The views expressed today neither constitutes an endorsement nor recommendation by The - PowerPoint Presentation

Slide1

The views expressed today neither constitutes an endorsement nor recommendation by The Raymond John Wean Foundation.

1

Let’s Talk Tax Reform:

How Nonprofit Organizations Will Be AffectedSlide2

2

Tax Cuts and Jobs Act of 2017

and

Common 990 Filing Issues

March 13, 2018

James M. Rosa, CPA, PFS

HBK CPAs and Consultants

jrosa@hbkcpa.com

330-758-8613Slide3

Tax Cuts and Jobs Act of 2017

Impact on Tax-Exempt OrganizationsSlide4

Individual Standard Deduction

Standard deduction in 2018:

4

Status

2017

2017

Tax Act

Single Filer

6,500

12,000

Married Joint Filer

13,000

24,000

Head of Household Filer

9,550

18,000 Slide5

Charitable Contributions

Charitable contributions changes after 2017The current 50% limitation for cash contributions to Public Charities increases to 60%The other AGI percentage limitations do not changeCash to Private Foundation 30%Capital gain property to Public Charity 30%

Capital gain property to Private Foundation 20%The five year carryover is retainedContributions that secure college athletic event seating rights are not deductible

5Slide6

Charitable Giving

The number of Americans who itemize their deductions will significantly decrease with the increase in the standard deductionCouncil on Foundations estimates donations may drop between $16 billion to $24 billion a year as many may lose the incentive to giveConsider bunching charitable contributions by donating every other year or through contributing to donor advised fund in years when itemized deductions can be over the standard deduction amount

6Slide7

Direct IRA Rollover to Charity

$100,000 limitHusband and wife can each give $100,000Must be 70-1/2 at time of rolloverSatisfies required minimum distributionTraditional and Roth IRAs (Don’t use Roth)SEPs, SIMPLE and Qualified Plans do not qualify

Can rollover to traditional IRA – two stepBeneficiary IRAs also qualify if beneficiary is 70-1/2Charity must be a public charity

Donor Advised Funds do not qualify

7Slide8

IRAs Make Great Assets to Donate

Leaving IRAs to charity avoids estate and income taxBeneficiary designation must name the charityIf left to private foundation, IRA is not subject to Section 4940 excise tax on investment incomeIf IRA is used to satisfy a legally binding pledge, the IRA will be taxableCharitable remainder trusts

8Slide9

Life Insurance and Charity

There is about $11 trillion of life insurance currently issued and outstanding in the U.S.Many individuals have large life insurance policies that they purchased for purposes that no longer existCashing in policies often has unfavorable income tax consequences Consider gifting insurance policies to charityLife insurance offers significant leverage to charitable gifting

9Slide10

Pease Limitation

The Pease limitation on itemized deductions for higher income taxpayers would be repealedThe reduction was 3% of the amount AGI exceeds certain thresholdsSingle: $261,500Joint: $313,800HoH: $287,650

Major donors may benefit more from their donations10Slide11

Moving Expenses

Moving expenses are no longer deductible and the employer reimbursement of moving expenses are taxable to the employeeIf an organization pays for the moving expenses of a new employee, the reimbursement is taxable income to the new employee11Slide12

Tax-Exempt Organization Compensation

Prior law did not limit the amount of compensation paid to by a tax-exempt organization to its employeesFor tax years beginning after 2017, a tax-exempt organization is subject to a 21% excise tax on compensation in excess of $1 million paid to any of its five highest paid employees for the tax yearOnce an employee qualifies as a covered person, the excise tax will apply to compensation in excess of $1 million paid to that person so long as the organization pays him remuneration

12Slide13

Investment Income of Private Colleges and Universities

For tax years beginning after 2017, certain private colleges and universities are subject to a 1.4 percent excise tax on net investment incomeThe provision only applies to private colleges and universities that have at least 500 students and assets (other than those used directly in carrying out the institution’s educational purposes) valued at the close of the preceding tax year of at least $500,000 per full-time studentState colleges and universities are not subject to the provision

13Slide14

Unrelated Business Income

Unrelated business taxable income (UBTI) is the net income derived by any tax-exempt organization from any commercial business activity unrelated to their exempt purpose regularly carried on by the organizationExamples:Advertising income from newsletters, magazines, periodicals

