TAKE ACTION! With a similar obligation/cost on nonprofit operations, legislation in New York (A03394) has been reintroduced that would require that nonprofits provide a receipt for donations to determine and disclose how that donation would be allocated internally. For instance, "administrative expenses"would have to be differentiated from funds "directly...helping with the...charitable work." This bill would require nonprofits to make a near-immediate internal commitment of donated funds, and maintain an internal accounting system tracking donations of all sizes.The publicly available Federal 990 tax return already provides a pretty clear picture of internal resource allocations. For these, and a variety of other reasons, we encourage NYCON members to contact your representatives and/or bill co-sponsors to share their perspective on the merits of this legislation.
- An archived video of the (4.5 hour) hearing is available here
- NYCON prepared a brief synopsis of the comments offered by the respective parties. Click to Read.
Other news Minimum Wage Updates:
- There are at least a dozen bills pending in the Legislature with bearing on NY's minimum wage. They range from simply tying the existing wage to inflation, to allowing counties to recommend a Living Wage.
- As NYCON has already said, it will be difficult for NY nonprofits to cope with the proposed increase, even if NY attempted to substantially offset an increased minimum wage, as most nonprofits are funded without NY State participation. Now, it appears that the Governor's budget proposal leaves even the State's commitment in doubt.
- As a general reminder, the minimum wage in NY is $9 in 2016, with increases (for those only subject to NY, not Federal, law) in the overtime exempt salary levels of "Administrative" and "Executive" positions from $34,125 to $35,100.
- On that overtime exempt issue, the latest update on the proposed US Dept. of Labor regulations increasing the overtime exempt salary level (as long as the 'duties' test is also met)...is a midsummer 2016 publishing...with a 60 day implementation period. Again, most nonprofits in NY have activities that keep them outside of the Federal rules...whereby they are covered by NY only.
NYCON will keep you updated on any developments.
Showing posts with label IRS. Show all posts
Showing posts with label IRS. Show all posts
Friday, February 12, 2016
Policy & Legislative Update
Wednesday, May 1, 2013
News from The Non-Profit Times
Audits Show Widespread Underreporting of UBI
Unreported unrelated business income in higher education was found in almost every case examined by the Internal Revenue Service (IRS).
“The audits identified some significant compliance issues at the colleges and universities examined,” said Lois Lerner, director, Exempt Organizations division of the IRS. “Because these issues may well be present elsewhere across the tax-exempt sector, all exempt organizations need to be aware of the importance of accurately reporting unrelated business income and providing appropriate executive compensation.”
This is part of the multi-year project on tax-exempt colleges and universities. The Colleges and Universities Compliance Project was launched in 2008 with the distribution of detailed questionnaires to 400 randomly-selected colleges and universities. The IRS selected 34 of the 400 for examination because their questionnaire responses and Form 990 reporting indicated potential noncompliance in the areas of unrelated business income and executive compensation.
Unrelated business income (UBI) is the income from a trade or business regularly conducted by an exempt organization and not substantially related to its exempt purpose. Unrelated business taxable income is the UBI that is taxable after deducting expenses directly connected to the trade or business. Because UBTI is calculated by totaling the UBI from all activities and subtracting the total allowable deductions, losses from one activity can offset profits from another. Examinations have resulted in:
- Increases to UBTI for 90 percent of colleges and universities examined totaling about $90 million;
- More than 180 changes to the amounts of UBTI reported by colleges and universities on Form 990-T; and
- Disallowance of more than $170 million in losses and Net Operating Losses (NOLs, i.e., losses reported in one year that are used to offset profits in other years), which could amount to more than $60 million in assessed taxes.
The primary reasons for increases to UBTI in the completed exams were:
- Disallowing expenses that were not connected to unrelated business activities.
The IRS found that examined colleges and universities were reporting certain losses as connected to unrelated business activities when they were not. The misreporting occurred in two ways:
1. Lack of profit motive: The IRS found that organizations were claiming losses from activities that did not qualify as a trade or business. Nearly 70 percent of examined colleges and universities reported losses from activities for which expenses had consistently exceeded UBI for many years. UBI must be generated by a trade or business.
An activity qualifies as a trade or business only if, among other things, the taxpayer engaged in the activity with the intent to make a profit. A pattern of recurring losses indicates a lack of profit motive. The IRS disallowed reporting of activities for which the taxpayer failed to show a profit motive. Those losses no longer offset profits from other activities in the current year or in future years, with more than $150 million of NOLs disallowed.
2. Improper expense allocation: The IRS also found that on nearly 60 percent of the Form 990-Ts examined, colleges and universities had misallocated expenses to offset UBI for specific activities. Organizations may allocate expenses that are used to carry on both exempt and unrelated business activities, but they must do so on a reasonable basis and the expenses offsetting UBI must be directly connected to the UBI activities. In many cases, the IRS found that claimed expenses, which generated losses, were not connected to the unrelated business activity.
The IRS checked the calculations for all NOLs reported on returns under exam and found that NOLs were either improperly calculated or unsubstantiated on more than a third of returns. As a result, the IRS disallowed nearly $19 million in NOLs.
The IRS also determined that nearly 40 percent of colleges and universities examined had misclassified certain activities as exempt or otherwise not reportable on Form 990-T. Fewer than 20 percent of these activities generated a loss. The examinations resulted in the reclassification of nearly $4 million in income as unrelated, subjecting those activities to tax.
