The CPA Desk

A Thought Leader Production by PKFTexas

Switch Up Your Nonprofit’s Fundraising Efforts to Avoid Donor Fatigue

After a flurry of year-end fundraising, you and your not-for-profit’s staff are probably ready for a little break. Your supporters may be tired, too. At some point, even the most philanthropic individuals experience donor fatigue and start saying “no” — even to their favorite charities.

Here’s how to remain engaged with donors and keep your fundraising efforts from eroding relationships and causing donor fatigue.

Stagger your attention

When you do a mass mailing for donations, do you blanket your entire donor base each time? Doing so can lead to donor fatigue. To avoid this, stagger your solicitations. Solicit your most significant donors in person, for example, but contact the next tier of donors with a personal letter or email. Follow up both communications with a phone call. Solicit all other donors by mass mailing.

Also, consider scaling back the number of donation requests you make. Donors may be annoyed by monthly appeals (especially in the form of mass mailings). But if they know you only ask once or twice a year — or in the event of emergencies — they’re more likely to be there when you need them.

Think of alternatives

Consider forgoing soliciting your major donors for money every year. A corporate sponsor’s nonmonetary donation — such as the use of a venue for an event — may be just as valuable. Or, instead of returning to the same event sponsor every year, seek new sponsors, but keep the established sponsor engaged by asking for support in another form. For example, request the donation of an auction item or gift basket.

The same holds true for individual donors. While you’d hate to miss out on a donation by simply not asking, consider requesting that significant donors contribute in ways besides writing a check. Your biggest supporters are likely well-established community members and have friends and colleagues who are charitably inclined. Ask major donors to donate their time by chairing a committee, emceeing an event or hosting a fundraising function on your nonprofit’s behalf. As a result, they’ll likely introduce your organization to others.

Be sensitive

A dedicated donor base is critical to your nonprofit’s continuing operation. To avoid alienating your biggest fans and creating donor fatigue, be sensitive to possible donor fatigue and know when to use a lighter touch.

Visit us at www.PKFTexas.com/NotforProfit/.

Bonus Depreciation in the Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act (TCJA) enhances some tax breaks for businesses while reducing or eliminating others. One break it enhances — temporarily — is bonus depreciation. While most TCJA provisions go into effect for the 2018 tax year, you might be able to benefit from the bonus depreciation enhancements when you file your 2017 tax return.

Pre-TCJA bonus depreciation

Under the pre-TCJA law, for qualified new assets that your business placed in service in 2017, you can claim a 50% first-year bonus depreciation deduction. Used assets don’t qualify. This tax break is available for the cost of new computer systems, purchased software, vehicles, machinery, equipment, office furniture, etc.

In addition, 50% bonus depreciation can be claimed for qualified improvement property, which means any qualified improvement to the interior portion of a nonresidential building if the improvement is placed in service after the date the building is placed in service. But qualified improvement costs don’t include expenditures for the enlargement of a building, an elevator or escalator, or the internal structural framework of a building.

TCJA expansion

The TCJA significantly expands bonus depreciation: For qualified property placed in service between September 28, 2017, and December 31, 2022 (or by December 31, 2023, for certain property with longer production periods), the first-year bonus depreciation percentage increases to 100%. In addition, the 100% deduction is allowed for not just new but also used qualifying property.

The new law also allows 100% bonus depreciation for qualified film, television and live theatrical productions placed in service on or after September 28, 2017. Productions are considered placed in service at the time of the initial release, broadcast or live commercial performance.

Beginning in 2023, bonus depreciation is scheduled to be reduced 20 percentage points each year. So, for example, it would be 80% for property placed in service in 2023, 60% in 2024, etc., until it would be fully eliminated in 2027.

For certain property with longer production periods, the reductions are delayed by one year. For example, 80% bonus depreciation would apply to long-production-period property placed in service in 2024.

Bonus depreciation is only one of the business tax breaks that have changed under the TCJA. Contact us for more information on this and other changes that will impact your business.

Use Quadrants to Improve Your Time Management Skills

Byron: Hi, my name’s Byron Hebert and this is another quick Tool Time update brought to you by The Entrepreneur’s Playbook and your friends at PKF Texas. What I want to talk to you about today is time and the most precious resource you have. We all have the same amount of time, but how we use that time is critical So, Steven Covey came up with the four quadrants of time management and you can see on this upper axis we’ve got “Urgent” and “Not Urgent” and over here we have “Important” and “Not Important”. So, in quadrant one is items that are urgent and important. That is the necessity quadrant.

That’s where we spend most of our time. That’s urgent things that come up that we have to do – deadlines and things like that. This quadrant here where is “Not Important” but “Urgent” is the quadrant of deception. This is time where we spend a lot of time but really, we feel like things are urgent but they’re really not that important – things like some phone calls, emails, things like that. Over herein this quadrant where the quadrant of “Not Important” and “Not Urgent” is the waste. We spend a lot of time – waste a lot of times sometimes on things that we – that are really not urgent or not important. Now, this quadrant is the quadrant of quality – “Not Urgent” but “Important”. This is where we think of things like strategy, training, family time.