Parking incomeOwning an interest in a for profit partnershipDebt-financed incomeCompeting with for profit businesses when not related to exempt purpose

14Slide15

Unrelated Business Income

A loss from an unrelated business activity will only be allowed against income from that activity and not against another unrelated business activityAn NOL deduction would only be allowed with respect to the activity the loss aroseDoes not apply to loss carryforwards for years beginning before January 1, 2018

15Slide16

Unrelated Business Income

Unrelated business taxable income includes any expenses paid or incurred by a tax exempt organization after 2017 for the following:Qualified transportation fringe benefits provided to employeesTransit passesTransportation on buses, van pools or other commuter highway vehicle if paid between home and work Qualified bicycle commuting reimbursement

Parking provided to an employee on or near the organization’s premises or on or near a location from which the employee commutes to work by transportationThe value of any on-premises athletic facility provided by an employer to his employees

16Slide17

The Ever-Growing & Increasingly Transparent Form 990

Common Filing Issues Slide18

990 Filing Requirement

Form 990: Long 12 page form is required for larger organizations Form 990-EZ: Short 4 page form can be used if the organization has gross receipts greater than $50,000 and less than $200,000, and total assets less than $500,000Form 990-N: Postcard form for organizations with gross receipts of $50,000 or less (except for private foundations and supporting organizations) Slide19

19

Form 990 Public Disclosure Issues

Form 990/990-EZ is a public document (including amended returns)

Social security numbers should never be used

Schedule B, Schedule of Contributors – the names and addresses are not required to be made available for public inspection; however all other information including amounts and descriptions of noncash contributions is required

Section 527, Political Organizations and Political Action Committees are required to disclose the names and addresses of contributors on Schedule B

Form 990-T is also now a public document

Exempt organizations should consider maintaining a public disclosure copy of Form 990/990-EZSlide20

Electronic Filing

Form 990/990-EZ can be filed electronicallyE-Filing is Required: If the organization files at least 250 returns of any type during the calendar year ending with or within the organization’s tax year AND

has total assets of $10 million of more at the end of the year“Return” includes W-2s, 1099s, 941s and other employment returns and excise tax returns

Form 990-N is an electronic form

20Slide21

990 Late Filing Penalty

The penalty for the late filing of Form 990 $20 per day up to $10,000 For organizations with over $1 million of gross receipts, the penalty is $100 per day up to $51,000An incomplete 990 can be treated as late filed including not checking a boxBy filing electronically, an error message is received if any part of the 990 is incomplete (other than excluding required schedules)Slide22

Change of Organization’s Name

If an organization changes it’s name, then the following information must be attached to the 990/990-EZ:A corporation: A copy of the amendment to the articles of incorporation

, and proof of filing with the appropriate state authority A trust: A copy of the amendment to the trust instrument, or a resolution to amend the trust instrument, showing the effective date of the change of name and signed by at least one trustee

An unincorporated association: A

copy of the amendment to the articles of association

, constitution, or other organizing document, showing the effective date of the change of name and signed by at least two officers, trustees, or members

22Slide23

“Terminated” Organizations

If an organization is terminated, liquidated, dissolved or merged then the Box “Terminated” must be checked in the heading of page 1 and …..Attach a certified copy of its articles of dissolution or merger approved by the appropriate state authorityIf a certified copy of its articles of dissolution or merger is not available, the organization must submit a

copy of a resolution or resolutions of its governing body approving plans of liquidation, termination, dissolution or merger

23Slide24

Excess Benefit Transactions

Part IV, Lines 25a and 25b: These related to “excess benefit transactions” which must be reported on Schedule LLine 25a is to be answered YES if the organization engaged in an excess benefit transaction with a disqualified person in the current yearLine 25b is to be answered YES if the organization became aware of an excess benefit transaction with a disqualified person in a prior year.

