Congress Repeals Nonprofit Employee Benefits Tax
Dec 31,2019
In 2017, Congress passed the Tax Cuts and Jobs Act. The tax law required associations and other tax-exempt organizations, such as churches, synagogues, hospitals and colleges, to pay a 21 percent unrelated business income tax (UBIT) on employee benefits, such as parking and transportation. Nonprofits grappled with the question of how to calculate their parking tax. The 21 percent tax also applied to mass-transit benefits such as subway passes, though the new regulations focused on parking. The provision was added because the legislation eliminated tax breaks for transportation-related fringe benefits from for-profit companies, and legislators wanted to treat all employers equally. After two years of advocacy by nonprofits to repeal what was considered by many to be a harmful tax, Congress has recognized that nonprofit employee benefits like parking and transit assistance are not a trade or business conducted for the production of income and therefore should not be regarded as...
Congress Repeals Onerous “Parking Tax”
Dec 26,2019
The government funding legislation passed by the House on Dec. 17 and by the Senate on Dec. 19 includes repeal of Internal Revenue Code Section 512(a)(7), commonly referred to as the “parking tax”.  The legislation was signed into law by the President on Dec. 20. The provision, enacted as part of the 2017 Tax Cuts and Jobs Act, required tax-exempt organizations to include in unrelated business income the amounts they pay or incur on qualified transportation fringe benefits.  The imputed taxable income from the provision resulted in many organizations incurring unrelated business income tax (UBIT) liabilities for the first time. The repeal is retroactive to the original date of enactment.  As a result, organizations are entitled to a refund of taxes paid since the provision’s original effective date of Jan. 1, 2018.  It is possible the IRS may develop a process for claiming the refunds and if so, we will...
The Evolution of Best Practices for Nonprofits: Measuring a Data Driven Impact
Jun 11,2019
A short two years ago, 59% of charitable donations were collected by telephone. For the nonprofits making those calls, a "whole lot of change" is underway, and the success stories of tomorrow are being designed with strategic new practices today. A recent special event hosted by Smith & Howard featured three leaders in the nonprofit field who shared insights on best practices for organizations adapting to changes affecting their donors, boards of directors and customers. Expert advice came from speakers representing Georgia Center for Nonprofits, United Way of Greater Atlanta and Goodwill of North Georgia. Generational Changes Create Shifts in Measures of Outcomes "Put your seat belt on," said Kathy Keeley, Executive Vice President, Programs & Senior Consultant at Georgia Center for Nonprofits as she opened the presentation. "The whole world has changed on us and we've got to change with it." Keeley said demographics and technology are the two...
Guidance Released on Taxable Income from Parking and Other Fringe Benefits
Jun 04,2019
The bill known as the Tax Cuts and Jobs Act, enacted in December 2017, added new Section 512(a)(7) to the Internal Revenue Code (IRC).  This new section requires tax-exempt organizations to increase their unrelated business taxable income (UBTI) by the amount paid or incurred for qualified transportation fringe benefits (QTFs) provided to employees. For this purpose, QTFs include the provision of parking and mass transit benefits, and taxable income is created whether the employer pays for the benefits directly or allows employees to pay for the benefits on a pretax basis.  Made effective Jan. 1, 2018, mere days after the new law was enacted, many tax-exempt organizations were facing the daunting requirement to calculate, report and pay income tax for the first time. In December 2018, the Treasury Department provided organizations and their tax advisors with some much-needed guidance on the new law in Notice 2018-99.  As described below, some...
Impact of Wayfair Supreme Court Decision on Nonprofit Organizations
Mar 12,2019
Sales tax is imposed upon retail sales of tangible personal property and taxable services in 45 states and the District of Columbia. Each state determines the circumstances under which a sales tax is imposed on the purchaser. Purchases by nonprofit organizations are exempt in most of the states, if the tangible personal property or taxable services are used or consumed exclusively for the purposes for which the organization was established. The states usually require each legal entity to register as a nonprofit entity with the state to receive state tax-exempt status. Upon state authorization, the entity can provide a state-approved exemption certificate to its vendors in order to purchase goods and services without paying sales tax. While nonprofit organizations can make purchases free of sales tax, their sales of goods and taxable services are usually taxable. One could argue that these sales ultimately benefit the organizations’ nonprofit activities but most states...
