The 2017 Tax Cuts and Jobs Act (the Act) passed by Congress on December 22, 2017 marks the most significant tax law changes in over 30 years. Most taxpayers will see their tax liability decrease. The Congressional Budget Office estimates the Act will reduce tax revenues by $1.455 trillion over the next 10 years. But all is not good for non-profit organizations as there are changes in the Act that may negatively impact charitable contributions. The Tax Policy Center predicts that charitable giving will decrease in 2018 by 4 percent to 6.5 percent, or between $12.3billion and $19.7billion. An Indiana University Lilly Family School of Philanthropy study estimates that charitable giving will decrease 4.6 percent or $13.1billion because of the Act.
A nonprofit will not ordinarily be taxed on its revenues. However, income from unrelated business income is subject to tax (UBIT). UBIT is based on gross income derived by any nonprofit from any unrelated business activity it regularly conducts less the expenses directly connected with the activity.
On Tuesday May 23, President Trump released his budget request for 2018 entitled “A New Foundation for American Greatness.”
The U.S. Government suffered budget deficits every year from 1970 through 1997. There were surpluses recorded in 1998 through 2001, but deficits returned from 2002 through today.
Interest in not-for-profits’ governance practices from lawmakers, watchdog groups and the general public has been growing in recent years. If your board hasn’t reviewed its roles and responsibilities recently, now is a good time.
If your not-for-profit solicits funds online — or uses other fundraising methods that cross state boundaries — it may need to register in multiple jurisdictions. We’ve answered some commonly asked questions.
My charity receives occasional contributions from out-of-state donors. Do I need to register with those states? Yes, but only if you’re actually asking for donations in those states. The critical activity is soliciting, not accepting, funds. Remember, email and text blasts and social media appeals are likely to be considered multistate solicitations.
Individuals who report illegal or unethical practices may risk their careers, or take other kinds of risks, when they do. Whistleblower policies help protect them. No federal law specifically requires not-for-profits to have such policies in place, but several state laws do. And IRS Form 990 asks nonprofits to state whether they have adopted a whistleblower policy.
In recent years, the IRS has increased its scrutiny — including actual audits — of not-for-profits. Do you know what to do if your organization receives an audit letter?
What is an audit?
An audit begins with the initial contact from the IRS and continues until a closing letter is issued. Before closing an audit, an officer of your nonprofit, your CPA and the IRS agent will discuss the agent’s conclusions at a closing conference. Both the conference and letter will explain your appeal rights.
If your not-for-profit is “stuck” and you’re not sure how to move forward, consider adopting some for-profit business practices. The essential missions of businesses and nonprofits are different, but the ways to achieve them often are the same.
Make a plan