An excess benefit transaction occurs when an economic benefit it provided to a disqualified person of a value in excess of the fair market value.Penalty tax is 25% on the recipient and can be 200% if not corrected. Organizational managers who participate are subject to a 10% penalty

24Slide25

Interested Party Loans

Part IV, Line 26 – 28: Loans between the organization and certain interested persons must be reported in Schedule L as well as grants or other financial assistance provided to certain interested parties, including to their family membersAn interested person

is a disqualified person (including an individual, corporation or other entity) who was in a position to exercise substantial influence of an organization

25Slide26

Compensation

Part VII: Clarifies that directors’ compensation for non-director independent contractor services to the organization and related organizations must be reported in Part VII, Section A Clarifies that

compensation from a management company to one of the organization’s officers, directors, trustees, key employees, or highest compensated employees is generally not reportable in Part VII, Section A. We have seen some organizations pay it’s Executive Director via a single member LLC, not treating the Executive Director as an employee

. Corporate officers are considered employees, not independent contractors

26Slide27

Connection Between Governance & Compliance

IRS released its findings of a study of its governance checklist concluding there is a correlation between good governance and tax complianceExempt organizations with a written mission statement

and those whose Form 990s were reviewed by the entire

board of directors are more likely to be tax compliant than those that do not follow those practices

The study also found that organizations that always use

comparability data

when making

compensation

decisions are more likely to be tax compliant, as are organizations with procedures in place for the proper use of charitable assets

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Connection Between Governance & Compliance

The study showed that organizations where control was concentrated in one individual or a small group of individuals were likely to be less compliantExempt organizations that filed a Form 990 indicating that they had

significant diversions of assets during the previous year will be examined under a new program

IRS has been criticized by practitioners in recent years over its foray into the management of exempt organizations

However,

IRS has maintained that there is a correlation to good governance and good tax compliance

and the study has now shown that.

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29

Form 990 Common Issues

The organization should

review

a draft 990 - to participate in commentary and allocation of expenses

990 will be used by donors, grantees and IRS

Opportunity to “

sell

” organization

IRS audit data

Unaware of IRS audit activity as promised with the new 990Slide30

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Form 990 Common Issues

Part I – Line 1:

Mission statement -

Describe the organization's mission or its most significant activities for the year, whichever the organization wishes to highlight

Part III – Line 1:

Mission statement -

Describe the organization's mission as articulated in its mission statement or as otherwise adopted by the organization's

governing body

, if applicable. If the organization does not have a mission that has been adopted or ratified by its

governing body

, enter “None.” Slide31

31

Form 990 Common Issues

Part III, Line 2: Check the box if any new program service was undertaken during the year and not listed on a prior Form 990 and describe in Schedule O

Part III, Line 4: Asks for a description of the organization’s program service achievements for it’s three largest programs as measured by expensesSlide32

32

Form 990 Common Issues

Part I – Line 3: Improper definitions of

independent

voting board member. An independent board member is defined as:

Not compensated

as an officer or employee or a related organization;

Did not receive

more than $10,000

as an independent contractor; and

Not

involved (or a family member) in a transaction with the organization required to be reported on Schedule L, Transactions with Interested Parties. Slide33

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Form 990 Common Issues

Part I – Line 6: Not entering the number of volunteers –

volunteer Board

members should be included

Part IV – Line 12: Asks if the organization received an audit in accordance with GAAP. If an audit is completed that is not in conformance with GAAP this question cannot be “YES”Slide34

34

Form 990 Common Issues

Part V – Line 1a: Failure to enter number of

1099s

issued.

Part V – Line 2: Failure to

disclose

family

or

business

relationships of officers, directors, trustees or key employees

Family

relationship exists, the family of an individual (unless specified otherwise) includes only his or her spouse, ancestors, brothers and sisters (whether whole or half blood), children (whether natural or adopted), grandchildren, great-grandchildren, and spouses of brothers, sisters, children, grandchildren, and great-grandchildren.

Business

relationships – see next slide

Part V –Line 2b: Failing to answer YES when all required

employment

tax returns were filed Slide35

Business Relationships

One person is employed by the other in a sole proprietorship or by an organization with which the other is associated as a TDOKE or greater-than-35% owner even if that organization is tax exemptOne person is transacting business with the other (other than in the ordinary course of either party's business on the same terms as are generally offered to the public), directly or indirectly, in one or more contracts of sale, lease, license, loan, performance of services, or other transaction involving transfers of cash or property valued in excess of $10,000 in the aggregate during the organization's tax year. Indirect transactions are transactions with an organization with which the one person is associated as a TDOKE or greater-than-35% owner. These transactions do not include charitable contributions to tax-exempt organizations

The two persons are each a director, trustee, officer, or greater-than-10% owner in the same business or investment entity

