he Tax Cuts and Jobs Act (HR 1 ) is on its way to the White House for President Trump’s expected signature before the weekend. The bill is set to bring about widespread changes to the US tax code for both businesses and individual Americans. However, it also impacts tax-exempt organizations.
Not every contribution to a charity qualifies for a charitable deduction. Charities that misunderstand the rules can lead donors astray when they offer tax receipts for non-deductible gifts inadvertently damaging donor relationships.
Nonprofits leaders often desire to move their nonprofit organization’s legal domicile from one state to another. Leadership may decide to move and wish to take the organization with them. In cases where the work is dispersed around the country, the organization may become frustrated with burdensome regulation in the state where it is domiciled and decide shop for a more favorable legal home.
On September 28, 2017, the IRS Tax Exempt and Government Entities division released its FY 2018 work plan. Of interest to nonprofits and their advisors, the IRS is planning to make changes to Form 1023-EZ early in 2018. These changes are in response to the concerns of stakeholders regarding whether the 1023-EZ process requires too little information.
To be eligible for the CFC, national and international charities must provide services, benefits, assistance, or conduct program activities in 15 or more different states or one or more foreign countries over the immediately preceding 3 calendar years.
Nonprofits corporations are required to have a registered agent in their state of domicile and in each state where they are registered to do business. The purpose of a registered agent is to ensure that there is a place with a street address (as opposed to a P.O. Box) where an organization can be contacted or served with notice of a lawsuit or other legal action.
When affiliated nonprofits work closely together, it is often cost effective to have some shared staff. When structuring shared staffing arrangements, it is important to carefully consider and document how costs will be allocated between the organization. Common arrangements include employee leasing and employee loan arrangements.
Charitable organizations in Arizona may serve and auction alcohol at fundraising events provided that they obtain the necessary special event licenses. Additionally, civic organizations, religious organizations, and fraternal organizations in existence for more than five years with regular membership are eligible to apply for special event licenses.
Today, May 15th is an important tax date for nonprofits whose fiscal year ends June 30th or December 31st. If the organization’s fiscal year ends June 30th, today is the last day to file the federal tax form.
At times, issues will give rise to spirited debate among Board Members who each possess valuable yet different skill sets and different points of view. The Chair should make efforts to mediate differing opinions and encourage consensus on actions or policies that represent the best aspects of all points of view.
To reduce the risk to the tax-exempt organization, the tax-exempt partner should exercise sufficient power and control over the joint venture’s activities to ensure the joint venture operates in furtherance of its tax-exempt purposes. Tax-exempt organizations must be particularly careful when entering into joint ventures structured as partnerships or LLCs because the IRS attributes the activities of such entities to its owners.
As most nonprofit directors and executives already know, if decision makers do not disclose their conflicts of interest and properly manage them, there is no way to know whose interest they are serving when they make decisions. Directors and trustees of nonprofits have a fiduciary duty of loyalty to make decisions in the organization’s best interest without regard to their own interests or the interests of third parties. Even the most well-meaning individuals can find their decisions clouded by competing interests.
Rubber stamp boards tend to take a hands off approach to their duties and simply approve everything put in front of them by management without actively participating in deliberation and debate. This approach is dangerous for the nonprofit and the directors.
Last Tuesday, a federal judge in Texas issued a nationwide injunction against a new regulation expanding the number of workers who would be eligible for time-and-a-half overtime pay.
Many tax-exempt organizations in Washington are still subject to business and occupation tax at both the state and local level. For B&O tax purposes, nonprofit organizations are generally presumed taxable in the same manner as for profit organizations.
Forty-five states and the District of Columbia regulate charitable solicitation. Charitable organizations are required to register and submit annual report/registration in forty-two (including DC) of those jurisdictions.
The micro-managing board members show up to their first board meeting and before they have done anything of substance for the organization, they want to revamp the reports, review the nonprofit’s journal entries, question every expense, and critique the Chief Executive’s management style. One might rightly ask whether these activities are adding value. I would argue that nine times out of ten they are not.
Once a potential founder has read our post on Nonprofit Business Planning – Steal All the Underpants, and has determined that a new nonprofit organization would serve a legitimate need in the community and can be supported without stealing any underpants, she must then consider the steps necessary to form the nonprofit corporation in Washington State and obtain tax-exemption from the IRS.
Often companies are blissfully unaware that their charitable sales promotion is a regulated activity and are surprised to learn that there are regulations they must comply with. However, states have an interest in protecting consumers from false and misleading advertising. They also have an interest in protecting charities from being exploited. Accordingly, at least 20 states regulate such cause marketing offers which are referred to interchangeably as “commercial co-ventures” or “charitable sales promotions.”
Newly formed charities often encounter a chicken and egg problem. They wish to begin their operations before they receive formal approval of their tax-exempt status but they can’t attract funding until they receive their federal 501(c)(3) determination.