Accounting & Auditing Blog

Not-for-Profit Update – Summer 2011

This quarterly Not-For-Profit Standard includes the following articles:

Buyer Beware: Alternative Investment Compliance and Tax Issues

By R. Michael Sorrells, CPA

With the promise of greater investment yields, many nonprofit organizations are jumping on the bandwagon and investing in an array of alternative investments, many of which derive income from offshore sources. Such investments include partnerships, limited liability companies (LLCs), hedge funds, funds-of-funds and other similar entities.

Click here to read more about alternative investment compliance and tax issues.

State Tax Liability for all Alternative Investments: What can you can do if you did not pay state taxes

By Laura Kalick, JD, LLM in Tax

Nonprofit organizations that have adopted Accounting Standards Codification (ASC) 740-10 (FIN 48) have gone through the exercise of determining whether there are any material uncertain tax positions. This analysis should have been performed for all income tax positions at the federal, international, and state and local levels. The identification of tax positions should have taken into account all the open tax years, i.e., those years that would be subject to assessment by the taxing authorities. In general, for federal income tax purposes, the government has three years from the date a tax return is filed to go back to assess taxes.

Click here to read more about state tax liability for all alternative investments.

Nonprofit Board Members: Paid or Volunteer?

By Mike Conover

The propriety of pay for board members serving tax-exempt organizations is in the news again. While not a new topic (it has been raised at any number of points in past years), the sentiments of some opposed to the practice has intensified. Undoubtedly, the financial turmoil of recent years, the gloomy economy and the predictable appearance of excesses in executive pay, in for-profits and nonprofits alike, have all contributed to this opposition. The outcry from the public has, in at least one recent instance in Massachusetts, prompted pending legislation to prohibit the practice of compensating board members altogether.

Click here to read more about nonprofit board members.

Incentives and Disincentives for Contributions

By Laura Kalick, JD, LLM in Tax

When a gift is made to a 501(c)(3) organization, the donor is allowed a charitable contribution deduction. The charitable contribution deduction is a major incentive for charitable giving and is a significant source of funding for charitable organizations.

Click here to read more about incentives and disincentives for contributions.

Issues in Charitable Giving

By Paul E. Hammerschmidt, CPA, MS (Taxation) and Christina K. Patten

Some issues in charitable giving are outlined as follows:

Partial Interests

Over the years some taxpayers have wanted to have their cake and eat it too. They've wanted to make a charitable contribution and still retain property rights that would entitle them to use the property. Taxpayers are subject to a significant number of restrictions that must be complied with before they are entitled to an income tax deduction for gifts of property to a charity. One of these restrictions generally provides that a taxpayer cannot take a charitable contribution deduction for a partial interest in property, i.e., a gift of less than his or her entire interest in the property [IRC Section 170(f)(3)(A)].

Click here to read about more issues in charitable giving.

FASB ASU 2011-04 and its Effects on Nonprofit Organizations

By Dick Larkin, CPA

Accounting Standards Update (ASU) 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS was issued to further conform the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) standards relating to fair value measurements. The IASB standards are referred to as International Financial Reporting Standards (IFRS). The principal remaining differences between the two sets of standards involve some terminology, and references to other standards, and matters that do not affect nonprofit organizations.

Click here to read more about FASB ASU 2011-04.

2011 OMB Circular A-133 Compliance Supplement Issued

By Tammy Ricciardella, CPA

On June 1, the Office of Management and Budget (OMB) issued the 2011 Circular A-133 Compliance Supplement (The Supplement) dated March 2011.

Click here to read a summary of some of the major changes from the 2010 Supplement.

IRS Targeting Fringe Benefits for Intermediate Sanctions

By R. Michael Sorrells, CPA

According to an IRS tax-exempt official at a recent nonprofit conference, fringe benefits are the most common area in which the IRS is imposing intermediate sanctions under IRC Section 4958. This code section, which applies to 501(c)(3) public charities and 501(c)(4) social welfare organizations, can lead to very expensive excise taxes for organization executives and even members of the governing body in certain situations.

Click here to read more about how the IRS is targeting fringe benefits for intermediate sanctions.

Gifts of Property and IRS Forms 8282 and 8283

By Sandra Feinsmith, CPA

Have you received a phone call from a donor requesting that your organization value, complete and send them Form 8283 for their noncash contributions to submit with their tax returns?

Click here to read more about Form 8282 and 8283.

New GASB Pronouncements

By Patricia Duperron, CPA

The following pronouncements from the Governmental Accounting Standards Board (GASB) will be effective for reporting governmental financial statements in upcoming years:
GASB Statement No. 59, Financial Instruments Omnibus, amends the reporting and disclosure requirements of certain financial instruments and external investment pools for which significant issues have been identified in practice. GASB Statements No. 25 and 43 are amended to remove the fair value exemption for unallocated insurance contracts. These were previously reported using a cost-based measure but are now required to be reported at fair value.

Click here to read more about the new GASB pronouncements.

Other Items to Note…

Schedule H – Hospitals

The IRS has just issued Announcement 2011-37, which indicates that Part V, Section B (Part V.B) of Schedule H, Hospitals, of the 2010 Form 990, Return of Organization Exempt From Income Tax, is optional for the 2010 tax year. This announcement came after protest from many groups regarding the issuance of the new schedule provisions before the IRS had even issued draft regulations on the new requirements. It is important to note that even though the particular section of the form will be optional, hospitals must still be in compliance with the new requirements.

Click here to read more about other items to note in the nonprofit sector.

Gambling with your Tax Exemption?: IRS Guide Highlights Important Exempt Issues

By Joyce Underwood, CPA

Gaming can have an impact on an organization's exempt status and requires special recordkeeping and reporting for the unique activities that surround these events including income, employment and excise taxes.

Gaming has become more visible with the addition of Schedule G in the revised Form 990. IRS updated its Publication 3079, Tax-Exempt Organizations and Gaming, late last year to provide current guidance. Gaming is often added to facilitate socializing and fundraising amongst a group with a common interest and is frequently included at exempt organizations' fundraising special events.

Click here to read more about tax exemption issues.

Nonprofit Expense Allocation

By Lee Klumpp, CPA

Over the past fifteen years, there has been more pressure on nonprofits to conform to the expectation set by stakeholders to keep overhead expenses (supporting services activities) down and therefore maximize the use of unrestricted and temporarily restricted funds that can be used on programmatic activities.

Click here to read more about nonprofit expense allocation.

For more information on our nonprofit accounting services, contact Skoda Minotti at 440-449-6800.

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