Tag Archives: Contributions

Private Schools Balance between Tuition and Contribution Revenue


Two of the most common revenue streams for private schools are tuition and contribution revenue.  Unfortunately, tuition alone does not cover the cost for private schools to run their programs and maintain their campuses. Contributions are a great addition to tuition for private schools. However, do you know how to account for both revenue sources?

Tuition revenue is accounted for as an exchange transaction that is recognized ratably over the term of the school year net of financial aid. Any money received in advance of revenue recognition treatment being met, should be recorded as deferred revenue liability. See how to account for delinquent tuition payments here.

Contributions are recorded when received or pledged as unrestricted, temporarily restricted, or permanently restricted depending on donor restrictions. Some private schools have capital campaigns that raise funds to improve facilities, initiate new programs, or to build an endowment. Capital campaigns usually have explicit or implied restrictions; the stated objective of the capital campaign usually makes the donor’s restriction clear. Pledges must be carefully reviewed to determine if they are conditional or unconditional. Unconditional pledges should be recognized at fair value as revenue in the year the pledge is made. Conditional pledges are to be recognized as revenue when the conditions are substantially met.

The federal tax code allows taxpayers to deduct contributions or donations made to qualified private nonprofit schools that operate to educate students in the community or serve some other approved purpose. However, a donation made to a nonprofit private school may not qualify for the deduction if the school significantly engages in additional activities that do not relate to charitable, scientific, humanitarian, or religious causes.

A private school may offer a gift or other benefit, such as tuition discounts, in appreciation of a donor’s generosity. Schools that choose to offer discounts should advise donors that they must reduce the deductible value of their donation by the value of all gifts and benefits from the private nonprofit school. For example, providing a $500 gift certificate in appreciation of a $20,000 donation may seem minimal, but it still requires the donor to report a charitable deduction of $19,500 rather than $20,000.

For more information about accounting for private schools or questions, please contact Melissa Musser at Mmusser@aronsonllc.com.

Beating the Odds with a Long Term Development Director

please giveI have had the honor of being associated with Bread for the City (Bread) for more than 20 years, the last six or seven as a Board Member and Treasurer.

One key element of Bread’s success has been the longevity of Kristin Foti, their development director. For many clients, Development Directors turn over frequently in line with survey data showing most organizations have a Development Director for about 3.5 years. Although still only in her early thirties, Kristin has been at Bread for more than 10 years, the last six as Chief Development Officer. I spoke to her and George Jones (the CEO of Bread for the last 20 years) on the reasons for their success.

While many factors influence a person’s decision to stay at a job, Kristin noted the stability of the organization as the strongest reason: the programs are well run, the finances are well managed, the Board Members are enthusiastic givers, and the senior executive team have long tenures. She also thrives in her partnership with George, who puts leadership above micromanagement. And she also commented on how it’s fun to work with an organization that continues to innovate and grow, keeping her job interesting and offering opportunities for professional growth.

Bread for the City engages in a fairly wide swath of fundraising activities including private foundation proposals, direct mail annual fund and capital campaign solicitations, annual events and personal solicitation by Kristin and/or George to major donors. The fundraising environment is very strong as George the CEO is actively involved with cultivating and stewarding larger donors, and the Board Members are generous givers who also solicit additional contributions. Kristin also works with a dynamic team, who she considers to be the best in their fields.

Bread’s active donor file is about 11,000 donors. Online donations and gifts solicited by email are the fastest growing source of donations, which has been a strong positive for the organization. Bread also continues to work to grow its major gifts and planned giving programs. (They have several times over the years received substantial testamentary bequests from donors who were not active with the organization while alive.)

There are many social service organizations in the DC area doing great work. The differentiating factor for Bread is the diversity of services they provide, including medical and dental care, food, clothing, social services, and civil legal assistance. All of these programs are fully operational and most have been around for 20 years or more. Vision care is the newest offering, which was launched in December.

While I suppose this is a bit of an advertisement for Bread, an organization I really care about, I hope this blog entry highlights the types of factors that go into a development director having a lengthy stay and the position not being a revolving door.

Learn more about our nonprofit group here: http://www.aronsonllc.com/industries/nonprofit-accounting

PATH Act Makes Permanent Several Popular Provisions which Promote Charitable Giving

Tax jpgOn December 18, 2015 the President signed the PATH Act (Protecting Americans from Tax Hikes Act). While generally considered an extenders bill (multiple tax incentives were extended one year at a time), this Act makes permanent some of the provisions which promote charitable giving by individuals and businesses.

