Under the Affordable Care Act (ACA), a small employer can claim a portion of insurance premiums paid as a tax credit. But what do you do if you are a tax-exempt organization? Don’t worry! You can still claim the credit if your organization is eligible. Eligible tax-exempt organizations can claim up to 35% of premiums paid. The credit is available for eligible employers for two consecutive tax years.
An eligible tax-exempt organization would file a Form 990-T and fill in line 44F, Credit for Small Employer Health Insurance Premiums, and attach a Form 8941, Credit for Small Employer Health Insurance Premiums.
The tax-exempt organization can file a Form 990-T in order to request the credit even if there is no unrelated business income to report. Just follow the instructions located here and look for details for Line 44F.
According to the IRS, “to be eligible for the credit, an eligible small employer generally must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace.”
To be eligible, you must meet three requirements:
The IRS has worksheets to help calculate this in the instructions for Form 8941.
For more information on business matters affecting nonprofit organizations, contact Aronson’s Nonprofit & Association Industry Services Group or Carol Barnard at 301.231.6200.
The District of Columbia requires business taxpayers to make tax payments over a certain threshold by electronic funds transfer (“EFT”). The most recent guidance issued by the D.C. Office of Tax and Revenue regarding EFT payments says that business taxpayers must pay EFT for all tax payments exceeding $10,000. However, over the last couple of months the Office of Tax and Revenue have been issuing notices to business taxpayers informing them that the EFT requirement has been decreased to payments exceeding $5,000. Although the Office of Tax and Revenue is authorized by statute to require EFT payments at this threshold, it has yet to issue a general notification to taxpayers or practitioners informing them of this new requirement.
According to conversations we have had with the Office of Tax and Revenue, their system will generate the 10% non-compliance penalty when a payment is submitted by check over $5,000. Although there is a reasonable cause waiver to the penalty that we think would obviously apply in these circumstances (i.e., no notice to taxpayers), the waiver requires a written request that could take some time in getting approved.
Taxpayers that suspect that they will have upcoming payments over $5,000 should register for making EFT payments on the Office of Tax and Revenue’s Electronic Taxpayer Service Center (eTSC) well advance of the payment due date. It can take 7-10 business days to receive the ID and password for the website, which are sent separately to taxpayers via regular mail. Taxpayers can call the Office of Tax and Revenue to receive their ID earlier, but the ID still may not be available for up to 7 business days after the registration is submitted.
Therefore, we would recommend completing the eTSC registration early if there is any chance that it will have an upcoming payment over $5,000. Please contact Aronson’s tax department if you have any questions.
Nonprofits with physical presence in DC are subject to collecting sales tax and remitting them to the DC government for any tangible personal property items sold.
If you find that your organization may not be in compliance with this law, Henry can help by doing a “voluntary disclosure” to come clean with the DC government and mitigate the dollar amount of damage this could cause if the District finds it first.
Sign up for a phone forum conducted by the specialists at the IRS on tax exempt organizations, to be held on July 18, 2012, at 2:00 p.m. EST, titled “Exempt Organizations and Gaming”. Here is the link to register: http://www.irs.gov/charities/article/0,,id=258086,00.html
Topics to be covered:
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.