35Slide36

Form 990 Common Issues

Part V – Line 7 asks about quid pro quo contributions (part contribution/part purchase donations)Contributions to an organization entitled to receive tax-deductible donations are only deductible to the extent a

gift's value exceeds the value of any goods or services the donor receives in returnFor donations in excess of $75

, charities

must

provide the donor with a

written statement

indicating the donor's deduction is limited to the excess of the contribution over the value of any goods or services received in return

The statement normally must also give a

good faith estimate

of the value of the goods or services

For

quid pro quo

donations of $75 or less the IRS presumably expects charities to voluntarily disclose to their donors how much of the contribution is deductible as a charitable contribution

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37

Form 990 Common Issues

Part VI – Line 11a:

Board member review of 990

: In order to answer this YES, Form 990 must be

provided to

the organization's governing body before it is filed. The instructions say this question can be answered YES

only if

a copy is provided to each voting member of the organization's governing body. In many cases Schedule O describes a process where the

CEO or CFO

or the audit committee receives a copy of the 990 rather than all the voting members Slide38

38

Form 990 Common Issues

Part VI – Line 12 through 16: Organization not having the following

policies

.

Conflict of interest policy and its enforcement

Whistleblower policy

Written document retention and destruction policy

Compensation policies

Joint venture policies

We have sample policy statements for your considerationSlide39

Form 990 Common Issues

Part VI, DisclosuresForms 990 and 1023 (or 1024) are required to be made available to the public if requested

Organizations are not required to make publicly available the names and addresses of contributors

A

public disclosure copy

of the 990 and 1023 should be available which would block this information

Line 18 asks if the 990 is available on “Own Website”, “

Another’s website

” and/or “Upon request”

Check the “Another's website” box only if the organization provided, and another person or organization posted on its website, an exact reproduction (other that the information permitted to be withheld) of any such forms during the tax year (

Guidestar.com availability does not mean YES)

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40

Form 990 Common Issues

Part VII – Section A: Column (C) lists all the organization positions including

Trustee or Director

Institutional trustee

Officer

Key employee

Highly compensated employee

Former

In many cases the

appropriate

boxes have

not

been checked and in a few cases not all the directors or trustees were listed Slide41

41

Form 990 Common Issues

Part VII – Section A:

Compensation must be reported for the calendar year ending with or within the organization's

tax year

Columns (D) and (E). Enter the amount, if any, shown in the required to be listed person's W-2, box 1 or 5 (whichever amount is greater), and/or Form 1099-MISC, box 7, for the calendar year ending with or within the organization's tax year

Pages 32, 33 and 34 of the 990 instructions provide a comprehensive chart of what compensation is reported on Part VII and Schedule JSlide42

Schedule J Form 990

Schedule J. The value of housing provided by the employer does not have to be reported as compensation to the extent that such value is a working condition fringe benefit

In addition, cell phones provided to employees primarily for business purposes are a working condition fringe benefit and not reportable

as compensation

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Part IX – Allocating Expenses

Expenses that are applicable to more than one activity or function (joint or indirect expenses) must be properly allocated. Importance of the allocation:

The amount of funds spent on program services (when compared to total expenses) is a measurement of the organization's effective stewardship of its assets. Donors

want to know the extent to which their contributions are used primarily for charitable purposes.

The IRS and state governments

examine expense classifications

to verify that the organization is operating primarily for an exempt purpose (and therefore continuing to qualify for its tax exemption). Some states are especially focused on an organization's fundraising activities and the related fundraising costs

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Part IX – Allocating Expenses

It is often difficult to properly allocate direct expenses that are common to more than one function (i.e., indirect expenses) For example, if an organization incurs costs for program service activities that also include a fundraising appeal (such as newsletters, mass mailings, or telethons), the allocation of the costs between the program service activity and fundraising may not be clear cut The IRS provides

little guidance concerning the allocation of these expenses

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Part IX – Allocating Expenses

GAAP's guidance on how to allocate costs that include elements of both program services and a fundraising appeal is found in the Financial Accounting Standards Board Codification (FASB ASC) 958-720 (formerly SOP 98-2, Accounting for Costs of Activities of Not-for-Profit Organizations and State and Local Governmental Entities That Include Fund Raising)

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Part IX – Allocating Expenses

