Author Archives: Mark Robins

Are you Part of a Trade Association? Membership Options for Government Employees

conflicts of interest

While many government employees benefit from professional association membership, federal and state statutes may prohibit or limit the reimbursement of annual dues or registration fees such memberships require. According to 5 U.S.C. 5757(a), federal agencies may only pay the expenses required for licensure within a particular profession. Moreover, agencies cannot pay the expenses for professional association membership unless membership is required for obtaining a professional license or certification. Therefore, a significant population of the government workforce that may benefit from joining an association elect not to if they are financially responsible.

In a targeted effort to increase association participation from government employees, several associations are developing alternative membership categories including free memberships and group memberships. For example, certain associations offer a membership category aimed at government employees that allows free membership for three years. After the three-year period, members can continue their participation as paying members or stop participating.

Alternatively, group memberships allow small groups to join rather than an individual. This membership strategy may alleviate some of cost associated with individual memberships. Smaller associations whose main revenue source is membership dues may benefit the most from group memberships.

This set of untapped government employees remains an appealing membership target for associations of all sizes. Determining an appropriate strategy to increase membership among this group is key to any association’s long-term growth.

For more information visit here or contact Mark Robins, CPA, at 301.231.6200.

How to Reinstate Nonprofit Status

The IRS has published frequently asked questions regarding the automatic revocation and how to reinstate nonprofit status. If you’re interested in reading it or your organization had its tax-exempt status revoked click the link below:

 http://www.irs.gov/pub/newsroom/automatic_exemption_revocation_for_non-filing_faqs.pdf

IRS Notice 2011-43 & 2011-44 provide guidance for nonprofit organization that recently lost their tax-exempt status during the automatic revocation. Notice 2011-43 applies only to certain small organizations that have lost their tax-exempt status. As definite in the notice, a small organization is one that has annual gross receipts of not more than $50,000 in its most recently completed taxable year.  Notice 2011-44 applies to all other organizations. See below for links to both Notice 2011-43 & 2011-44.

 Notice 2011-43: http://www.irs.gov/pub/irs-drop/n-11-43.pdf

Notice 2011-44: http://www.irs.gov/pub/irs-drop/n-11-44.pdf

Other Ways Nonprofits Can Get In Trouble With The IRS

According to the Washington Post , roughly 8,400 nonprofits in the Washington D.C. area recently lost their tax-exempt status because of failure to file the necessary annual returns. The IRS has renewed their commitment to ensuring that nonprofits are complying with the rules and regulation that govern their tax-exempt status. Besides failure to file an annual return, non-profits can still be at risk from other potential problems such as engaging in excess benefit transactions, lobbying and deviation from exempt purpose or excessive unrelated business income.

501(c)(3) and 501(c)(4) organizations are prohibited from entering into “excess benefit transactions” with “disqualified persons”. An “excess benefits transactions” is a transaction is which an amount paid by a nonprofit to a disqualified person is more than the value of the consideration received by the organization.  A “disqualified person” is any person who in the five years prior to the transaction was in a position to exercise substantial influence over the organization’s affairs.

501(c)(3) organization are not allowed to directly support or oppose  candidates for public office.  501(c)(3) organizations operating as public charities (other than a church or church-related entities) can elect to file Form 5768 in order to make expenditures to influence legislation, subject to certain limits set forth by the IRS.

If an organization materially departs from its exempt status or its unrelated business income becomes a significant part of the organizations revenues the IRS may revoke its tax-exempt status.

IRS halts examination of gift tax on contributions to 501(c)(4) until further investigation

In December of 2010, the IRS indicated it would be paying closer attention to contributions made to politically active 501(c)(4) organizations, with an emphasis on contributions made in excess of exemptions.  This focus is mainly due to large contributions received during the 2010 elections. Back in 1982 the IRS declared theses gifts taxable but has not been enforcing it. The current individual gift tax exemption is $13,000 in a year, $26,000 for couples, and any amount over will be taxed at 35%. The lifetime exemption currently covers up to $5 million in gifts. Earlier this year in an effort to increase gift and estate tax return filings the IRS sent out letters to large donors informing them that investigations had been opened to determine why they had not filed a return. On July 7, 2011 the IRS released a letter halting all current and former investigations until all implications of the issue have been reviewed.

What You Need to Know About 457 Plans

Does your organization have a 457 eligible deferred compensation plan?  Are you recognizing unrealized gains and loss for the change in fair value? Well, you should be. According to code section 457, the plan assets shall remain solely the property and rights of the employer subject to the claims of general creditors, therefore the plan assets should be adjusted for fair value and unrealized gains and losses should be recognized according to FASB Codification 958-320-35. FASB Codification 958-320-35-1, states that “Investments in equity securities with readily determinable fair values and all investments in debt securities shall be measured at fair value in the statement of financial position”. Because the plans assets are the sole property of the employer changes is fair value should be recognized until the assets are transferred to and become the property of the participant. The unrealized gain or loss will have a corresponding increase or decrease in a salary related expense and should be recorded in the period adjusted. According to FASB codification 710-10-25-9, the costs associated with an individual year of the employee’s service should be recognized in that year.

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