Examinations resulted in more than 180 changes to UBTI reported for specific activities by colleges and universities. More than 30 different activities were connected to the changes. The majority of these adjustments came from the following activities: Fitness, recreation centers and sports camps; advertising; facility rentals; arenas; and, golf.
To see the online aricle click here.
Wednesday, April 17, 2013
The NonProfit Times Weekly E-Newsletter
| IRS Reports 10,000 Fewer Nonprofits In 2012 | ||||||
There were 10,000 fewer registered tax-exempt organizations in 2012 than in 2011. According to the Internal Revenue Service (IRS) Data Book for 2012, which was released Monday, there were 1,484,818 501(c) organizations for the fiscal year ending in September, compared with 1,494,882 in 2011 – a decrease of 10,064, or about 0.68 percent.Read more...
|
Wednesday, October 5, 2011
Voluntary Compliance Program announced by IRS to address worker misclassification
Information for your members: You may have seen that in late September the IRS announced a voluntary compliance program for employers (including nonprofit employers) to enable those who have mistakenly classified workers as independent contractors to make a correction, along with a modest payment, and avoid the usual penalties of noncompliance. This program’s announcement offers an opportunity to remind nonprofits about the risk of misclassification and share information with them about the voluntary compliance program. See the National Council’s website materials on this topic.
Here is the text of the IRS announcement about the voluntary compliance program (from the IRS’s EO Update circulated on October 4):
“The IRS has launched a new program that will enable many employers, including tax-exempt employers, to resolve past worker classification issues and come back into compliance by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit. To be eligible for the new Voluntary Classification Settlement Program an applicant must:
Consistently have treated the workers as nonemployees in the past
Filed all required Forms 1099 for the workers for the previous three years
Not currently be under audit by the IRS, Department of Labor or a state agency concerning the classification of these workers.
Full details, including FAQs, will be available on the Employment Tax Pages of IRS.gov and in Announcement 2011-64.”
Wednesday, June 22, 2011
Schumer: Losing Tax-Exempt Status Could Be An Unfair Blow To New York’s Nonprofits
Schumer: Losing Tax-Exempt Status Could Be An Unfair Blow To New York’s Nonprofits
Report Provides County-By-County Breakdown Of The Over 6,000 New York Nonprofit Groups That Lost Tax Exempt Status – Groups Can Correct Error, But Have To Do It Soon Before Costs Go Up
Today, U.S. Senator Charles E. Schumer unveiled a new section of his website to aid New York nonprofit groups that may have mistakenly lost their tax exempt status. Schumer is strongly encouraging nonprofit groups to check a recently-released Internal Revenue Service (IRS) list, available on Schumer’s website, to ensure that they have not been mistakenly stripped of their tax-exempt status – a move that could cost these groups thousands of dollars. Schumer’s webpage was launched shortly after media reports indicated that several nonprofit groups, including the New Windsor Little League and Plattekill Public Library, were included on the list released June 8th, despite the fact that their paperwork was up to date and filed with the IRS. Several nonprofit groups were never contacted by the IRS, despite several attempts to send mailings and other communications to warn the groups of the looming deadline to avoid losing their designation as a 501(c)(3) group.
“Little leagues, public libraries, museums, meal programs, and other nonprofit organizations that are the very fabric of communities throughout Upstate New York are at risk of losing their tax-exempt status and paying thousands of dollars in penalties through no fault of their own,” said Schumer. “Whether because of a lost notice in the mail or paperwork errors, no nonprofit should needlessly lose their tax exempt status. Every nonprofit group in Upstate New York should take a moment to ensure that they won’t be forced to pay unnecessary taxes this year. I’ve launched this new page on my website to make it easy and painless for groups to make sure that they’re not on the list, and to take steps to correct the problem if they are. Remaining tax-exempt helps keep costs down while boosting fundraising for charity organizations.”
"The good work of community charities has a vital impact on the everyday lives of New Yorkers,” said Doug Sauer, Chief Executive Officer of the New York Council of Nonprofits. “Whether it is providing volunteer first responder assistance, providing food and housing to families in need, caring for our children, disabled and elderly, fostering economic development or creating and promoting arts and culture - charities are integral to our quality of life in ways that are often taken for granted. NYCON is eager to do what we can to assist those organizations whose tax status have been revoked so that they continue their important contributions."
On June 8th, the IRS released a list of 275,000 nonprofits nationwide who automatically lost their tax-exempt status because they failed to file annual reports for three years in a row. The list included over 19,000 New York organizations, including more than 6,000 across Upstate New York. While the IRS believes that many of these organizations are no longer operational, they acknowledge that some groups on the list might not have been aware of the requirement, and are taking steps to allow these nonprofits to reinstate their tax-exempt status. In making the announcement, IRS Commissioner Doug Shulman said that, “We realize there may be some legitimate organizations, especially very small ones that were unaware of their new filing requirement.”