Whenever possible, charge expenses directly to a particular functionEstablish an organization's

accounting system and chart of accounts to facilitate this

If an individual spends 50% of the time on program related activities, 40% on management and general activities, and 10% conducting fundraising activities, salary and related expenses for the individual are

recorded accordingly

when entered in the accounting system

Without

an on-the-spot allocation, an organization may face large accounting fees for the hours required to determine the proper allocation of expenses among functions

46Slide47

Part IX: Fundraising Expenses – Column (D)

Part VIII, Statement of Revenue shows on Line 1f shows

contributions, gifts, grants, etc but on Part IX there are no fundraising expenses are shown in

column (D) Common costs:

Fees paid to professional fundraisers or public relations firms

Expenses of participating in federated fundraising campaigns (e.g., United Way campaigns)

Costs of soliciting gifts or grants from foundations and other organizations, including the cost of obtaining government grants reportable on line 1e of Part VIII of Form 990

Expenses of attending clinics, workshops, and other activities for improving fundraising techniques

Costs of radio and television material

Expenses of campaign “kick-off” events for an organization's fundraising volunteers (e.g., postage, printing, meals, and entertainment)

Overhead costs allocable to fundraising activities

47Slide48

Public Charity Status

Tax-exempt 501(c)(3) organizations can either be public charities or private foundationsPublic charity status:Churches, schools, hospitals and governmental units

Publicly supported organizations which receive at least one third of their support from government or the general publicOrganizations supported by revenues from exempt activities, for example, a museum or symphony orchestra

, if they receive more than one third of their support from the general public and less than one-third of support from investment income

Supporting organizations organized and operated for the benefit of the publicly supported organization or public charity

Organizations organized and operated for public safety

48Slide49

Public Charity StatusPublic charity status is preferred:Charitable contributions to public charities are governed by less restrictive rules than contributions to private foundations

Cash may be deducted up to 60% of income rather than 30%Capital gain property can be deducted up to 30% of income rather than 20%Fair market value of appreciated property may be deducted (with private foundations, this only applies to marketable securities)

Public charities are not subject to the private foundation excise taxes

Public charities may engage in limited lobbying activities while private foundations cannot

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Schedule A – Public Support Test

Publicly supported organizations (i.e., those listed in lines 5, 7, 8, and 10 of Schedule A, Part I) must describe the sources of their revenue in Part II or IIIAn organization is

not required to use the same public

support test

specified in its determination letter from the IRS

It can

annually use the support test

that best reflects its sources of support and that enables it to retain public charity status

The organization must use the accounting method checked on Form 990, Part XII, line 1, or Form 990-EZ, line G, to prepare its 2011 Schedule A regardless of the accounting method used in completing Schedule A in prior years

50Slide51

Reason for Public Charity Status

Schedule A, Part ISlide52

Schedule A – Public Support Test

Section 509(a)(1) Part II: An organization that checked box 5, 7, or 8 on Part I. Generally #7

- an organization that normally receives a substantial part (normally more than one-third) of its support from a government unit or from the general publicSection 509(a)(2) Part III

: An organization that checked

box #10

on Part I – an organization that normally (1) receives more than 33-1/3% of its support from contributions, membership fees and gross receipts from activities related to its exempt functions and (2) no more than 33-1/3% from gross investment income and UBTI

52Slide53

Schedule A – Public Support Test

For both Part II and Part III, public support includes:Gifts, grants, contributions and membership fees (excluding unusual grants)Tax revenues levied for the organization’s benefit

Value of services or facilities furnished by a government unit without chargePart III public support also includes:Part III Line 2: Gross receipts from activities related

to an organization's exempt purpose (i.e.,

exempt function income

)

Part III, Line 3: Revenue from activities that are

unrelated

to the organization's exempt function, but which are

not

treated

as unrelated business activities because of a statutory exclusion

53Slide54

Schedule A – Public Support Test

What is an unusual grant for purposes of Part II and Part III? Generally a grant is unusual if it:is a

substantial contribution or bequest from a disinterested party;

was

attracted

by reason of the publicly supported nature of the organization;

is

unusual or unexpected with respect to amount

; and

would, by reason of its amount, result in the organization

not meeting

the applicable public support test

Unusual grants are excluded from the

numerator

and the

denominator

of the public support tests

54Slide55

Schedule A – Public Support Test

Section 509(a)(1) – Item 7 in Part I: Test looks at whether the organization collects diverse contributions (described as public support) compared to its total revenue received In general, the Section 509(a)(1) test requires that the organization

either receive at least one-third of its support from general public contributions or meet a separate

