TAKE ACTION! With a similar obligation/cost on nonprofit operations, legislation in New York (A03394) has been reintroduced that would require that nonprofits provide a receipt for donations to determine and disclose how that donation would be allocated internally. For instance, "administrative expenses"would have to be differentiated from funds "directly...helping with the...charitable work." This bill would require nonprofits to make a near-immediate internal commitment of donated funds, and maintain an internal accounting system tracking donations of all sizes.The publicly available Federal 990 tax return already provides a pretty clear picture of internal resource allocations. For these, and a variety of other reasons, we encourage NYCON members to contact your representatives and/or bill co-sponsors to share their perspective on the merits of this legislation.
- An archived video of the (4.5 hour) hearing is available here
- NYCON prepared a brief synopsis of the comments offered by the respective parties. Click to Read.
Other news Minimum Wage Updates:
- There are at least a dozen bills pending in the Legislature with bearing on NY's minimum wage. They range from simply tying the existing wage to inflation, to allowing counties to recommend a Living Wage.
- As NYCON has already said, it will be difficult for NY nonprofits to cope with the proposed increase, even if NY attempted to substantially offset an increased minimum wage, as most nonprofits are funded without NY State participation. Now, it appears that the Governor's budget proposal leaves even the State's commitment in doubt.
- As a general reminder, the minimum wage in NY is $9 in 2016, with increases (for those only subject to NY, not Federal, law) in the overtime exempt salary levels of "Administrative" and "Executive" positions from $34,125 to $35,100.
- On that overtime exempt issue, the latest update on the proposed US Dept. of Labor regulations increasing the overtime exempt salary level (as long as the 'duties' test is also met)...is a midsummer 2016 publishing...with a 60 day implementation period. Again, most nonprofits in NY have activities that keep them outside of the Federal rules...whereby they are covered by NY only.
NYCON will keep you updated on any developments.
Showing posts with label IRS. Show all posts
Showing posts with label IRS. Show all posts
Friday, February 12, 2016
Policy & Legislative Update
Wednesday, May 1, 2013
News from The Non-Profit Times
Audits Show Widespread Underreporting of UBI
Unreported unrelated business income in higher education was found in almost every case examined by the Internal Revenue Service (IRS).
“The audits identified some significant compliance issues at the colleges and universities examined,” said Lois Lerner, director, Exempt Organizations division of the IRS. “Because these issues may well be present elsewhere across the tax-exempt sector, all exempt organizations need to be aware of the importance of accurately reporting unrelated business income and providing appropriate executive compensation.”
This is part of the multi-year project on tax-exempt colleges and universities. The Colleges and Universities Compliance Project was launched in 2008 with the distribution of detailed questionnaires to 400 randomly-selected colleges and universities. The IRS selected 34 of the 400 for examination because their questionnaire responses and Form 990 reporting indicated potential noncompliance in the areas of unrelated business income and executive compensation.
Unrelated business income (UBI) is the income from a trade or business regularly conducted by an exempt organization and not substantially related to its exempt purpose. Unrelated business taxable income is the UBI that is taxable after deducting expenses directly connected to the trade or business. Because UBTI is calculated by totaling the UBI from all activities and subtracting the total allowable deductions, losses from one activity can offset profits from another. Examinations have resulted in:
- Increases to UBTI for 90 percent of colleges and universities examined totaling about $90 million;
- More than 180 changes to the amounts of UBTI reported by colleges and universities on Form 990-T; and
- Disallowance of more than $170 million in losses and Net Operating Losses (NOLs, i.e., losses reported in one year that are used to offset profits in other years), which could amount to more than $60 million in assessed taxes.
The primary reasons for increases to UBTI in the completed exams were:
- Disallowing expenses that were not connected to unrelated business activities.
The IRS found that examined colleges and universities were reporting certain losses as connected to unrelated business activities when they were not. The misreporting occurred in two ways:
1. Lack of profit motive: The IRS found that organizations were claiming losses from activities that did not qualify as a trade or business. Nearly 70 percent of examined colleges and universities reported losses from activities for which expenses had consistently exceeded UBI for many years. UBI must be generated by a trade or business.
An activity qualifies as a trade or business only if, among other things, the taxpayer engaged in the activity with the intent to make a profit. A pattern of recurring losses indicates a lack of profit motive. The IRS disallowed reporting of activities for which the taxpayer failed to show a profit motive. Those losses no longer offset profits from other activities in the current year or in future years, with more than $150 million of NOLs disallowed.