The list includes a diverse range of nonprofit groups including sports leagues, public libraries, museums and other educational programs, conservation groups, religious organizations, business networking groups, and others. There are over 106,000 registered nonprofits in New York state, according to the New York Council of Nonprofits, employing over 1.2 million New Yorkers statewide. Included in this total are 3,000 food pantries that feed approximately 3 million people each year. Over 17,000 people work in New York museums, which help contribute over a billion dollars to the state’s economy each year, thanks to visits from 6.6 million families, senior citizens, and students. In 2010, the American Red Cross in New York responded to 3,920 local disasters, and has trained nearly 590,000 people in First Aid. The group has also trained over 168,000 people in emergency preparedness, collected over 400,000 units of blood, and helped over 66,000 military families through their Armed Forces Emergency Services and Community Outreach Programs, according to the New York Council of Nonprofits. New York charities play an important role in communities across the state, and should be allowed to continue to do their good work in a tax-exempt state that will help their bottom line, allowing the nonprofits to serve more Upstate New Yorkers.
Here is how the nonprofits who lost their tax-exempt status break down across the state:
Report Provides County-By-County Breakdown Of The Over 6,000 New York Nonprofit Groups That Lost Tax Exempt Status – Groups Can Correct Error, But Have To Do It Soon Before Costs Go Up
Today, U.S. Senator Charles E. Schumer unveiled a new section of his website to aid New York nonprofit groups that may have mistakenly lost their tax exempt status. Schumer is strongly encouraging nonprofit groups to check a recently-released Internal Revenue Service (IRS) list, available on Schumer’s website, to ensure that they have not been mistakenly stripped of their tax-exempt status – a move that could cost these groups thousands of dollars. Schumer’s webpage was launched shortly after media reports indicated that several nonprofit groups, including the New Windsor Little League and Plattekill Public Library, were included on the list released June 8th, despite the fact that their paperwork was up to date and filed with the IRS. Several nonprofit groups were never contacted by the IRS, despite several attempts to send mailings and other communications to warn the groups of the looming deadline to avoid losing their designation as a 501(c)(3) group.
“Little leagues, public libraries, museums, meal programs, and other nonprofit organizations that are the very fabric of communities throughout Upstate New York are at risk of losing their tax-exempt status and paying thousands of dollars in penalties through no fault of their own,” said Schumer. “Whether because of a lost notice in the mail or paperwork errors, no nonprofit should needlessly lose their tax exempt status. Every nonprofit group in Upstate New York should take a moment to ensure that they won’t be forced to pay unnecessary taxes this year. I’ve launched this new page on my website to make it easy and painless for groups to make sure that they’re not on the list, and to take steps to correct the problem if they are. Remaining tax-exempt helps keep costs down while boosting fundraising for charity organizations.”
"The good work of community charities has a vital impact on the everyday lives of New Yorkers,” said Doug Sauer, Chief Executive Officer of the New York Council of Nonprofits. “Whether it is providing volunteer first responder assistance, providing food and housing to families in need, caring for our children, disabled and elderly, fostering economic development or creating and promoting arts and culture - charities are integral to our quality of life in ways that are often taken for granted. NYCON is eager to do what we can to assist those organizations whose tax status have been revoked so that they continue their important contributions."
On June 8th, the IRS released a list of 275,000 nonprofits nationwide who automatically lost their tax-exempt status because they failed to file annual reports for three years in a row. The list included over 19,000 New York organizations, including more than 6,000 across Upstate New York. While the IRS believes that many of these organizations are no longer operational, they acknowledge that some groups on the list might not have been aware of the requirement, and are taking steps to allow these nonprofits to reinstate their tax-exempt status. In making the announcement, IRS Commissioner Doug Shulman said that, “We realize there may be some legitimate organizations, especially very small ones that were unaware of their new filing requirement.”
The list includes a diverse range of nonprofit groups including sports leagues, public libraries, museums and other educational programs, conservation groups, religious organizations, business networking groups, and others. There are over 106,000 registered nonprofits in New York state, according to the New York Council of Nonprofits, employing over 1.2 million New Yorkers statewide. Included in this total are 3,000 food pantries that feed approximately 3 million people each year. Over 17,000 people work in New York museums, which help contribute over a billion dollars to the state’s economy each year, thanks to visits from 6.6 million families, senior citizens, and students. In 2010, the American Red Cross in New York responded to 3,920 local disasters, and has trained nearly 590,000 people in First Aid. The group has also trained over 168,000 people in emergency preparedness, collected over 400,000 units of blood, and helped over 66,000 military families through their Armed Forces Emergency Services and Community Outreach Programs, according to the New York Council of Nonprofits. New York charities play an important role in communities across the state, and should be allowed to continue to do their good work in a tax-exempt state that will help their bottom line, allowing the nonprofits to serve more Upstate New Yorkers.
Here is how the nonprofits who lost their tax-exempt status break down across the state:
- In the Capital Region, approximately 952 nonprofits lost their tax-exempt status.
- In Western New York, approximately 687 nonprofits lost their tax-exempt status.
- In the Rochester-Finger Lakes Region, approximately 867 nonprofits lost their tax-exempt status.
- In the Southern Tier, approximately 562 nonprofits lost their tax-exempt status.
- In Central New York, approximately 811 nonprofits lost their tax-exempt status.
- In the Hudson Valley, approximately 1,942 nonprofits lost their tax-exempt status.
- In the North Country, approximately 426 nonprofits lost their tax-exempt status.