Attracting Donors in Light of Tax Reform
Mar 01,2019
Following the enactment of the Tax Cuts and Jobs Act (TCJA), nonprofits have expressed concern about decreased contribution revenue because of changes in the new tax law, such as an increased standard deduction. There is still opportunity to attract donors to support your mission. Charitable giving can provide not only tax deductions, but also the satisfaction of doing good. On top of that, it’s one of the most flexible tax planning tools because donors can control the timing of their deductions to best meet their needs. Background: Prior to 2013, taxpayers could not directly transfer funds tax-free from an IRA to a charitable organization. Instead, individuals were required to pay tax on the distribution, regardless of their charitable intentions. In effect, the tax law worked against retirees who wanted to use IRA funds for charitable donations but no longer itemized their deductions. One opportunity available to nonprofits is the qualified...
Doug Shipman, CEO of The Woodruff Arts Center, Talks Music Investment Act Amendment
Feb 27,2019
Georgia’s entertainment industry has enjoyed explosive growth, in large part due to our state’s generous tax credits and incentives. Those tax advantages did not spill over into the music side of the performing arts until the Georgia Music Investment Act (HB 155) was passed in January 2018. While the goal was to bring investment and music production to Georgia, there were weaknesses in the original legislation that kept it from being the boon to the local economy that it could be. On February 19, 2019, several Georgia legislators proposed an amendment to the Georgia Music Investment Act, HB 347. If passed, it will provide a welcome boost for the industry – and the state. Highlights of the amendment include: Transferability and salability of credits Increase in percentage of production expenditures considered for tax credits (from 15% to 30%) Lowering of thresholds Removal of the 12-month period from the definition of...
Sales and Use Tax Exemption Applied for Georgia’s Fine Arts Organizations
Jan 29,2019
On January 15, 2019, the Georgia Department of Revenue issued a letter ruling on the sales tax exemption for certain ticket sales to fine art performances. The sales of tickets to fine art performances held in a venue owned and operated by a §501(c)(3) organization are exempt from Georgia sales tax even if the nonprofit organization co-presents the performances with a for-profit organization. The sales tax exemption (in effect until July 1, 2020) applies to the sales of tickets, fees or charges for admission to certain fine arts performances or exhibitions in Georgia. The exemption is to be applied to §501(c)(3) organizations whose mission is to advance the arts in Georgia, and provide arts, educational, and culturally significant programming and exhibits for the benefit and enrichment of Georgia citizens. For purposes of the exemption, “fine arts” means poetry, photography, ballet, dance, opera theater, dramatic arts, painting, sculpture, ceramics, drawing, watercolor,...
Are Grants Subject to Revenue Recognition?
Nov 06,2018
Nonprofits received long-awaited clarification on a key accounting question from the Financial Accounting Standards Board. As discussed in the article on page 1, the FASB released a final accounting standards update (ASU), Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made. The ASU aims to standardize how grants and other contracts are classified across the sector, as either an exchange transaction or a contribution. Classifying grants as either a contribution or exchange transaction is the first step in implementing revenue recognition. The clarified guidance in ASU 2018-08 aims to help nonprofits complete that first step in a consistent way across the sector. This article outlines a practical example of the process to evaluate a grant under the new ASU. Practical Example: How to Evaluate a Grant Under the New Guidance Description of ‘Nonprofit A’: A large research association that specializes in space exploration. Its mission...
5 Things to Know About Substantiating Donations
Nov 06,2018
There are virtually countless charitable organizations to which you might donate. You may choose to give cash or to contribute noncash items such as stock, personal property or real estate. Whatever you donate, once you do the good deed, you owe it to yourself to claim a tax deduction (provided you itemize rather than taking the standard deduction). One requirement is documentation. And precisely what you’ll need depends on the type and value of your donation. Here are five things to know about substantiating charitable donations: Cash contributions of less than $250 are the easiest to substantiate. A canceled check or credit card statement is sufficient. Alternatively, you can obtain a receipt from the recipient organization showing its name, as well as the date, place and amount of the contribution. Bear in mind that unsubstantiated contributions aren’t deductible. So you must have a receipt or bank record. Noncash donations of...

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