2. Improper expense allocation: The IRS also found that on nearly 60 percent of the Form 990-Ts examined, colleges and universities had misallocated expenses to offset UBI for specific activities. Organizations may allocate expenses that are used to carry on both exempt and unrelated business activities, but they must do so on a reasonable basis and the expenses offsetting UBI must be directly connected to the UBI activities. In many cases, the IRS found that claimed expenses, which generated losses, were not connected to the unrelated business activity.
The IRS checked the calculations for all NOLs reported on returns under exam and found that NOLs were either improperly calculated or unsubstantiated on more than a third of returns. As a result, the IRS disallowed nearly $19 million in NOLs.
The IRS also determined that nearly 40 percent of colleges and universities examined had misclassified certain activities as exempt or otherwise not reportable on Form 990-T. Fewer than 20 percent of these activities generated a loss. The examinations resulted in the reclassification of nearly $4 million in income as unrelated, subjecting those activities to tax.
Examinations resulted in more than 180 changes to UBTI reported for specific activities by colleges and universities. More than 30 different activities were connected to the changes. The majority of these adjustments came from the following activities: Fitness, recreation centers and sports camps; advertising; facility rentals; arenas; and, golf.
To see the online aricle click here.
Wednesday, April 17, 2013
The NonProfit Times Weekly E-Newsletter
| IRS Reports 10,000 Fewer Nonprofits In 2012 | ||||||
There were 10,000 fewer registered tax-exempt organizations in 2012 than in 2011. According to the Internal Revenue Service (IRS) Data Book for 2012, which was released Monday, there were 1,484,818 501(c) organizations for the fiscal year ending in September, compared with 1,494,882 in 2011 – a decrease of 10,064, or about 0.68 percent.Read more...
|
Thursday, June 23, 2011
Sen. Schumer announces new website addendum
The Observer reported that Sen. Charles Schumer announced Wednesday a new addition to his website to help local non-profit organizations.
The Internal Revenue Service has recently released a list of New York non-profit organizations that have lost their tax exempt status. This list contained 275,000 nonprofits nationwide which included 19,000 non-profit organizations located in New York state.
"Upstate New York is hands down one of the best places in the country to live and raise a family. And we owe our high quality of life in large part to the tens of thousands of non-profit groups that serve our communities," Schumer said.
Approximately 562 nonprofits lost their status in the Southern Tier in addition to 687 nonprofits losing their status in Western New York.
"For several decades, large nonprofits have been required to submit an involved annual report to the federal government detailing their activities, income and expenses. But small, community-based nonprofits with limited revenue were exempt from this paper," Schumer said during a conference call.
In 2007, legislation was changed requiring all non-profit organizations to file a yearly form but most nonprofits were unaware of the new requirement, according to Schumer.
"Many of these organizations are too small to employ an accountant or tax lawyer to help them navigate the ever-changing nuances of the tax code, so they were completely unaware of the new requirement," Schumer said.
Being named on this list means, he implies, that a non-profit organization has not filed paperwork for three consecutive years. Being named on this list means nonprofits cannot continue having a nonprofit status and any income is eligible for taxation, including donations. Being eligible for taxation on donations can hinder fundraising.
If a nonprofit is on the IRS list and would like to reinstate their tax exempt status, there are various steps that must be taken.
"If a group has proof that they met the filing requirement for one or more of the last three years, they simply have to fax the form to the government, and they will be reinstated, free of charge," Schumer said.
If a group has failed to file the correct forms, forms can be resubmitted. The nonprofit status will be restored for a fee of $100 if the group has receipts that total less than $50,000 annually. The fee will increase from $100 to $850 effective Jan. 1, 2012.
Non-profit organizations who have questions about the whole process can go online to Schumer's website, www.senate.schumer.gov for more information and for the complete IRS list of non-profit organizations which have lost their status. The complete link is www.schumer.senate.gov/Public/irs_6_22_11.htm.
The Internal Revenue Service has recently released a list of New York non-profit organizations that have lost their tax exempt status. This list contained 275,000 nonprofits nationwide which included 19,000 non-profit organizations located in New York state.
"Upstate New York is hands down one of the best places in the country to live and raise a family. And we owe our high quality of life in large part to the tens of thousands of non-profit groups that serve our communities," Schumer said.
Approximately 562 nonprofits lost their status in the Southern Tier in addition to 687 nonprofits losing their status in Western New York.