Being included on the list means that these nonprofits are no longer eligible to receive tax-deductible contributions, and that any income the group receives may be taxed. This has the effect of raising taxes on the nonprofit, while also putting a serious damper on their fundraising. The Pension Protection Act, passed by Congress in 2007, requires tax-exempt organizations to file an information return or notice each year with the IRS. Smaller groups are required to file for the first time in 2007, and the law automatically revokes the tax-exempt status of groups that do not file for three consecutive years. As a result, the first nonprofits to be revoked under the new law saw their status removed based on 2010 returns, filed in April of this year.
Fortunately, as long as groups are aware that they have been improperly stripped of their tax-exempt status, they can take corrective action at minimal cost to the group. Any nonprofit that can demonstrate that it has met its filing requirement for one or more of the last three years can fax copies of their past tax returns to be reinstated at no cost to the group. Additionally, those groups with under $50,000 in income that have not filed tax returns over the past three years can file for reinstatement for a reduced fee of just $100. If the groups fail to file by December 31, 2011, that fee jumps to $400-850 for 2012. Due to the limited window to take advantage of cheaper and easier ways to reapply for tax-exempt status, Schumer is encouraging nonprofits across Upstate New York to check his website and the list of those that lost 501(c)(3) status to ensure that their paperwork is up to date. If a group finds that they have lost their tax exempt status, they can follow the instructions on Schumer’s website and take steps to see that it is reinstated.
The new section of Schumer’s website can be accessed by visiting http://schumer.senate.gov/Public/irs_6_22_11.htm
Monday, June 13, 2011
Some Tier organizations lose tax-exempt status
The Press & Sun-Bulletin reported:
What do Vestal Fire companies 1, 2 and 3, the IBM Quarter Century Club and the local chapter of Optimist International have in common?
They're among the approximately 275,000 organizations that lost their tax-exempt status with the Internal Revenue Service because they didn't file legally required annual reports for three consecutive years.
"The IRS believes the vast majority of these organizations are defunct," said IRS spokeswoman Dianne Besunder.
Approximately 176 nonprofits from Owego to Sidney are affected. They include American Legion posts in Owego and Conklin, Kiwanis clubs in Endicott and Chenango Valley, the Broome County Sheriff's Benevolent Association, several cemetery associations, and Lions clubs in Vestal and Chenango Valley.
The Endicott-Vestal-Endwell Kiwanis Club just started in October, said member Alan Kline, who learned about the revocation from a reporter. The club, which didn't realize it had to file, will reapply for its nonprofit status, he said.
"It's less than a year that we've been incorporated," he said. "They should still have us, I hope."
The list also includes some lesser-known organizations: the Russian Moods Male Chorus, the Ozalid Club, the Southern Tier Dart League and the Brush Owners Association. The Binghamton Masonic Temple, Inc. and the Senior Citizens Club of Binghamton both list 66 Main St. as their address -- the old Masonic Temple, which has been empty for decades.
Also listed are four Vestal fire companies -- 1, 2 and 3 and Willow Point -- and Binghamton Crime Stoppers, which offers rewards to help solve area crimes and works alongside area police departments.
Vestal Fire Chief Christopher Lupold couldn't immediately be reached for comment and a call to the Binghamton Police Bureau's crime prevention unit, which normally deals with Crime Stoppers, wasn't immediately returned.
Last year, the Union Volunteer Emergency Squad received notice it was in danger of losing its nonprofit status. UVES sent in the needed forms, resolving the issue.
The Press & Sun-Bulletin reached out to multiple nonprofits on the list Friday afternoon. Many couldn't be reached because they listed only post office boxes; for others, numbers weren't listed, were no longer in operation, or calls and e-mails went unanswered.
The Pension Protection Act, passed by Congress in 2006, requires most tax-exempt organizations to file an annual information return or notice with the IRS. Small organizations were required to file for the first time in 2007. The law automatically revokes the tax-exempt status of any group that doesn't file the required documentation for three consecutive years, according to the IRS.
Last year, the IRS published a list of at-risk groups and gave smaller organizations an additional five months to file; about 50,000 did.
Revocation means groups will have to pay corporate income tax on annual revenue and may have their state tax exemptions revoked. Donors also won't receive tax deductions for gifts, according to the National Council of Nonprofits.
Groups can apply to have their tax-exempt status reinstated by filing additional forms with the IRS.
The New York Council of Nonprofits is going through the IRS' revocation list, said Valerie Venezia, the group's vice president of membership and marketing.
A number of the organizations on a previous list of those who still needed to file before the deadline weren't defunct; rather, they were usually small organizations that had transitions in leadership, were volunteer-driven or hadn't heard about the change in the form 990 filing requirement, she said.
More Information:
The New York Council of Nonprofits can provide assistance to its nonprofit members who have to file again for their exemption status. Members can call (800) 515-5012 or visit www.nycon.org for help. For more on what to do in case of revocation, visit www.councilofnonprofits.org/revocation.
What do Vestal Fire companies 1, 2 and 3, the IBM Quarter Century Club and the local chapter of Optimist International have in common?
They're among the approximately 275,000 organizations that lost their tax-exempt status with the Internal Revenue Service because they didn't file legally required annual reports for three consecutive years.
"The IRS believes the vast majority of these organizations are defunct," said IRS spokeswoman Dianne Besunder.
