In a recent court case St. George’s Episcopal Church v. Town of Durham, the New Hampshire Supreme Court ruled that revenue from leased parking spots is taxable income to the church. In it’s ruling, the court said since the church only used the parking spots for six hours per week, the parking spots must be used more than “slightly, negligibly or insignificantly”, to maintain their tax exemption status. Furthermore, the court rejected the church’s argument that since revenue earned from leased parking spots was used for the church’s exempt purpose, the revenue was exempt from taxation.
While this case involves the state of New Hampshire, all churches should be aware of this rule and evaluate it against current practices and local laws. For more information, the article by Douglas Rocks is in the January 2017 edition of The Exempt Organization Tax Review published by Tax Analysts.
For more information on nonprofit taxation, please contact Rob Eby at 301.231.6200.
Big changes related to nonprofit accounting are on the horizon. On April 22, 2015, the Financial Accounting Standards Board (FASB) issued proposed ASU, Presentation of Financial Statements of Not-for-Profit Entities. In response to requests for better information about how nonprofits use their resources, the proposed update is intended to add clarity about an organization’s liquidity, financial performance and cash flows, while also improving upon the current net asset classification scheme.
“The proposed ASU contains recommended enhancements to the fundamental reporting model for not-for-profit organizations—a model that has existed for more than 20 years,” stated FASB member Lawrence W. Smith. “We believe that these changes will refresh the model in ways that will make not-for-profit financial statements even more useful to donors, lenders, and other users.”
Many nonprofit organizations and users of financial statements agree that it’s time for an update.
Highlights of the proposed ASU include:
Aronson LLC’s Nonprofit and Association Industry Services Group is monitoring these changes closely and will provide updates as they become available. In the meantime, if you have any questions about nonprofit accounting standards or other issues, please contact your Aronson advisor or Rob Eby at 301.231.6200.
Nonprofits with employees in the District of Columbia should be aware of a new DC law that will require an additional employment form for every employee. The Wage Theft Prevention Amendment Act of 2014 applies to all employers operating in DC, including exempt organizations. The Act, drafted by Mayor Vincent Gray last year, has already had several updates, including the most recent notification that a Sample Notice Template has been issued by the DC Department of Employment Services.
As reported by Venable LLP, “the new law requires nonprofits with DC employees (and all DC employers) to provide a written notice to current and future employees that contains:
The Act outlines a new penalty structure for organizations that violate its provisions, including a failure to maintain proper records of employee work hours and compensation. Additionally, the Act strengthens anti-retaliation protections for employees.
On March 4th, the FASB voted to move forward on a proposal that would change the way universities, charities, foundation and other nonprofit organizations communicate the manner in which they spend and invest funds. The proposed changes would require financial statements to reflect additional transparency regarding liquidity, financial performance and cash flow.
Support for the proposal was not unanimous, with FASB Chairman Russell Golden and Vice Chair James Kroeker voting against the proposed standard in a 5-2 vote. Even among the five board members who voted in favor, two did so with reservations.
Reports the Journal of Accountancy: “FASB Chairman Russell Golden, who cast one of the dissenting votes, said some aspects of the proposal will reduce costs, promote simplification, and provide additional benefits to the not-for-profit community. But he is concerned that the project may increase complexity in the system overall because some of the tentative decisions address conditions only for not-for-profits on issues that also apply outside the not-for-profit sector.”
The proposal will tentatively get an April release with comments due by July 31, 2015. Stay tuned to the Aronson Nonprofit Report for updates to this developing story.
Contact Aronson’s Nonprofit & Association Industry Services Group at 301.231.6200 for more information about this or other financial reporting issues.
Tuesday morning, the Internal Revenue Service issued the 2015 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck will be:
• 57.5 cents per mile for business miles driven, up from 56 cents in 2014
• 23 cents per mile driven for medical or moving purposes, down half a cent from 2014
• 14 cents per mile driven in service of charitable organizations