This month's Not-for-Profit Update includes:
- New Governmental Accounting Standards Board (GASB) Pronouncements
- Political Activities by Tax-Exempt Organizations
- Pay Bias in the Boardroom
- Audit/Finance Committee Review for Form 990 – Key Considerations
- IRS.Gov Website Redesign
- Nonprofit Risk Management
- IRS Provides Guidance on Deductibility of Charitable Contributions to Domestic Disregarded Entities
- Congressional Focus on Tax-Exempt Organizations
- Avoiding a Troublesome Audit
- More FAQs on Auto-Revocation
New Governmental Accounting Standards Board (GASB) Pronouncements
By Patricia Duperron, CPA
This article summarizes some of the new GASB pronouncements that will be effective in future years.
GASB Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements (SCA) will apply to governments that have another entity operating a public asset. An SCA is an arrangement between a transferor (a government) and an operator (governmental or nongovernmental entity) in which (1) the transferor conveys to an operator the right and related obligation to provide services through the use of infrastructure or another public asset, (2) the operator collects fees from third parties and is compensated by fees, (3) the transferor determines what services the operator is required to provide, to whom and at what price and (4) the transferor is entitled to significant residual interest in the service utility of the asset at the end of the agreement. Examples include toll roads, convention facilities or a parking garage.
Click here to read more about the new GASB pronouncements.
Political Activities by Tax-Exempt Organizations
By Sandra Feinsmith, CPA
As we enter the home stretch to Election Day on Nov. 6, Internal Revenue Code (IRC ) Section 501(c)(3) organizations will be speaking out on issues that are important to their charitable mission.
Click here to read more about the political activities by
Pay Bias in the Boardroom
By Michael Conover
I’ve had a couple of experiences this summer that set the stage for this short piece. While preparing to kick off a client project, the board chair informed me that several of his board members questioned the need for a pay study (“Are we making a much bigger deal of this than we need to?”). He went on to say that these same individuals just didn’t feel it was necessary to “pay a lot of money” for an individual to run this organization ($20 million operating budget, staff of 200+).
Click here to read more about pay bias.
Audit/Finance Committee Review for Form 990 – Key Considerations
By R. Michael Sorrells, CPA
With the transparency and public availability of the “new” Form 990, review of the Form 990 by audit or finance committees (and sometimes the entire governing body) has become a best practice adopted by most nonprofit organizations. This has been made almost mandatory with the Form 990 requiring a description of the review process. It is also important to note that the IRS, in a preliminary study of audited charitable organizations, has concluded that nonprofits with a review process are more likely to have better tax compliance.
Click here to read more about the review for Form 990.
IRS.Gov Website Redesign
By Joyce Underwood, CPA
In case you haven't had a chance to visit the Internal Revenue Service (IRS) website (IRS.gov) recently, you may be surprised to find a distinctly different site on a new platform with added features.
Click here to read more about the IRS.Gov website redesign.
Nonprofit Risk Management
By Michael E. Batts, CPA
Now more than ever before, nonprofit leaders must recognize the importance of risk management as an inherent part of organizational oversight and leadership. But what does proper risk management look like, and whose responsibility is it? Many nonprofit boards assume that the CEO and management have the “bases covered” and board involvement is often limited to reacting to flare-ups. Such an approach to risk management is problematic and dangerous for multiple reasons.
Click here to read more about nonprofit risk management.
IRS Provides Guidance on Deductibility of Charitable Contributions to Domestic Disregarded Entities
By Paul E. Hammerschmidt, CPA, MS (Taxation) and Christina K. Patten
On July 31, 2012, the Internal Revenue Service (IRS ) released Notice 2012-52 which confirms the position that charitable contributions to domestic single member limited liability companies (SMLL C) that are wholly owned and controlled by U.S. charities such as 501(c)(3) organizations are deductible as charitable contributions. A limited liability company (LL C) can either be treated as a separate corporation or as a pass-through entity that is not taxed. If the LL C is treated as a pass through entity, then the owner or member of the LL C is taxed on its income. If there is only one owner, the SMLL C can be disregarded for federal tax purposes and treated as part of the parent charity (i.e., branch or division), allowing a charitable contribution deduction under the Internal Revenue Code (IRC). 1
Click here to read more about the IRS's guidance on deductibility of charitable contributions and domestic disregarded entities.
Congressional Focus on Tax-Exempt Organizations
By Laura Kalick, JD, LLM in Taxation
As part of the tax reform debate, one area of congressional focus is the tax-exempt sector. And why not? The nonprofit sector is a very substantial part of the economy with 10 percent of the workforce being employed by the sector and assets of over $2.5 trillion. 1 On May 16, 2012, the U.S. House Ways & Means Subcommittee on Oversight (Subcommittee) held the first in a series of hearings on tax-exempt organizations. 2 The focus of the hearing was to discuss current issues affecting tax-exempt organizations, including lower tax revenue as a result of the growing tax-exempt sector, new requirements for tax-exempt hospitals, good governance standards and the Form 990. The second hearing was held by the Subcommittee on July 25. On the same day the Senate Finance Committee held a hearing on education tax incentives and tax reform. 3 Higher education is one of the largest segments of the nonprofit sector. The Difficulty of Regulating Tax- Exempt Organizations
Click here to read more about the congressional focus on tax-exempt organizations.
Avoiding a Troublesome Audit
By Randy Gregg, CPA
Audits are a lot of work in the best situations, but sometimes they can be downright painful.
Nonprofit audits can be delayed and deadlines missed if support for some accounting issues is not carefully planned. Here are a few of the areas that can cause delays and give all involved a case of heartburn.
Click here to read more about avoiding troublesome audits.
More FAQs on Auto-Revocation
By Joyce Underwood, CPA
In June 2012 the Internal Revenue Service (IRS ) released an updated document, Automatic Exemption Revocations for Non-Filing: Frequently Asked Questions (FAQ), summarizing issues that organizations face when losing their exemption for failing to file 990-series forms for three consecutive years.
Click here to read more facts on auto-revocation.
For more information about accounting for nonprofit organizations, leave a message below or contact Ken Haffey by calling 440-449-6800.