Tag Archives: Tax

Planning a Fundraising Event? The Devil is in the Details!

Zemanta Related Posts ThumbnailAs if planning for a fundraising event, such as a silent auction or an annual dinner, wasn’t already one of the busiest times on the calendar for a charity organization, there is the required records and correspondence that needs to be addressed to keep your organization on the up and up with IRS rules. IRS rules?  I didn’t know the IRS had rules regarding my fundraising event! What do I do now? How do I comply?

Here is a short summary of some of the records and bookkeeping that fundraising generates:

  • Sponsorship donations should be evaluated to determine the components of donation vs goods and services received
  • Donated goods for an auction have to be valued at FMV as of the date of donation
  • Auction donations “sold” at the event are recorded as donations; unsold items are returned and not booked
  • Acknowledgment letters are sent to donors for items over $250
  • Ticket sales are required to disclose the donative deductible portion
  • Donations of property valued more than $5,000 has special reporting requirements

It’s fairly common knowledge that a nonprofit has to provide a written acknowledgment letter to a donor for any single contribution of $250 or more before the donor can deduct the gift. Lessor known is the responsibility of a charity to provide the value of goods and services provided in exchange for contributions of $75 or more, which is usually the case for fundraising ticket sales. A token exception exists for items of low cost given to entice donors to donate. There are more complicated rules for donation of a car, boat or airplane. And donations of items valued by a donor at more than $5,000 may trigger a requirement for the donor to obtain a qualified appraisal and complete of Form 8283, of which the charitable organization will be asked to complete Part IV.

Many of the required correspondence are for information that needs to be determined before the event occurs, such as the donative portion of a ticket sale or sponsorship contribution. Coordination between those with this knowledge and those who are organizing the fundraising event or contributions in general are vital to a smooth outcome.

For more information contact Kathy Cuddapah at 301-231-6200.

Learn more about us 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.

Ready for the “Cadillac Tax”?

Zemanta Related Posts ThumbnailWith the fickle business environment, businesses must be able to adapt to the various changes that occur in order to be efficient and successful and with a new tax called the “Cadillac Tax”, it will put all existing businesses’ ability to adapt to a dynamic business environment to the test.

The “Cadillac Tax” was proposed to achieve multiple goals such as: bringing uniformity between the different social classes due to employers of lower income employees typically not providing or providing very minimal subsidized employer sponsored health insurance for those employees; cutting costs on healthcare spending due to some taking advantage of their employer sponsored healthcare plan by going to the doctor when they don’t necessarily need to; and encouraging employers to shift funds used to subsidized health plans towards providing high salaries or wages to their employees. This new tax, which is expected to be ratified in 2018, imposes a 40% excise tax on employer sponsored health plans that exceed a threshold of $10,200 for individuals and $27,500 for families. Although the 40% tax is directly effecting the health insurance companies, this tax will ultimately be passed onto the employers that are sponsoring their health plans. This tax will surely have a big impact on a large amount of employers business operations due to employers most likely being inclined to take preventative measures to avoid having this “Cadillac Tax” passed onto them.

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The First Church of… Cannabis?

In one of the more interesting nonprofit stories in the news recently, the First Church of Cannabis in Indianapolis has received its tax exempt status from the IRS. The IRS determination letter, which has been published online, dates from March 27, 2015 and grants 501(c)(3) status to the organization as a church.  According to Wikipedia, the First Church of Cannabis was formed in March 2015 by Bill Levin, who titles himself “Grand Poobah” of the church. The church has a list of twelve commandments called the “Deity Dozen”, which includes abstention from Internet trolling.

We make no editorial comments on this development other than that it is a changing world!

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