These include:

  • Charitable contributions of food inventory –several tax incentives apply here such as making permanent an enhanced deduction for contributions of food inventory by both corporate and non-corporate donors and, beginning in 2016, increasing the contribution limit to 15 percent of the taxpayers net income for the year, and providing a 5-year carryover for qualifying food contributions that exceed the 15 % limit.
  • IRA Charitable Transfers –The one that gets the most press is the tax-free treatment of charitable distributions from individual retirement plans by individuals age 70 ½ and older. An individual age 70 ½ must annually withdraw required minimum distributions (“RMD”) from their IRA. The amount is generally taxable to the recipient. This provision allows an IRA participant to meet their IRA RMD requirement through an “IRA Charitable Rollover” whereby IRA amounts (up to $100,000 annually) transferred directly to charity are not treated as taxable income. This in effect reduces the participant’s adjusted gross income (“AGI”), which is important because many tax deductions, credits, and some taxes (e.g., the 3.8% Obamacare net investment income tax) depend on the level of a taxpayer’s AGI. This provision was the most used and desired charitable donation extender, and the charitable sector is most pleased it is now a permanent part of the law.
  • Incentives for qualified conservation contributions. Special rules have been made permanent for contributions of capital gain real property for conservation purposes. These rules include enhanced annual charitable deduction limits for contributions of real property for conservation purposes and a longer carry-forward period (15 years, rather than 5 years) for qualified conservation contributions in excess of the enhanced annual charitable deduction limits.
  • Modification of unrelated business income tax treatment of certain payments to a controlling exempt organization — the amount of certain rent or royalty payments made by a controlled exempt organization to a controlling exempt organization that need to be treated as unrelated business taxable income by the controlling exempt organization is limited by a special tax provisions now made permanent.
  • Basis adjustment to S Corp stock resulting from a charitable contribution of property –the Act makes permanent the rule that a shareholder’s basis in the stock of an S Corporation is reduced only by the shareholder’s pro rata share of the adjusted basis of property contributed by the S Corporation for charitable purposes. This alleviates the former concern of S corporation shareholders about getting a full fair market value deduction for donations of appreciated capital gain property.

Please contact our office if you have any questions about these provisions at 301-231-6200.

IRS Weighing New Options for Documenting Donations

W2There may be a new rule change for the verification of donations.  According to Bloomsberg BNA, in September the Internal Revenue Service proposed a rule change for the reporting of donations of $250 or more. With the old rule many taxpayers were able to make donations and then claim them on the Form 990 without having to have a “traditional contribution receipt.”  The new rule change is planning to stop taxpayers from being able to claim donations without a “traditional contribution receipt” and make sure they have a “contemporaneous written acknowledgement” of any donations over $250.  If this new rule does occur the Internal Revenue Service would create a new form that details “information on gifts… or a ‘donee report.’”  The purpose of this new form is to help simplify and have more organized audits. For more information please visit https://philanthropy.com/article/IRS-Weighing-New-Option-for/234151.

The Philanthropreneurs of Today

charity keyTechnology has played an enormous role in transforming our lives, making our day-to-day activities infinitely easier and less time-consuming. Who doesn’t know the tech-savvy leaders of this century?  Masterminds like Bill Gates (Microsoft), Mark Zuckerberg (Facebook), Jan Koum (Whatsapp) and many more have revolutionized this modern era. Not only have they completely changed the face of technology and communication, but they have also become philanthropreneurs, taking leading roles using their innovations and fortunes for humanitarian purposes. The number of the tech entrepreneurs playing a philanthropic role has increased significantly in comparison to past years. Their contributions have escalated by 27.5% in 2014, in contrast to 4% during 2012. Do you know who’s among the America’s 50 Philanthropists? About 47% of the donations are made by benefactors in the field of technology. Here, take a look:

  • #6 Nicholas Woodman, founder of GoPro, donated a sum of $500 million dollars.
  • #5 Sean Parker, former President of Facebook, contributed about $550 million for charitable causes.
  • #4 Jan Koum , founder of Whatsapp, donated $556 million to the Silicone Valley Foundation, which is the wealthiest community foundation of America today.
  • #3 Ted Stanley, founder of MBI, donated $652.4 million for mental health research at Broad Institute.
  • #2 Ralph C. Wilson, founder of Buffalo Bills, donated $1 billion to his family foundation.
  • #1, we have our all-time favorite, Mr. and Mrs. Bill Gates, donating over $1.5 million to their family foundation.

According to The Chronicle of Philanthropy, most of these contributions have not been specifically assigned to a cause. The donations were mainly made to foundations, schools, and universities, respectively. These tech philanthropists are interested in talent acquisition and promoting change, rather than building long-term endowments. Meanwhile, most of the contributions made by the donors who work in finance are directed to fund universities that they attended, aiming to accumulate talented thinkers. If continued at this rate, the contributions made by the donors in the field of technology will dominate those made by donors in finance.

For more information on business topics affecting nonprofit organizations, contact Aronson’s Nonprofit & Association Industry Services Group or Sadia Tariq at 301.231.6200.


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