Not-for-profit organizations are different from for-profit businesses in many vital ways. One of the most crucial differences is that under Section 501(c)(3), Sec. 501(c)(7) and other provisions, not-for-profits are tax-exempt. But your tax-exempt status is fragile. If you don’t follow the rules laid out in IRS Publication 557, Tax-Exempt Status for Your Organization, the IRS could revoke it.
Be particularly alert to the following common stumbling blocks.
High-net-worth individuals donated $5.8 billion during the first six months of the COVID-19 pandemic — generous giving by most standards. This is according to a recent report, “Philanthropy and COVID-19 in the first half of 2020,” from the Center for Disaster Philanthropy and information service Candid. However, that $5.8 billion amount is deceptive, because nearly three-quarters of it came from one donor, Mackenzie Scott (the ex-wife of Amazon’s Jeff Bezos).
In fact, a 2020 study from the Milken Institute Center for Strategic Philanthropy found that only a relatively small percentage, 36%, of the ultra-wealthy are involved in charitable giving. This may sound like ominous news for not-for-profit organizations. But there are ways to tap this group’s ample resources.
Continue Reading Consider High-Net-Worth Individuals for Your NFP Efforts
If you’re approaching retirement, you probably want to ensure the money you’ve saved in retirement plans lasts as long as possible. If so, be aware that a law was recently enacted that makes significant changes to retirement accounts.
The SECURE Act, which was signed into law in late 2019, made a number of changes of interest to those nearing retirement.
If your not-for-profit has lost financial support during the pandemic, you may be looking for ways to raise new revenue. But if your proposed solution is a side business, be careful. Even when business ventures are related to a not-for-profit’s exempt purpose, they can run afoul of the commerciality doctrine — and jeopardize an organization’s tax status.
Continue Reading Not-for-Profits: Be Careful of the Commerciality Doctrine
Many not-for-profits experience a flood of last-minute donations at the end of the year. Although cash is easy to value, valuing noncash donations is trickier.
If you’re struggling to assign amounts to contributions — either for a donor or your own records — review this cheat sheet.
Continue Reading Valuing Noncash Donations for Your Not-for-Profit
The fourth 2020 estimated tax payment deadline for individuals is Friday, January 15, 2021. If you’re self-employed and don’t have withholding from paychecks, you probably have to make estimated tax payments. These payments must be sent to the IRS on a quarterly basis.
Even if you do have some withholding from paychecks or payments you receive, you may still have to make estimated payments if you receive other types of income such as Social Security, prizes, rent, interest, and dividends.
Holiday-inspired generosity and the desire to reduce tax liability makes the end of the year a busy time for charitable giving. According to Network for Good and other sources, approximately 30% of charitable gifts are made in December alone. For not-for-profits, an important part of processing these donations is sending thank-you letters that acknowledge donor gifts.
To ensure your letters contain everything they should, here’s a refresher course.
Continue Reading The Importance of Acknowledging Donor Gifts
Delegating ideally gives not-for-profit executives time to focus on mission critical tasks and provides growth opportunities to staffers. However, you need to approach delegation strategically.
This means assigning the right tasks to the right staffers — and following up on assigned work to ensure it’s completed to your standards.
Continue Reading Tips: Delegating as a Not-for-Profit Leader
As a result of the current estate tax exemption amount ($11.58 million in 2020), many estates no longer need to be concerned with federal estate tax. Before 2011, a much smaller amount resulted in estate plans attempting to avoid it. Now, because many estates won’t be subject to tax, more planning can be devoted to saving income taxes for your heirs.
While saving both income and transfer taxes has always been a goal of estate planning, it was more difficult to succeed at both when the estate and gift tax exemption level was much lower.
Here are some strategies to consider.
Continue Reading Plan for Income Taxes as Part of Your Estate Plan
As the COVID-19 pandemic continues, various not-for-profit organizations have experienced a decline in charitable contributions from supporters, and Congress responded with a new provision in the Coronavirus Aid, Relief, and Economic Security (CARES) Act – Public Law (P.L.) 116-136.
This provision aims to provide relief to charitable organizations. Under Section 2204, the provision allows