10% facts and circumstances test

55Slide56
Slide57

Schedule A – Public Support Test

For Part II public support must be reduced by the portion of total contributions by each person included in Line 1 that exceeds 2% of total support from Line 11, column (f)

Line 11, column (f) is total support for the 5 year period

ending with the current tax year

Must maintain a

record

of total contributions from each donor other the past 5-years to accurately complete

NOTE

: Support from

public charities

and

government units are not

limited or subject to this reduction in public support

57Slide58

10% Facts and Circumstances Test

The organization must meet two requirements:At least 10% of the organization’s support is from governmental units and/or from contributions from the general public andThe organization is organized and operated so as to attract new and additional public or governmental support on a continuous basis

Additional factors include:The actual percentage of public support – the higher the betterThe actual sources of support – the larger the number and the broader the better

Composition of the governing body – the more community representation the better

Types of services provided

58Slide59

Schedule A – Public Support Test

Section 509(a)(2) – Item 9 in Part I: Test looks at whether the organization has both diverse contributions

and program service revenue compared to its total

In general, the Section 509(a)(2) test requires that the organization receive

more than one-third of its support from general public contributions and/or from activities

related to its tax-exempt purpose

Also

under this test,

no more than one-third

of the organization's support can be from gross

investment

income and business income from unrelated activities

59Slide60
Slide61

Schedule A – Public Support Test

For Part III, Line 3: The most common of revenue excluded from unrelated trade or business activities include those: in which substantially all (generally 85% or more) the work is performed by volunteers

;conducted primarily for the convenience of the organization's members, students, patients, officers, or employees;

involving the

sale of merchandise

, substantially all of which was received as contributions;

consisting of qualified public entertainment activities, or qualified convention or trade show activities;

that

legally

conduct

bingo

games; or

consisting of qualified sponsorship payments

61Slide62

Schedule A – Public Support Test

For Part III public support must be reduced by receipts from disqualified persons that are included in Lines 1, 2 and 3.A disqualified person includes:1. A

substantial contributor, which is any person who gave an aggregate amount of more than $5,000, if that amount is more than 2% of the total contributions the foundation or organization received from its inception through the end of the year in which that person's contributions were received.

2. A

foundation manager

(i.e., an

officer, director, or trustee

of the organization) or any individual having powers or responsibilities similar to those of officers, directors, or trustees.

NOTE: P

ublic charities and government units are not considered disqualified persons and so are not subject to this limitation

62Slide63

Schedule A – Public Support Test

A disqualified person includes:3. An owner of more than 20% of the voting power of a corporation, profits interest of a partnership, or beneficial interest of a trust or an unincorporated enterprise that is a substantial contributor to the organization.

4 A family member of an individual included items 1 to 3. A family member

, for this purpose, is the donor's spouse, ancestors, children, grandchildren, great-grandchildren, and the spouses of children, grandchildren, and great-grandchildren.

5. A

corporation, partnership, trust, or estate

in which persons described in 1 thru 4 above own more than

35%

of the voting power, profits interest, or beneficial interest

63Slide64

Schedule A – Public Support Test

Part III public support must also be reduced by amounts included in Lines 2 and 3 receive from other than disqualified persons that exceed the greater of $5,000 or 1% of total supportThis limitation does apply

to revenue received from public charities and government agencies

64Slide65

PART III EXAMPLE: The Neighborhood Health Clinic, Inc. (NHC), a Section 501(c)(3) organization described in line 9 of Part I, was created several years ago by Drs. Martin and Rosen to provide affordable medical care to low-income families.

During 2013 and the four years preceding 2013, NHC received the following support:

Source of Support

2009

2010

2011

2012

2013

Dr. Martin

-

(Disqualified person)

$ 18,000

$ 30,000

$ 25,000

$ 46,000

$ 10,100

Dr. Rosen

–

(Disqualified person)

20,000

40,000

40,000

80,000

10,500

Medical Resources, Inc.

-

(Disqualified person since

Drs. Martin and Rosen each own 50% of the corporation)

10,000

15,000

25,000

20,000

17,000

Relief Agency, Inc.

