Recent non profit tax happenings

1. May 31, 2012
Have You Been Through the C.A.V.E.?
(Non-Cash Contributions Update)
Presented by:
Dave Moja, Partner
Recent Not-for-Profit
Tax Happenings
Small Employer Health Credit
The GAO reported that for the 2010 tax year:
• 170,300 small employers claimed the small
employer health insurance tax credit, but the
number of eligible small businesses is potentially
1.4
1 4 million to 4 million
• The average credit claimed was about $2,700
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2. Small Employer Health Credit
According to the Medical Expenditure Panel
Survey (MEPS), up to 83% of employers who
may otherwise be eligible for the full credit do
not offer health insurance.
Small Employer Health Credit
• It is unlikely that small employers view the
credit as a big enough incentive to begin
offering health insurance and to make a
credit claim
• Discussion groups interviewed by the GAO
indicated that the tax credit was too
complicated due to various eligibility
requirements, data collection, and the
number of worksheets to be completed
Reporting Partnership Interests on
Form 990
The IRS announced that it has changed the 2011
Form 990-EZ and Form 990 instructions
• For tax year 2011, it is now optional for filers to
use information from Schedule K-1 to report their
interests in the income expenses and assets of
income, expenses,
joint ventures and other partnerships
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3. Reporting Partnership Interests on
Form 990
• The IRS received public comments arguing that
using the organization's books and records (the
method required in the 2010 instructions)
provides a more accurate value of assets, and
organizations often do not receive all Schedule
g
K-1s until after the Form 990 due date
(IRS Ann. 2012-19 )
Work Opportunity Tax Credit –
Expanded
• VOW to Hire Heroes Act
• Available to exempt organizations
• Certified Qualified Veterans – Form 8850
• Hiring period = 11/22/11 to 1/1/13
• EO credit = up to $6,240
• Credit taken on Form 5884-C
• Against Social Security taxes paid
• IRS Notice 2012-13 = FAQ&A
Lois Lerner Speech at 4/19/12
Conference
• Governance
• Significant Diversions of Assets
• Form 990-N (ePostcard filings)
• Processing Determination Applications
• Form 990 and Identity Theft Potential
• Conclusions
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4. Per Diem Rates
The IRS announced that it will no longer be
updating IRS Pub. 1542 (Per Diem Rates)
• Used by employers who pay a per diem
allowance to employees for business travel away
from home within the continental U S
U.S.
• Taxpayers must instead use the General
Services Administration (GSA) website
(www.gsa.gov) for current per diem rates
Per Diem Rates
• Other information regarding the rates, such as
substantiation methods and transition rules, is
available in IRS Pub. 463
Supreme Court to Rule on PPACA
• Suit brought by 26 states
• 11th Circuit has ruled unconstitutional
• Highest Court began hearings in March 2012
• Expect ruling by Court recess in June
• What can happen?
• What do we expect?
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5. Attack on Charitable Contributions
• Current Administration has proposed five
times
• Most recently in 2013 budget proposal
• Limit value of charitable contributions to 28%
• Shift in rhetoric in recent years
• Support
• Subsidies
• Studies = $2.9B to $5.6B loss to charities
Non-Cash Gifts/GIK Update
New IRS Publication 1771
The IRS has released a revised
Publication 1771, “Charitable
Contributions – Substantiation and
Disclosure Requirements”
• E l i general rules and
Explains l l d
specifications for documenting
charitable deductions
• Covers new guidelines that allow
charities to electronically mail
documentation to donors
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6. Wording on Charitable Receipts
• Taxpayers claimed a charitable contribution
deduction primarily made up of checks
written to their church for amounts larger
than $250
Wording on Charitable Receipts
• The church acknowledged its receipt of the
contributions on a year-end statement to the
taxpayers, but there was no language
concerning whether any goods or services
were provided in consideration for the
ere pro ided
contributions
Wording on Charitable Receipts
• The Tax Court disallowed the deduction and
reminded taxpayers that the terms of the
statute require an affirmative statement that
no goods or services were received
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7. Recent IRS GIK Audit Activity
• Ignoring AICPA and industry standards
• Apparently no knowledge of FAS 157
• Going back to 2007 Form 990 – an
“obsolete” form
• I.R.C. Section 6652(c)(1)(A)(ii) penalties =
$50,000/year
• Why not look to the future and try to work
together for a solution?
IRS Preliminary Findings Letter - GIK
IRS’ overtly accusatory tone:
• “…employees were involved with the
overestimation of GIK to deceive the general
public into thinking its overhead expenses were
much lower than they actually were ” (emphasis
were.
mine)
• “[Organization] did not file a complete or
accurate return. It knowingly did this to miss-lead
[sic] potential donors into donating to
[organization].”
Schedule M
• Line items – descriptions
• Column A – check boxes
• Column B – number of contributions/items
• Column C – value/amounts
• Form 990, Part VIII, Line 1g
• Column D – method of determining amounts
• Column C – TOTAL line?!