Approximately 176 nonprofits from Owego to Sidney are affected. They include American Legion posts in Owego and Conklin, Kiwanis clubs in Endicott and Chenango Valley, the Broome County Sheriff's Benevolent Association, several cemetery associations, and Lions clubs in Vestal and Chenango Valley.
The Endicott-Vestal-Endwell Kiwanis Club just started in October, said member Alan Kline, who learned about the revocation from a reporter. The club, which didn't realize it had to file, will reapply for its nonprofit status, he said.
"It's less than a year that we've been incorporated," he said. "They should still have us, I hope."
The list also includes some lesser-known organizations: the Russian Moods Male Chorus, the Ozalid Club, the Southern Tier Dart League and the Brush Owners Association. The Binghamton Masonic Temple, Inc. and the Senior Citizens Club of Binghamton both list 66 Main St. as their address -- the old Masonic Temple, which has been empty for decades.
Also listed are four Vestal fire companies -- 1, 2 and 3 and Willow Point -- and Binghamton Crime Stoppers, which offers rewards to help solve area crimes and works alongside area police departments.
Vestal Fire Chief Christopher Lupold couldn't immediately be reached for comment and a call to the Binghamton Police Bureau's crime prevention unit, which normally deals with Crime Stoppers, wasn't immediately returned.
Last year, the Union Volunteer Emergency Squad received notice it was in danger of losing its nonprofit status. UVES sent in the needed forms, resolving the issue.
The Press & Sun-Bulletin reached out to multiple nonprofits on the list Friday afternoon. Many couldn't be reached because they listed only post office boxes; for others, numbers weren't listed, were no longer in operation, or calls and e-mails went unanswered.
The Pension Protection Act, passed by Congress in 2006, requires most tax-exempt organizations to file an annual information return or notice with the IRS. Small organizations were required to file for the first time in 2007. The law automatically revokes the tax-exempt status of any group that doesn't file the required documentation for three consecutive years, according to the IRS.
Last year, the IRS published a list of at-risk groups and gave smaller organizations an additional five months to file; about 50,000 did.
Revocation means groups will have to pay corporate income tax on annual revenue and may have their state tax exemptions revoked. Donors also won't receive tax deductions for gifts, according to the National Council of Nonprofits.
Groups can apply to have their tax-exempt status reinstated by filing additional forms with the IRS.
The New York Council of Nonprofits is going through the IRS' revocation list, said Valerie Venezia, the group's vice president of membership and marketing.
A number of the organizations on a previous list of those who still needed to file before the deadline weren't defunct; rather, they were usually small organizations that had transitions in leadership, were volunteer-driven or hadn't heard about the change in the form 990 filing requirement, she said.
More Information:
The New York Council of Nonprofits can provide assistance to its nonprofit members who have to file again for their exemption status. Members can call (800) 515-5012 or visit www.nycon.org for help. For more on what to do in case of revocation, visit www.councilofnonprofits.org/revocation.
Sunday, November 14, 2010
Paperwork problems jeopardize nonprofit status of several Broome organizations
Like hundreds of other area nonprofits, Union Volunteer Emergency Squad was in jeopardy of losing its nonprofit status.
The reason? Failing to file paperwork with the Internal Revenue Service.
"I honestly don't know why it wasn't sent in," said UVES Executive Director Matthew Fellows.
UVES is joined by hundreds of nonprofits in the Southern Tier who were flagged by the IRS as organizations that haven't filed their 990 forms -- paperwork required for nonprofits -- by an Oct. 15 deadline, meaning they could lose their nonprofit
status.
If that happens, the agencies could be required to pay taxes -- and perhaps more significantly, donors would find their generosity was no longer tax deductible.
The 990 forms verify to the IRS that the nonprofits are still in operation.
In 2008, the IRS established a new form -- the 990 -- to be filed annually by nonprofits. For those with an income of less than $25,000, the form was a 990N, said Kevin Stadelmaier, legal advisor for the New York Council of Nonprofits Inc.'s Buffalo office.
Over the decades, as groups were added to the IRS's nonprofit database, there was no mechanism to remove those that were no longer active. The 990N was established as a device to recognize which small nonprofits were still operating and which had
ceased to exist.
"The real reason why the law was enacted was to kind of cull out these nonprofits ... that were no longer conducting tax-exempt activities," Stadelmaier said.
For smaller organizations -- those with incomes of less than $25,000 -- filing with the IRS isn't a typical function, which is why they might have missed the new requirement, Stadelmaier said.
"They didn't realize they were required," he said. "They might have gone years and years without filing anything."
At UVES, the error was noticed recently, Fellows said. Actually, it was the IRS that noticed. Since then, the organization sent in its missing 990 forms.
"We had some internal issues that we self-reported," Fellows said. "Everything has already been sent in."
Each year, UVES has an independent audit performed by its accounting firm. The audits showed the bills were paid and the forms were filled out, but no red
flags went up about the missing 990s because UVES paid to have them completed and assumed they had been filed properly, said Fellows, who has been with UVES for the past year.
When contacted by the IRS, the first thought was the federal agency was at fault.
"We thought it was an error at first," Fellows said.
