One-time Filing Relief Allows Tax-exempts to File Form 990 by Oct 15 to Save Exempt Status

IRS has announced that under a one-time relief program small tax-exempt organizations that failed to file returns for 2007, 2008 and 2009 can avoid losing their tax-exempt status by filing a return by Oct. 15, 2010. Two types of relief are available: (1) a filing extension for the smallest organizations (eligible to file Form 990-N); and (2) a voluntary compliance program for small organizations (eligible to file Form 990-EZ). IR 2010-87

See http://www.irs.gov/charities/article/0,,id=225702,00.html for more information.

Redefining Material Weakness, Significant Deficiency, and Control Deficiency

Some of you have probably noticed there have been a few changes to the management letter you have received this year.  Statement of Auditing Standard (SAS) 115 recently replaced SAS 112, and was effective for engagements ending after December 15, 2009 with early adoption acceptable.  The changes were to adjust the language to agree with FASB 5.  The biggest change between SAS 112 and SAS 115 is the addition to the definition of a control, stating that the control must be designed to allow management to correct the misstatement found, not just to detect and prevent.  Below are the SAS 112 versions of the definitions for control deficiency, significant deficiency, and material weakness along with the SAS 115 definitions so that you can see the changes. Continue reading »

Foreign Reporting Issues and Statute of Limitations

Please be aware that a failure to file information returns with respect to certain foreign transactions  (specifically Forms 8865, 926, 8621, 5471, 5472, 3520, and TD F 90.22.1) not only can result in significant penalties but also that the statute of limitations with respect to the entire tax return (not just items related to the missing information or forms) does not begin to run until the required information has been provided (See IRC  6501(c)(8)).  There is no “reasonable cause exception” with respect to the statute of limitations issue at this time although such a provision is included in pending tax legislation.  Please note that this can have significant FIN 48 implications as well.

Health Care Act – Increased Taxes and Business Reporting

The health care legislation that was enacted in two parts earlier this year impose on businesses a number of reporting requirements and potential tax penalties.  The legislation will also impose significant new taxes on higher income individuals.  The following chart summarizes the major tax provisions and the year in which each is effective:

  Continue reading »

Not-For-Profit Entities: Mergers and Acquisitions

FASB Statement No. 164, Not-For-Profit Entities: Mergers and Acquisitions was amended at the beginning of the year. The updates were to be in effect beginning in 2010 for calendar year entities. The main criterion to distinguish between a merger and acquisition is determining if one entity obtained control over the other. If this occurred, the transaction is defined as an acquisition. If the entity ceded control to a new not-for-profit entity, it is recorded as a merger.  Continue reading »

Social Venture Capital: New Trend Among Nonprofits

Social venture capital has become the new source of funding for struggling nonprofit organizations in response to the economic recession. It is also due to a new growing trend of investors wishing to align their investments with social missions. Bill Gates, Ted Leonsis and Steve Case have become the leaders of the trend, where the investors are now using their money to earn “social returns.”

Bookda Gheisar, executive director of Seattle-based Global Washington, claims that “funding is shifting, and nonprofits have been really forced to think about new sources of revenues.” Continue reading »

World of Auditing Must Learn Lessons of History

The economic recession has market participants questioning what events led to the crisis, and what steps need to be taken to reduce the risk of future crises. Although auditors are not being blamed for the financial meltdown, Michael Izza, author of the article and CEO of the Institute of Chartered Accountants in England and Wales (ICAEW), is examining their role in the banking crisis, and ways their roles as auditors can be improved to better identify systematic risk problems. Izza states that “making sure the audit process continues to meet market expectations must be a priority.” Continue reading »

New IRS Compliance Headaches for Businesses

 Contained within the recently enacted healthcare legislation are new form 1099-MISC reporting requirements that have the potential of creating significant tracking and paperwork burdens for your company.  The government projects the new reporting rules will generate $17.1 billion of tax revenue through 2019, the theory being that those who do not get forms 1099 underreport their income.  Though the new requirements do not take effect until 2012, planning now for their implementation will save you aggravation later.

Under the current rules, a business must issue a form 1099-MISC to report payments that aggregate to $600 or more during the calendar year to any single payee, excluding corporations.  There are a few exceptions, the most notable of which are that payments to an incorporated law firm and to an incorporated health service provider are subject to these reporting requirements.  Further, with few exceptions, such payments are generally for services.  Purchases of equipment, furniture, supplies, and other tangible personal property were not reported. Continue reading »

Fundraising Up 12.1% Between February and April

According to the Blackbaud Index of Charitable Giving, overall revenue increased by approximately 12.1% from February through April, compared to the same period in 2009. This statistic reflects 1,400 nonprofit organizations representing $2.2 billion in revenue. Also according to the index, a soar in revenue for organizations earning less than $1 million was recorded resulting in a gain of 12.3 percent

During the comparable period, a revenue increase of 19.2 percent was experienced for companies with revenue of more than $10 million, and organizations earning revenue between $1 million and $10 million underwent a slight 2.5 percent gain in revenue.

A three-month moving average of year-over-year percent changes in revenue is used to calculate the numbers reflected in the index. Chuck Longfield, chief scientist at Blackbaud, claims the reasoning behind the calculation is due to the fact that companies have events or mailings that take place at approximately the same time every year. He says that “if an event was in late April one year but early May the next, the change in monthly revenue might be significant while the change in revenue over a three-month period might actually be the same.” Therefore by using a moving average, the index is less sensitive to timing issues while also serving as a more useful decision-making tool. Although, Longfield claims that one disadvantage to the moving average is that “the “smoother” index will dampen large fluctuations caused, for example, by disaster relief giving.”

Even amidst the economic recession, smaller and larger nonprofit organizations are showing signs of economic life.