"For several decades, large nonprofits have been required to submit an involved annual report to the federal government detailing their activities, income and expenses. But small, community-based nonprofits with limited revenue were exempt from this paper," Schumer said during a conference call.
In 2007, legislation was changed requiring all non-profit organizations to file a yearly form but most nonprofits were unaware of the new requirement, according to Schumer.
"Many of these organizations are too small to employ an accountant or tax lawyer to help them navigate the ever-changing nuances of the tax code, so they were completely unaware of the new requirement," Schumer said.
Being named on this list means, he implies, that a non-profit organization has not filed paperwork for three consecutive years. Being named on this list means nonprofits cannot continue having a nonprofit status and any income is eligible for taxation, including donations. Being eligible for taxation on donations can hinder fundraising.
If a nonprofit is on the IRS list and would like to reinstate their tax exempt status, there are various steps that must be taken.
"If a group has proof that they met the filing requirement for one or more of the last three years, they simply have to fax the form to the government, and they will be reinstated, free of charge," Schumer said.
If a group has failed to file the correct forms, forms can be resubmitted. The nonprofit status will be restored for a fee of $100 if the group has receipts that total less than $50,000 annually. The fee will increase from $100 to $850 effective Jan. 1, 2012.
Non-profit organizations who have questions about the whole process can go online to Schumer's website, www.senate.schumer.gov for more information and for the complete IRS list of non-profit organizations which have lost their status. The complete link is www.schumer.senate.gov/Public/irs_6_22_11.htm.
Monday, July 19, 2010
Nonprofit Advocacy Matters Update from National Council of Nonprofits
Five Worst Government Contracting Abuses
Late payments for contracted services is only one of many ways that governments shortchange nonprofits and exploit the contracting relationship. See the five worst government contracting abuses and let us know if you can add further documentation, if you've seen worse, or if you know of solutions in your state that help prevent these and other abuses.
Hearing to Consider Gulf Coast Need for Charitable Assistance
Viewing the impact of the Gulf oil spill on people in the region, Congress is asking "what needs to be done and how the charitable sector and others can reach out to these communities and help." The Oversight Subcommittee of the House Ways and Means Committee has scheduled a hearing for Tuesday, July 20, to consider these questions and examine how donations contributed to charities are being used. In announcing the hearing, Chairman John Lewis (D-GA) stated, "This is the moment when government must rely on charitable organizations to fulfill their missions and address these urgent needs."
Rival Estate Tax Revisions Proposed
The estate tax expired at the end of 2009, but will snap back automatically in 2011 to a 55 percent tax rate with a $1 million exemption unless changes are made. Senators are proposing rival plans to weaken or strengthen the federal tax on estates. Sens. Blanche Lincoln (D-AR) and Jon Kyl (R-AZ) introduced a measure last week to set the estate tax rate at 35 percent, with a $5 million exemption phased in over 10 years and indexed for inflation. Sen. Bernie Sanders (I-VT) recently introduced the Responsible Estate Tax Act, S.3533 to set an exemption of $3.5 million and impose tax rates from between 35 percent and 55 percent based on the size of the estate above the exemption level. Senate Majority Leader Harry Reid (D-NV) has said that he does not intend to allow any estate tax votes in the coming weeks, but he continues to negotiate with the Republican Leader, Sen. Mitch McConnell (R-KY), on the Senate schedule and amendments.
Financial Regulatory Reform Enacted, Cuts Debit Card Fees
Last week the Senate passed and sent to President Obama the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R.4173). The measure imposes new restrictions on risky financial investments, creates a Consumer Financial Protection Bureau within the Federal Reserve, and allows the Federal Reserve to regulate the amount of fees that nonprofits and merchants can be charged for debit card transactions. President Obama is expected to sign the bill this week.
Nonprofit Sector Act
Federal Data of "Uncertain Quality"
The case for the Nonprofit Sector and Community Solutions Act, H.R. 5533, was made recently by SubsidyScope, a program of Pew Charitable Trusts. In seeking to analyze the effects of tax subsidies and federal grants, the authors reached the following conclusions:
"It is challenging to assemble and present spending and subsidy data regarding the nonprofit sector because the federal government does not identify nonprofits as a distinct budget category. Further, federal budget data are of uncertain quality; specifically, the data available through USAspending.gov are incomplete because certain program information is missing for a number of records, making it difficult to discern which specific agencies and programs may be awarding funds to nonprofits."