UVES is not alone. The Broome County Sheriffs Benevolent Association, Boys & Girls of Western Broome Foundation Inc., New York State Electric & Gas Foundation Inc., several American Legion posts from Bainbridge to Owego, various union branches and a host of other organizations and associations failed to file by the Oct. 15 deadline, according to the IRS.
Contacting nonprofits on the list was nearly impossible for this newspaper. Telephone calls were not returned, while others couldn't be contacted because they didn't have listed phone numbers and had only Post Office box addresses. Some of the
nonprofits on the IRS list include:
* Maine-Endwell Booster Club Inc.
* Endicott Rotary Foundation Inc.
* International Association of Fire Fighters in Johnson City
* Tioga County Industrial Development Corp.
* Vestal Lions Club
* Broome County Sheriff's Foundation
* Vestal Youth Football League Inc.
* Dress for Success - Binghamton
* City Rescue Mission Inc. in Binghamton
Also on the list is Binghamton Crime Stoppers, which is a participating member of Crime Stoppers International. The organization had invalid e-mail addresses on its web site regarding fundraising, publicity and general information. An e-mail and
telephone message sent to the website's administrator was not answered.
Crime Stoppers, which offers rewards to help solve area crimes and works alongside area police departments, failed to file with the IRS for the past three years, meaning the do-good organization might not be able to stay in operation as a nonprofit.
Not being able to contact nonprofits, some of which have addresses filed decades ago with the IRS, is another reason why some missed the deadline to file, said Kelly Mathews, chief operating officer and senior vice president of financial, accountability and compliant services with New York Council of
Nonprofits Inc.
"Getting the word out to a lot of those very small organizations -- it was probably difficult to find some of them," she said.
Though the IRS and groups like NYCON had extensive educational promotions regarding the new procedures, many smaller nonprofits, including those no longer in existence, weren't kept in the loop, Mathews said.
"I think a lot of organization, particularly the smaller guys, weren't aware of the filing requirements," she said. "Historically, there was nothing for those little
guys to report with." Read more here.
The reason? Failing to file paperwork with the Internal Revenue Service.
"I honestly don't know why it wasn't sent in," said UVES Executive Director Matthew Fellows.
UVES is joined by hundreds of nonprofits in the Southern Tier who were flagged by the IRS as organizations that haven't filed their 990 forms -- paperwork required for nonprofits -- by an Oct. 15 deadline, meaning they could lose their nonprofit
status.
If that happens, the agencies could be required to pay taxes -- and perhaps more significantly, donors would find their generosity was no longer tax deductible.
The 990 forms verify to the IRS that the nonprofits are still in operation.
In 2008, the IRS established a new form -- the 990 -- to be filed annually by nonprofits. For those with an income of less than $25,000, the form was a 990N, said Kevin Stadelmaier, legal advisor for the New York Council of Nonprofits Inc.'s Buffalo office.
Over the decades, as groups were added to the IRS's nonprofit database, there was no mechanism to remove those that were no longer active. The 990N was established as a device to recognize which small nonprofits were still operating and which had
ceased to exist.
"The real reason why the law was enacted was to kind of cull out these nonprofits ... that were no longer conducting tax-exempt activities," Stadelmaier said.
For smaller organizations -- those with incomes of less than $25,000 -- filing with the IRS isn't a typical function, which is why they might have missed the new requirement, Stadelmaier said.
"They didn't realize they were required," he said. "They might have gone years and years without filing anything."
At UVES, the error was noticed recently, Fellows said. Actually, it was the IRS that noticed. Since then, the organization sent in its missing 990 forms.
"We had some internal issues that we self-reported," Fellows said. "Everything has already been sent in."
Each year, UVES has an independent audit performed by its accounting firm. The audits showed the bills were paid and the forms were filled out, but no red
flags went up about the missing 990s because UVES paid to have them completed and assumed they had been filed properly, said Fellows, who has been with UVES for the past year.
When contacted by the IRS, the first thought was the federal agency was at fault.
"We thought it was an error at first," Fellows said.
UVES is not alone. The Broome County Sheriffs Benevolent Association, Boys & Girls of Western Broome Foundation Inc., New York State Electric & Gas Foundation Inc., several American Legion posts from Bainbridge to Owego, various union branches and a host of other organizations and associations failed to file by the Oct. 15 deadline, according to the IRS.
Contacting nonprofits on the list was nearly impossible for this newspaper. Telephone calls were not returned, while others couldn't be contacted because they didn't have listed phone numbers and had only Post Office box addresses. Some of the
nonprofits on the IRS list include:
* Maine-Endwell Booster Club Inc.
* Endicott Rotary Foundation Inc.
* International Association of Fire Fighters in Johnson City
* Tioga County Industrial Development Corp.
* Vestal Lions Club
* Broome County Sheriff's Foundation
* Vestal Youth Football League Inc.
* Dress for Success - Binghamton
* City Rescue Mission Inc. in Binghamton
Also on the list is Binghamton Crime Stoppers, which is a participating member of Crime Stoppers International. The organization had invalid e-mail addresses on its web site regarding fundraising, publicity and general information. An e-mail and
telephone message sent to the website's administrator was not answered.
Crime Stoppers, which offers rewards to help solve area crimes and works alongside area police departments, failed to file with the IRS for the past three years, meaning the do-good organization might not be able to stay in operation as a nonprofit.