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8. The C.A.V.E.
• Conservation Easements
• Art
• Vehicles
• Equities
Conservation Easements
• Defined
• “Conservation Easement Audit Techniques
Guide”
• 2011 Form 990 – significant changes
g g
• Form 990, Part IV, Line 7
• Schedule D, Part II
• Schedule M, Lines 13, 14
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9. Conservation Easements
• A restriction (granted in perpetuity) on the
use that may be made of real property
granted exclusively for conservation
purposes
Conservation Easements
• Conservation purposes include:
• Preserving land areas for outdoor recreation by,
or for the education of, the general public
• Protecting a relatively natural habitat of fish,
wildlife, plants,
wildlife or plants or a similar ecosystem
Conservation Easements
• Preserving open space, including farmland and
forest land, where such preservation will yield a
significant public benefit and is either for the
scenic enjoyment of the general public or
pursuant to a clearly defined federal, state, or
local governmental conservation policy
• Preserving a historically important land area or a
certified historic structure
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10. Conservation Easements
For more information, see section 170(h) and
Notice 2004-41, 2004-2 C.B. 31
Conservation Easement Audit
Techniques Guide
• 14 chapters
• September 30, 2011
• Introduction to Conservation Easements
• Statutory Requirements
• Conservation Purpose
• Substantiation
• Appraisals, Amounts, Valuations
• Conducting the Examination
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11. Art (Collections, Historical Treasures...)
• Defined
• Limitations
• SFAS 116
• Form 990, Part IV, Line 8
• Schedule D, Part III
• Schedule M, Lines 1-3
Works of Art
• Includes paintings, sculptures, prints,
drawings, ceramics, antiques, decorative
arts, textiles, carpets, silver, photography,
film, video, installation and multimedia arts,
rare books and man scripts historical
manuscripts,
memorabilia, and other similar objects
• Does not include collectibles or taxidermy
Collectibles
• Includes autographs, sports memorabilia,
dolls, stamps, coins, books (other than
books and publications reported on Line 4 of
Schedule M), gems, and jewelry (other than
costume je elr
cost me jewelry reportable on Line 5 of
Schedule M)
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12. Historical Treasure
• A building, structure, area, or property (real
or personal) with recognized cultural,
aesthetic, or historical value that is
significant in the history, architecture,
archeology, c lt re
archeolog or culture of a country, state, or
co ntr state
city
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13. Schedule M, Line 3: Art – Fractional
Interests
A contribution of the donor’s entire interest
must consist of a part of each substantial
interest or right the donor owns in such work of
art and must extend over the entire term of the
donor’s interest in the propert
property.
Vehicles
• Defined
• IRS Publication 4302
• Form 1098-C
• Form 990, Part V, Line 7h
• Schedule M, Lines 6, 7
Vehicles – Schedule M, Lines 6,7
• Motor vehicles manufactured primarily for
use on public streets, roads, and highways
• Does not include contributions of the donor’s
stock in trade or property held by the donor
primarily for sale to customers in the
ordinary course of a trade or business
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14. Vehicles – Schedule M, Lines 6,7
• The organization is required to file Form
1098-C, Contributions of Motor Vehicles,
Boats, and Airplanes, with the donor and the
IRS with respect to these contributions
Form 990, Part V, Line 7h
• A donor of (1) a motor vehicle for use on
public roads, (2) a boat, or (3) an airplane
cannot claim a charitable contribution
deduction in excess of $500 unless the
donee organi ation pro ides the donor with
organization provides ith
a Form 1098-C, Contributions of Motor
Vehicles, Boats, and Airplanes, for the
donation (or a written acknowledgment with
the same information)
Form 990, Part V, Line 7h
• If the organization did not receive a
contribution of a car, boat, airplane, or other
vehicle, leave line 7h blank
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15. IRS Publication 4302
“A Charity’s Guide to
Vehicle Donations”
Equities
• Defined
• Form 990, Part IV, Line 11b
• Form 990, Part X, Column B, Line 12
• Schedule D, Part VII
• Schedule M, Lines 9-12
• Schedule M, Line 32a/b (Part II)
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16. Schedule D, Part VII
• Other securities to be reported in this part
include closely held stock
• They also include:
1. Publicly traded stock for which the
organization holds 5% or more of the
outstanding shares of the same class, and
2. Publicly-traded stock in a corporation that
comprised more than 5% of the organization's
total assets at the end of the tax year
Schedule D, Part VII
• List each separate class of publicly-traded
stock held by the organization that meets
either of these 5% ownership tests
• Do not include program-related investments
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17. Schedule M, Lines 9-12
• Line 9 = publicly traded securities
• Line 10 = securities that are not publicly
traded
• Line 11 = partnership, LLC, trust – not
publicly traded
• Line 12 = securities not listed on Lines 9-11
Questions?
Thank you!
Contact Information
Dave Moja
dmoja@capincrouse.com
dmoja@capincrouse com
407.883.4671
© CapinCrouse LLP 2012
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