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How the New Tax Law Affects Nonprofits

The recently enacted tax law has both direct and indirect effect on nonprofits. The indirect effect is the decreased tax incentive for charitable contributions that results from doubling the standard deduction, decreasing individual and corporate tax rates, and increasing the estate tax exemption. It is difficult to know how these will affect charitable giving, but the huge increase in online giving at year-end (The Chronicle of Philanthropy reported that online donors gave 38% more to charities during the last week of 2017 than in the last week of 2016) indicates that tax incentives do impact charitable giving. The fact that individuals can now deduct cash contributions to qualified charities up to 60% of adjusted gross income (previously 50%) isn’t likely to do much to offset these disincentives.

Unrelated Business Income

Although lower rates will apply to nonprofits paying unrelated business income tax, a new provision restricts losses from one unrelated activity from being offset against other activities.

Unrelated Business Income Taxation will also be applied to certain fringe benefits paid for by tax exempt organizations for qualified transportation fringe benefits, or for on -premises athletic facilities. There is also an excise tax on certain nonprofit salaries exceeding $1 million.

Moving Expense Deductibility

If your organization pays moving expenses for new or current employees, these are no longer excludable from taxable income. This may require nonprofit employers to pay more to make their employees “whole”.

Provisions That Did Not Make It into the Final Law

Several provisions did not make it into the final law, including:

  • repeal of the Johnson amendment,
  • changes to private foundation excise taxes,
  • reductions to qualified tuition plans and employer-provided educational assistance,
  • taxing the value of housing for the convenience of the employer,
  • unrelated business income tax on royalties from licensing an exempt organization’s name, and from research activities where results were not made publicly available,
  • enhanced donor advised fund reporting, and
  • taxing interest on certain private activity bonds.

Getting your nonprofit listed on GuideStar

GuideStar’s website states that one of the questions they get most frequently is “How can I get my organization added to your database?” They go on to explain different circumstances.

For example, GuideStar won’t list organizations that don’t yet have IRS approval for their exempt status even if approval has been applied for. GuideStar will list organizations once IRS publishes them in the Business Master File, but that process takes months, so it is okay for you to send IRS approval information directly to GuideStar.

Some organizations such as churches, or organizations that file a combined return, won’t get listed by IRS, so you will have to contact GuideStar and provide necessary information. For example, religious organizations that have not applied for recognition of exempt status to IRS and which have their own employer identification number must provide information about the year they were established and other information confirming their status (GuideStar lists 3 different sets of documents that are acceptable). Organizations that are part of a group ruling must provide a copy of IRS confirmation of their employer identification number and documentation that the organization is an official chapter or affiliate of the national organization.

Guide Star even provides procedures for small nonprofits with a charitable fiscal sponsor to become registered.

You can contact GuideStar by email at outreach@guidestar.org, by fax at 757-229-8912 by mail to GuideStar, 4801 Courthouse St., Suite 220 Williamsburg, VA 23188 or visit their website at GUIDESTAR WEBSITE.

Summer 2017 Newsletter

Download the complete Newsletter HERE

INSIDE THIS ISSUE:
Purchasing Policies for
Nonprofits
JOE-NYC New Twist on
Affordable Housing
Top Issues for Nonprofits in 2017
How IRS Reviews Your 3
Application for Exemption
IRS Audits of Charities Will Be
Less Confusing
Jeanne Beutner, CPA Promoted
to Full Partner
WebStar Winner: The Nonprofit
Risk Management Center

“the best part of my job is getting to know our
clients and working with them. I love how our firm is so
service-oriented. We really
focus on helping our clients
in any way possible.” ~ Jeanne Beutner

Download the complete Newsletter HERE