Not being able to contact nonprofits, some of which have addresses filed decades ago with the IRS, is another reason why some missed the deadline to file, said Kelly Mathews, chief operating officer and senior vice president of financial, accountability and compliant services with New York Council of
Nonprofits Inc.
"Getting the word out to a lot of those very small organizations -- it was probably difficult to find some of them," she said.
Though the IRS and groups like NYCON had extensive educational promotions regarding the new procedures, many smaller nonprofits, including those no longer in existence, weren't kept in the loop, Mathews said.
"I think a lot of organization, particularly the smaller guys, weren't aware of the filing requirements," she said. "Historically, there was nothing for those little
guys to report with." Read more here.
Tuesday, September 28, 2010
Nonprofit Resources Regarding the Oct. 15 Deadline
Time is running out for small nonprofits facing loss of tax-exempt status because they have not filed Form 990-N or Form 990-EZ for three consecutive years. The deadline for the IRS's one-time filing relief program is October 15, 2010. After that, nonprofits that are required to file a 990 and whose filings are at least three years in arrears will automatically lose their exemptions. To regain tax-exempt status, they will have to apply to the IRS all over again, a process that can take several months and requires payment of fees. To help you make sense of the rules and regulations surrounding this program, GuideStar is offering you a few resources:
- GuideStar Resource Center: includes articles and links to keep you updated in this ongoing process.
- IRS Communications Toolkit: includes facts outlining the situation, a list of organizations IRS records show are at risk, a YouTube video, and a widget for posting on Web sites.
- Guide Star Charity Check: includes information on exemption status of organizations and is updated as more information from the IRS becomes available.
Monday, July 19, 2010
National Council of Nonprofits' Nonprofit Advocacy Update
Five Worst Government Contracting Abuses
Late payments for contracted services is only one of many ways that governments shortchange nonprofits and exploit the contracting relationship. See the five worst government contracting abuses and let us know if you can add further documentation, if you've seen worse, or if you know of solutions in your state that help prevent these and other abuses.
Hearing to Consider Gulf Coast Need for Charitable Assistance
Viewing the impact of the Gulf oil spill on people in the region, Congress is asking "what needs to be done and how the charitable sector and others can reach out to these communities and help." The Oversight Subcommittee of the House Ways and Means Committee has scheduled a hearing for Tuesday, July 20, to consider these questions and examine how donations contributed to charities are being used. In announcing the hearing, Chairman John Lewis (D-GA) stated, "This is the moment when government must rely on charitable organizations to fulfill their missions and address these urgent needs."
Rival Estate Tax Revisions Proposed
The estate tax expired at the end of 2009, but will snap back automatically in 2011 to a 55 percent tax rate with a $1 million exemption unless changes are made. Senators are proposing rival plans to weaken or strengthen the federal tax on estates. Sens. Blanche Lincoln (D-AR) and Jon Kyl (R-AZ) introduced a measure last week to set the estate tax rate at 35 percent, with a $5 million exemption phased in over 10 years and indexed for inflation. Sen. Bernie Sanders (I-VT) recently introduced the Responsible Estate Tax Act, S.3533 to set an exemption of $3.5 million and impose tax rates from between 35 percent and 55 percent based on the size of the estate above the exemption level. Senate Majority Leader Harry Reid (D-NV) has said that he does not intend to allow any estate tax votes in the coming weeks, but he continues to negotiate with the Republican Leader, Sen. Mitch McConnell (R-KY), on the Senate schedule and amendments.
Financial Regulatory Reform Enacted, Cuts Debit Card Fees
Last week the Senate passed and sent to President Obama the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R.4173). The measure imposes new restrictions on risky financial investments, creates a Consumer Financial Protection Bureau within the Federal Reserve, and allows the Federal Reserve to regulate the amount of fees that nonprofits and merchants can be charged for debit card transactions. President Obama is expected to sign the bill this week.
Nonprofit Sector Act
Federal Data of "Uncertain Quality"
The case for the Nonprofit Sector and Community Solutions Act, H.R. 5533, was made recently by SubsidyScope, a program of Pew Charitable Trusts. In seeking to analyze the effects of tax subsidies and federal grants, the authors reached the following conclusions:
"It is challenging to assemble and present spending and subsidy data regarding the nonprofit sector because the federal government does not identify nonprofits as a distinct budget category. Further, federal budget data are of uncertain quality; specifically, the data available through USAspending.gov are incomplete because certain program information is missing for a number of records, making it difficult to discern which specific agencies and programs may be awarding funds to nonprofits."
A key component of H.R. 5533 is to overcome the data challenges that SubsidyScope, and many other nonprofit researchers, have identified.
IRS Seeks Comments on New Disclosure Requirement
The health care reform law enacted earlier this year requires nonprofits and businesses, starting in 2012, to report aggregate payments to vendors in excess of $600 for goods and other property. The requirement applies for payments to all vendors, not just those related to health care. Currently, nonprofits and others are required to file Form 1099s for payment of services by independent contractors, but not for goods from vendors. The IRS is seeking public comment on how to most effectively carry out the law change, with the stated goal of minimizing burdens and avoiding duplicate reporting. The deadline for comments is Sept. 29, 2010. Please share this information with your accounting and operations personnel and send the National Council your ideas on how best to limit the impact of this new reporting requirement.