A key component of H.R. 5533 is to overcome the data challenges that SubsidyScope, and many other nonprofit researchers, have identified.
IRS Seeks Comments on New Disclosure Requirement
The health care reform law enacted earlier this year requires nonprofits and businesses, starting in 2012, to report aggregate payments to vendors in excess of $600 for goods and other property. The requirement applies for payments to all vendors, not just those related to health care. Currently, nonprofits and others are required to file Form 1099s for payment of services by independent contractors, but not for goods from vendors. The IRS is seeking public comment on how to most effectively carry out the law change, with the stated goal of minimizing burdens and avoiding duplicate reporting. The deadline for comments is Sept. 29, 2010. Please share this information with your accounting and operations personnel and send the National Council your ideas on how best to limit the impact of this new reporting requirement.
Late payments for contracted services is only one of many ways that governments shortchange nonprofits and exploit the contracting relationship. See the five worst government contracting abuses and let us know if you can add further documentation, if you've seen worse, or if you know of solutions in your state that help prevent these and other abuses.
Hearing to Consider Gulf Coast Need for Charitable Assistance
Viewing the impact of the Gulf oil spill on people in the region, Congress is asking "what needs to be done and how the charitable sector and others can reach out to these communities and help." The Oversight Subcommittee of the House Ways and Means Committee has scheduled a hearing for Tuesday, July 20, to consider these questions and examine how donations contributed to charities are being used. In announcing the hearing, Chairman John Lewis (D-GA) stated, "This is the moment when government must rely on charitable organizations to fulfill their missions and address these urgent needs."
Rival Estate Tax Revisions Proposed
The estate tax expired at the end of 2009, but will snap back automatically in 2011 to a 55 percent tax rate with a $1 million exemption unless changes are made. Senators are proposing rival plans to weaken or strengthen the federal tax on estates. Sens. Blanche Lincoln (D-AR) and Jon Kyl (R-AZ) introduced a measure last week to set the estate tax rate at 35 percent, with a $5 million exemption phased in over 10 years and indexed for inflation. Sen. Bernie Sanders (I-VT) recently introduced the Responsible Estate Tax Act, S.3533 to set an exemption of $3.5 million and impose tax rates from between 35 percent and 55 percent based on the size of the estate above the exemption level. Senate Majority Leader Harry Reid (D-NV) has said that he does not intend to allow any estate tax votes in the coming weeks, but he continues to negotiate with the Republican Leader, Sen. Mitch McConnell (R-KY), on the Senate schedule and amendments.
Financial Regulatory Reform Enacted, Cuts Debit Card Fees
Last week the Senate passed and sent to President Obama the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R.4173). The measure imposes new restrictions on risky financial investments, creates a Consumer Financial Protection Bureau within the Federal Reserve, and allows the Federal Reserve to regulate the amount of fees that nonprofits and merchants can be charged for debit card transactions. President Obama is expected to sign the bill this week.
Nonprofit Sector Act
Federal Data of "Uncertain Quality"
The case for the Nonprofit Sector and Community Solutions Act, H.R. 5533, was made recently by SubsidyScope, a program of Pew Charitable Trusts. In seeking to analyze the effects of tax subsidies and federal grants, the authors reached the following conclusions:
"It is challenging to assemble and present spending and subsidy data regarding the nonprofit sector because the federal government does not identify nonprofits as a distinct budget category. Further, federal budget data are of uncertain quality; specifically, the data available through USAspending.gov are incomplete because certain program information is missing for a number of records, making it difficult to discern which specific agencies and programs may be awarding funds to nonprofits."
A key component of H.R. 5533 is to overcome the data challenges that SubsidyScope, and many other nonprofit researchers, have identified.
IRS Seeks Comments on New Disclosure Requirement
The health care reform law enacted earlier this year requires nonprofits and businesses, starting in 2012, to report aggregate payments to vendors in excess of $600 for goods and other property. The requirement applies for payments to all vendors, not just those related to health care. Currently, nonprofits and others are required to file Form 1099s for payment of services by independent contractors, but not for goods from vendors. The IRS is seeking public comment on how to most effectively carry out the law change, with the stated goal of minimizing burdens and avoiding duplicate reporting. The deadline for comments is Sept. 29, 2010. Please share this information with your accounting and operations personnel and send the National Council your ideas on how best to limit the impact of this new reporting requirement.
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