Not-for-Profit Standard E-Newsletter- Fall 2011

This quarterly Not-For-Profit Standard includes the following articles:

IRS Changes Position on Who Must Appove Governance Policies

By Laura Kalick, JD, LLM in Tax

As you know, the form 990 requests information about whether an organization has adopted various policies, including conflict of interest, compensation review, document retention, etc.

These questions were introduced for the first time when the Form 990 was revised. At the time, the addition of the questions was very controversial and some still take the position that the IRS does not have the statutory authority to ask the questions. On the other hand, the IRS believes that it does have the authority to ask the questions because it is the IRS’s responsibility to see that the tax laws are properly administered.

Click here to read more about who must approve governance policies.

IRS Releases New Form 8940, Request for Miscellaneous Determinations

By Joyce Underwood, CPA

The IRS has released a new form to facilitate requests for determinations regarding certain activities and events (other than initial exemption applications). In the past if an organization wanted an affirmative opinion on a situation, the organization would request an advance ruling from the IRS to preapprove the facts and consequences. This opinion was obtained by submitting a written request including all the information under the specific regulations necessary to make a determination on the status. Each request under the new form is subject to a user fee as currently outlined under Revenue Procedure 2011-8. The fees currently range from $400 - $1,000. The one-page form is accompanied by instructions that specify what information needs to be submitted to support each of the nine types of requests that may be submitted.

Click here to read more about the new form 8940.

AICPA Comments on Revised Form 99-0

By Joyce Underwood

In June 2011, the IRS released Announcement 2011-36 requesting public comments on transitional issues and frequently asked questions involving the redesigned Form 990. On August 9th the AICPA released its comments developed by their Exempt Organizations Tax Technical Resource Panel and approved by their Tax Executive Committee in a letter to Stephen Clarke of the IRS.

Click here to read more about the revised Form 99-0.

Navigating Through the Accounting for Joint Activites

By Lee Klump, CPA

Many nonprofit organizations solicit contributions to support their mission through a variety of fundraising activities, including the following:

• Direct mail
• Telephone solicitation
• Door-to-door canvassing
• Telethons
• Television and radio spots
• Special events and others

Sometimes these fundraising activities include components that would otherwise be associated with programmatic or supporting service activities, but in fact support fundraising activities.

Click here to read more about accounting for joint activities.

Executive Compensation: Is it Reasonable?

By Mike Conover

There seems to be no end to the stories of sensational executive pay practives exposed in tax- exempt organizations. Rarely is much attention given to the specifics of the organization or the qualifications required of the executive in question. The focus of the story usually rests on the paradox of “not-for-profit” versus an allegedly “outrageous” amount of compensation. As predictable as these stories might appear, they are especially disturbing during difficult economic times. And unfortunately, the stories not only taint the organization who is the subject of the article, but the entire tax-exempt community.

Click here to read more about executive compensation.

Updates From the IRS

By Laura Kalick, JD, LLM in Tax

The following discusses a few recent issues that have been addressed by the IRS that tax-exempt organizations should be aware of.

Booster Club Dues and Non-Exempt Activity
An organization may conduct a fundraising campaign to raise funds for a particular activity that will be undertaken by the members; for example, a trip for children. One division of the IRS has indicated that if an individual makes a contribution that will be credited for the account of their child’s trip, and the amount in excess of the benefit received by the child was given with a charitable donative intent, that it may be possible to deduct the amount in excess as a charitable contribution.

Click here to read more updates from the IRS.

Private Foundation Foreign Giving

By R. Michael Sorrells, CPA

Grant making private foundations (PFs) are required to make a minimum amount of qualified distributions annually. This minimum is based upon a percentage of the PF’s investments, subject to a few modifications. Failure to make the amount of required minimum distributions annually can result in excise taxes and could even lead to loss of exempt status. Additionally, non-qualifying grants or contributions may be considered taxable expenditures and are subject to an excise tax of 20% (for the organization) and an additional 5% tax on PF officers or managers personally, if they knowingly approve such distributions.

Click more to read about private foundation foreign giving.

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