Late payments for contracted services is only one of many ways that governments shortchange nonprofits and exploit the contracting relationship. See the five worst government contracting abuses and let us know if you can add further documentation, if you've seen worse, or if you know of solutions in your state that help prevent these and other abuses.
Hearing to Consider Gulf Coast Need for Charitable Assistance
Viewing the impact of the Gulf oil spill on people in the region, Congress is asking "what needs to be done and how the charitable sector and others can reach out to these communities and help." The Oversight Subcommittee of the House Ways and Means Committee has scheduled a hearing for Tuesday, July 20, to consider these questions and examine how donations contributed to charities are being used. In announcing the hearing, Chairman John Lewis (D-GA) stated, "This is the moment when government must rely on charitable organizations to fulfill their missions and address these urgent needs."
Rival Estate Tax Revisions Proposed
The estate tax expired at the end of 2009, but will snap back automatically in 2011 to a 55 percent tax rate with a $1 million exemption unless changes are made. Senators are proposing rival plans to weaken or strengthen the federal tax on estates. Sens. Blanche Lincoln (D-AR) and Jon Kyl (R-AZ) introduced a measure last week to set the estate tax rate at 35 percent, with a $5 million exemption phased in over 10 years and indexed for inflation. Sen. Bernie Sanders (I-VT) recently introduced the Responsible Estate Tax Act, S.3533 to set an exemption of $3.5 million and impose tax rates from between 35 percent and 55 percent based on the size of the estate above the exemption level. Senate Majority Leader Harry Reid (D-NV) has said that he does not intend to allow any estate tax votes in the coming weeks, but he continues to negotiate with the Republican Leader, Sen. Mitch McConnell (R-KY), on the Senate schedule and amendments.
Financial Regulatory Reform Enacted, Cuts Debit Card Fees
Last week the Senate passed and sent to President Obama the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R.4173). The measure imposes new restrictions on risky financial investments, creates a Consumer Financial Protection Bureau within the Federal Reserve, and allows the Federal Reserve to regulate the amount of fees that nonprofits and merchants can be charged for debit card transactions. President Obama is expected to sign the bill this week.
Nonprofit Sector Act
Federal Data of "Uncertain Quality"
The case for the Nonprofit Sector and Community Solutions Act, H.R. 5533, was made recently by SubsidyScope, a program of Pew Charitable Trusts. In seeking to analyze the effects of tax subsidies and federal grants, the authors reached the following conclusions:
"It is challenging to assemble and present spending and subsidy data regarding the nonprofit sector because the federal government does not identify nonprofits as a distinct budget category. Further, federal budget data are of uncertain quality; specifically, the data available through USAspending.gov are incomplete because certain program information is missing for a number of records, making it difficult to discern which specific agencies and programs may be awarding funds to nonprofits."
A key component of H.R. 5533 is to overcome the data challenges that SubsidyScope, and many other nonprofit researchers, have identified.
IRS Seeks Comments on New Disclosure Requirement
The health care reform law enacted earlier this year requires nonprofits and businesses, starting in 2012, to report aggregate payments to vendors in excess of $600 for goods and other property. The requirement applies for payments to all vendors, not just those related to health care. Currently, nonprofits and others are required to file Form 1099s for payment of services by independent contractors, but not for goods from vendors. The IRS is seeking public comment on how to most effectively carry out the law change, with the stated goal of minimizing burdens and avoiding duplicate reporting. The deadline for comments is Sept. 29, 2010. Please share this information with your accounting and operations personnel and send the National Council your ideas on how best to limit the impact of this new reporting requirement.
Friday, April 23, 2010
One-Fourth of Nonprofits Are to Lose Tax Breaks
The NY Times reported that As many as 400,000 nonprofit organizations are weeks away from a doomsday.
At midnight on May 15, an estimated one-fifth to one-quarter of some 1.6 million charities, trade associations and membership groups will lose their tax exemptions, thanks to a provision buried in a 2006 federal bill aimed at pension reform.
“It’s going to be an unholy mess once these organizations realize what’s happened to them,” said Diana Aviv, president of the Independent Sector, a nonprofit trade group.
The federal legislation passed in 2006 required all nonprofits to file tax forms the following year. Previously, only organizations with revenues of $25,000 or more — or the vast majority of nonprofit groups — had to file.
The new law, embedded in the 393 pages of the Pension Protection Act of 2006, also directed the Internal Revenue Service to revoke the tax exemptions of groups that failed to file for three consecutive years. Three years have passed, and thus the deadline looms.
Read more here.
At midnight on May 15, an estimated one-fifth to one-quarter of some 1.6 million charities, trade associations and membership groups will lose their tax exemptions, thanks to a provision buried in a 2006 federal bill aimed at pension reform.
“It’s going to be an unholy mess once these organizations realize what’s happened to them,” said Diana Aviv, president of the Independent Sector, a nonprofit trade group.
The federal legislation passed in 2006 required all nonprofits to file tax forms the following year. Previously, only organizations with revenues of $25,000 or more — or the vast majority of nonprofit groups — had to file.
The new law, embedded in the 393 pages of the Pension Protection Act of 2006, also directed the Internal Revenue Service to revoke the tax exemptions of groups that failed to file for three consecutive years. Three years have passed, and thus the deadline looms.
Read more here.
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