- (Public charity payments to NHC for providing medical attention to residents of RAI's night shelters)

225,000

235,000

233,000

242,000

244,000

Gross receipts from patients (all less than $5,000 per person)

215,100

230,905

276,980

224,340

250,055

Bass Foundation (donation of a new clinic)

1,475,000

Contributions from the general public (all less than $5,000 each)

6,450

6,890

8,550

13,340

45,000

Total support

$ 494,550

$ 557,795

$ 608,530

$ 625,680

$ 2,051,655Slide66
Slide67

Part III Example Notes

a Line 1: $82,600 ($10,100 + $10,500 + $17,000 + $45,000). (The $1,475,000 donation is excluded as an unusual grant but should be reported on Schedule A, Part IV.)

b Line 2: $494,055 ($244,000 + $250,055).

c

Line 7a:

$37,600 ($10,100 + $10,500 + $17,000).

d

Line 7b:

$238,233 [$244,000 − 1% (2,051,655 − $1,475,000)]Slide68

Schedule B – Schedule of Contributors

The name, address, and zip code of every contributor who gave (directly or indirectly) an organization at least $5,000 total in money, securities, or any other property type during the tax year on Schedule B of Form 990 Identify a donor as “anonymous

” only if the organization does not know the donor's identityThe identity of donors is not required to be disclosed to the public

68Slide69

Schedule D – Part XIV

If there is a FASB ASC 740 (formerly FIN 48) footnote in a financial statement, the entire footnote disclosure must be reported in this part of Schedule D

69Slide70

70

Form 990 Common Issues

Schedule I:

Grants and Other Assistance to Organizations, Government and Individuals – Part II: Not all the information requested has been completed Schedule I requires information on grants and other assistance provided to government and organizations. For organizations, the following information is required:

EIN

IRC Section

Amount of cash grant

Amount of non-cash grant

Valuation method

Description of non-cash assistance

Purpose of grant or assistanceSlide71

71

Form 990 Common Issues

Schedule J, Part II:

Compensation must be reported for the calendar year ending with or within the organization's tax year

Columns (B) through (F). Enter the amount, if any, shown in the required to be listed person's W-2, box 1 or 5 (whichever amount is greater), and/or Form 1099-MISC, box 7, for the calendar year ending with or within the organization's tax year

Pages 32, 33 and 34 of the 990 instructions provide a comprehensive chart of what compensation is reported on Part VII and Schedule JSlide72

Excess Benefit Transactions

Schedule J, question 1a, asks about specific expenses and fringe benefits provided to listed persons: first-class or charter travel, travel for companions, tax indemnification and gross-up payments, discretionary spending account, housing allowance or residence for personal use, payments for business use of personal residence, health or social club dues or initiation fees, and personal services These must be identified regardless of

whether they were reported as compensation on the W-2 or 1099-MISC. For each item, additional information must be provided as to the type of benefit, who received it, and whether the benefit was treated as taxable compensation

72Slide73

Excess Benefit Transactions

Excess benefit transactions are governed under Section 4958. A disqualified person who benefits from an excess benefit transaction is subject to a first-tier penalty

equal to 25 percent of the excess benefit

Organization

managers

(including any officer, director or trustee or any individual who has responsibilities similar to officers, directors or trustees of the tax-exempt organization) who participate in an excess benefit transaction

knowing

that it is improper are subject to a first-tier penalty tax of

10 percent

of the excess benefit

73Slide74

74

Form 990 Common Issues

Schedule R, Related Organizations and Unrelated Partnerships: Not all the information requested has been completed. Schedule R requires the disclosure of disregarded entities owned by the organization, related tax-exempt organizations, related partnerships, corporation and trusts

A

related

tax-exempt organization to the filing organization is one that is a

parent - subsidiary

,

brother/sister entity

[i.e., is controlled by the same person(s) who control the filing organization], or is a

supporting or supported

organization of the filing organizationSlide75

Unrelated Business Income (UBTI)

Debt financed income is UBTI, including investment income such as rental incomeRental income, including debt financed properties does not create UBTI when rented to other charitable organizations

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Unrelated Business Income (UBTI)

Debt financed income is UBTI, including investment income such as rental incomeRental income, including debt financed properties does not create UBTI when rented to other charitable organizationsIncome from a publicly traded partnership that is engaged in an active trade or business will be UBTI, including any gain on the sale of the partnership interest. Most common example are gas pipeline partnerships

76Slide77

QUESTIONS

THANKS FOR ATTENDINGSlide78

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