. Application of UBIT to state and local retirement systems also erodes the Constitutional immunity states and the federal government each enjoy from taxation by the other.
Investment earnings pay for approximately two-thirds of public pension benefits. Federal taxation of these earnings will increase both cost and volatility, thereby impairing the fiscal health of both the plans and their sponsors, and ultimately increasing costs to taxpayers.
We hope we can count on your assistance in ensuring this provision is not included in the final conference report. If you have any questions about this matter, please contact us at 800-848-2088.