This is where we want to focus a little bit more time. Keep out of the quadrant of deception, the quadrant of waste and look to spend more time in the quality of quadrant. Now, how do you do that? This is a good time of year to reassess the things that you do every day. Think of the 80/20 rule. 20 percent of the things you do add 80 percent of the value to your company, so focus on those areas. Think of the other 80 percent. What are you doing that doesn’t add value to your company or to your life? And of those things, you want to try to eliminate it. You either get rid of them, or delegate them to somebody else. So, again, you want to stay out of these quadrants, focus more on this quadrant – quadrant of quality – to improve your life and improve your company. Thank you. This is Byron Hebert. This has been another quick Tool Time update brought to you by your friends at PKF Texas and The Entrepreneur’s Playbook.

Find Out What Drives Your Business with a Business Excellence Model

Byron: Hi, my name is Byron Hebert, and this is another Tool Time update brought to you by PKF Texas and The Entrepreneur’s Playbook.

What I want to talk to you about today is a business excellence model that was developed actually by the European Foundation for Quality Management back in the ’60s as a way to reward companies that were performing well. And what they found was that there are certain enablers in your business that help you perform well. One of them being leadership. The right people. The right strategy. Partners, and processes. And they actually weighted those in order of importance in order to process and leadership and people have a significant role in your ability that enables you to run your business effectively.

So then if you have these enablers in place, that drives your results, which are your people results, customer results, society results, good corporate citizenship, and your key performance indicators, as in your sales, profitability, cash flow and things like that.

So how you can use this model in your business is to rate yourself right now in terms of your enablers. If out of 100 how important is leadership, how well are you at leadership? How good is your company right now, or do you need to develop a leadership team or a leadership training? So maybe you’re an eighty there and you want to get to 100, you’ve got a twenty gap, and you start working on how you can effectively move the dial from eighty to 100 by training, or making an emphasis on rewarding those who show leadership. Things like that.

As far as your people, do you have the right people in the organization? On a scale of ninety, if it was ninety, where are you? Eighty-five is pretty good. Maybe you’re at a sixty, and you’ve got a thirty gap there that you need to fill and start getting some ideas of how you can get the right people in your organization.

So again, this is a business excellence model. The enablers are your leadership people, strategy, partnership and processes, and with that you’ll get the results that you can measure in your people, customers, society, and key performance indicators.

Again, my name is Byron Hebert. This has been a quick Tool Time update brought to you by PKF Texas and The Entrepreneur’s Playbook.

For those of you listening in on the radio and would like to see the graphic form of this tool being demonstrated, you can go to TheBusinessmakers.com and look for the videos under Entrepreneur’s Playbook.

Retirement Plan Contribution Limit Changes for 2018

Retirement plan contribution limits are indexed for inflation, but with inflation remaining low, most of the limits remain unchanged for 2018. But one piece of good news for taxpayers who’re already maxing out their contributions is that the 401(k) limit has gone up by $500. The only other limit that has increased from the 2017 level is for contributions to defined contribution plans, which has gone up by $1,000.

Type of limit 2018 limit
Elective deferrals to 401(k), 403(b), 457(b)(2)
and 457(c)(1) plans
$18,500
Contributions to defined contribution plans $55,000
Contributions to SIMPLEs $12,500
Contributions to IRAs $5,500
Catch-up contributions to 401(k), 403(b), 457(b)(2)
and 457(c)(1) plans
$6,000
Catch-up contributions to SIMPLEs $3,000
Catch-up contributions to IRAs $1,000

If you’re not already maxing out your contributions to other plans, you still have an opportunity to save more in 2018. And if you turn age 50 in 2018, you can begin to take advantage of catch-up contributions.

Higher-income taxpayers should also be pleased that some limits on their retirement plan contributions that had been discussed as part of tax reform didn’t make it into the final legislation.

However, keep in mind that there are still additional factors that may affect how much you’re allowed to contribute (or how much your employer can contribute on your behalf). For example, income-based limits may reduce or eliminate your ability to make Roth IRA contributions or to make deductible traditional IRA contributions.

If you have questions about how much you can contribute to tax-advantaged retirement plans in 2018, check with us.

How Your Nonprofit Can Successfully Execute a Capital Campaign

When your not-for-profit desperately needs a new facility, costly equipment or an endowment, a capital campaign can be the best way to raise funds. But to be successful, a campaign requires strong leadership, extensive planning and dedicated participants.

Leading the troops

Capital campaigns generally are long-term projects — often lasting three or more years. To carry out yours, you need a champion with vision and stamina. Consider board members or look to leaders in the greater community with such qualifications as:

  • A fundraising track record,
  • Knowledge of your community and local issues,
  • The ability to motivate others, and
  • Time to attend planning sessions and fundraising activities.

Most capital campaigns require a small army to raise funds through direct mail, email solicitations, direct solicitations and special events. In addition to staff and board members, reach out to current volunteers, like-minded community groups and clients who’ve benefited from your services.

