Transcript Spring 2009 Nonprofit Tax Update

Spring 2009 Nonprofit Tax Update
The Finance & Administration Roundtable
May 20, 2009
Douglas A. Boedeker, CPA, CMA
Tate & Tryon
202-419-5106
[email protected]
Update Overview
 Recent Federal Tax Developments
 Changes in laws/regulations
 IRS areas of focus
 Issues from recent audits
 DC, MD, and VA Tax Developments
 Overview of “FIN 48”
 Overview of FASB “Codification Project”
Federal Tax Developments
New Form 990
 Preparation of “New Form” 990s has begun
in earnest.
 Initial tax preparation software glitches are
getting fixed.
 E-filing of new form is working well.
 Be sure to address the “Board Review”
question early to smooth out preparation
logistics.
Federal Tax Developments
Employment tax reporting for single-member
limited liability companies (SMLLCs)
 Before 2009, SMLLCs could report employment
taxes as part of its owner’s payroll tax returns.
 Effective January 1, 2009, SMLLCs must report
payroll taxes separately.
 Thus, SMLLCs will need their own EIN and
registration with EFTPS.
 Legal review may be needed to determine whether
an employee works for the SMLLC or the owner.
Having a good cost-sharing or management
agreement in place can help in this area.
Federal Tax Developments
COBRA Premium Reduction
 Applies to folks involuntarily terminated between 9/1/2008 –
12/31/2009. (Certain restrictions apply.)
 COBRA premiums are reduced to 35% of normal rate. Former
employer is reimbursed the remaining 65% through an
employment tax credit. (Credit is received via Form 941.)
 COBRA premium reduction begins the first period after
February 17, 2009.
 Helpful web-sites:
 www.dol.gov/ebsa/cobra.html
 www.irs.gov/newsroom/article/0,,id=204708,00.html
Federal Tax Developments
Extended Five Year Net Operating Loss (NOL)
Carryback Period
 Normal NOL carryback period is two years.
 For 2008 “small businesses” can elect to carryback
NOLs up to five years.
 A “small business” has less than $15 million in gross
receipts 2008
 Question: Does an exempt org. with $40 million in
revenue, but only $2 million in unrelated business
income (UBI) count as a “small business”?
Federal Tax Developments
Removal of “Advance Ruling Period” for new
Charities
 Filing of Form 8734 no longer required after
initial five years of a charity’s existence.
 IRS will use the data in Schedule “A” of the
Form 990 to assess whether a charity has
met the public support requirements. (One
benefit of the new 990!)
Federal Tax Developments
New Planned Areas of Focus by IRS Exempt
Organization Division
 Evaluation of data provided by new Form 990
 Working on an EO Voluntary Compliance Program.
(Anticipated sometime in 2009.)
 “Charitable Spending” Initiative – what does society
get in return for your tax exempt status?
 Will focus on charities with “unusual” fund raising levels or
those reporting unrelated trade activity with low levels of
program service expenditures.
Federal Tax Developments
New Planned Areas of Focus by IRS Exempt
Organization Division - continued
 “Gifts in Kind” Initiative
 Concerned with “puffery” related to valuation of
donations.
 “Governance” Initiative
 Looking for data to support the assertion that “a
well-governed organization is more likely to be
compliant with the tax law.”
Federal Tax Developments
Recent IRS Audits – Areas of Focus
Two national 501(c)(3) entities:

Executive Compensation

Taxability of mailing list rental revenue

Cost sharing between 501(c)(3) and related
501(c)(4). Possible employment tax issues. Have
a written agreement in place!

“Educational” nature of organization’s advocacy
mailings – see IRS Revenue Procedure 86-43
Recent State Developments

All three jurisdictions have/will have tax amnesty
or voluntary compliance programs offering
reduced penalties and interest on unfiled returns.

DC – Voluntary Compliance Program


MD – Tax Amnesty Program


Wayne Nickum (202) 442-6586; Wayne.Nickum@DC .gov
Will be effective from 9/1/2009 – 10/30/2009
VA – Tax Amnesty Program

Will be effective sometime during 7/1/2009 – 6/30/2010
“FIN 48” Accounting for Uncertainty in
Income Taxes

Generally effective for years beginning in 2009

Assume all income tax positions will be audited by taxing
authorities. Are you “More-likely-than-not” to prevail? If not,
a tax liability must be accrued

Schedule D of Form 990 requires detailed reporting of
any FIN 48 accruals directly to the IRS!

HOT OFF THE PRESS – Proposed FSP No. FIN 48-d,
Application Guidance for Pass-through Entities and TaxExempt Not-for-Profit Entities and Disclosure
Modifications for Nonpublic Entities. Go to
www.fasb.org for your very own copy.
FASB Accounting Standards Codification
Project
 Effective July 1, 2009, the Codification will be THE
source for authoritative GAAP.
 Compiles basically all accounting literature into one
searchable database.
 Should make GAAP research more reliable.
 www.fasb.org or asc.fasb.org for an on-line tutorial
 Probably the biggest thing that no one is talking about!
Thanks for your time!
Tate & Tryon, CPAs
805 15th Street, NW #900
Washington, DC 20005
202-293-2200
www.tatetryon.com