Approaching donors

Identify a large group — say 1,000 individuals — to solicit for donations. Draw your list from past donors, area business owners, board members, volunteers and other likely prospects. Then narrow that list to the 100 largest potential donors and talk to them first. Secure large gifts before pursuing anything under $1,000.

Be sure to train team members on how to solicit funds and provide them with sample scripts. To help volunteers make effective phone solicitations, record a few calls and play them back for the group to critique.

Focus on execution

It’s important to ensure that key constituents share your fundraising vision and strategies for reaching the campaign’s goals. Break down your overall goal into smaller objectives and celebrate when you reach each one. Also regularly report gifts, track your progress toward reaching your ultimate goal and measure the effectiveness of your activities.

Also pay attention to how you craft your message. Potential donors must see your organization as capable and strong, but also as the same group they’ve championed for years. Instead of focusing on what donations will do for your nonprofit, show potential donors the impact on their community.

Many measures of success

You’ll know you’ve reached your goal when you’ve raised a certain dollar amount. But don’t forget about other measures of success, such as return on investment or percentage of past donors contributing. We can help you identify the most valuable metrics.

Year-End Giving: What You Need to Know

Charitable giving can be a powerful tax-saving strategy: Donations to qualified charities are generally fully deductible, and you have complete control over when and how much you give. Here are some important considerations to keep in mind this year to ensure you receive the tax benefits you desire.

Delivery date

To be deductible on your 2017 return, a charitable donation must be made by Dec. 31, 2017. According to the IRS, a donation generally is “made” at the time of its “unconditional delivery.” But what does this mean? Is it the date you, for example, write a check or make an online gift via your credit card? Or is it the date the charity actually receives the funds — or perhaps the date of the charity’s acknowledgment of your gift?

The delivery date depends in part on what you donate and how you donate it. Here are a few examples for common donations:

Check. The date you mail it.

Credit card. The date you make the charge.

Pay-by-phone account. The date the financial institution pays the amount.

Stock certificate. The date you mail the properly endorsed stock certificate to the charity.

Qualified charity status

To be deductible, a donation also must be made to a “qualified charity” — one that’s eligible to receive tax-deductible contributions.

The IRS’s online search tool, Exempt Organizations (EO) Select Check, can help you more easily find out whether an organization is eligible to receive tax-deductible charitable contributions. You can access EO Select Check at http://apps.irs.gov/app/eos. Information about organizations eligible to receive deductible contributions is updated monthly.

Potential impact of tax reform

The charitable donation deduction isn’t among the deductions that have been proposed for elimination or reduction under tax reform. In fact, income-based limits on how much can be deducted in a particular year might be expanded, which will benefit higher-income taxpayers who make substantial charitable gifts.

However, for many taxpayers, accelerating into this year donations that they might normally give next year may make sense for a couple of tax-reform-related reasons:

  1. If your tax rate goes down for 2018, then 2017 donations will save you more tax because deductions are more powerful when rates are higher.
  2. If the standard deduction is raised significantly and many itemized deductions are eliminated or reduced, then it may not make sense for you to itemize deductions in 2018, in which case you wouldn’t benefit from charitable donation deduction next year.

Many additional rules apply to the charitable donation deduction, so please contact us if you have questions about the deductibility of a gift you’ve made or are considering making — or the potential impact of tax reform on your charitable giving plans.

2018 First Quarter Tax Deadlines You Need to Know

Here are some of the key tax-related deadlines affecting businesses and other employers during the first quarter of 2018. Keep in mind that this list isn’t all-inclusive, so there may be additional deadlines that apply to you. Contact us to ensure you’re meeting all applicable deadlines and to learn more about the filing requirements.

January 31

  • File 2017 Forms W-2, “Wage and Tax Statement,” with the Social Security Administration and provide copies to your employees.
  • Provide copies of 2017 Forms 1099-MISC, “Miscellaneous Income,” to recipients of income from your business where required.
  • File 2017 Forms 1099-MISC reporting nonemployee compensation payments in Box 7 with the IRS.
  • File Form 940, “Employer’s Annual Federal Unemployment (FUTA) Tax Return,” for 2017. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it’s more than $500, you must deposit it. However, if you deposited the tax for the year in full and on time, you have until February 12 to file the return.
  • File Form 941, “Employer’s Quarterly Federal Tax Return,” to report Medicare, Social Security and income taxes withheld in the fourth quarter of 2017. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until February 12 to file the return. (Employers that have an estimated annual employment tax liability of $1,000 or less may be eligible to file Form 944,“Employer’s Annual Federal Tax Return.”)
  • File Form 945, “Annual Return of Withheld Federal Income Tax,” for 2017 to report income tax withheld on all nonpayroll items, including backup withholding and withholding on accounts such as pensions, annuities and IRAs. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 12 to file the return.

February 28

  • File 2017 Forms 1099-MISC with the IRS if 1) they’re not required to be filed earlier and 2) you’re filing paper copies. (Otherwise, the filing deadline is April 2.)

March 15

  • If a calendar-year partnership or S corporation, file or extend your 2017 tax return and pay any tax due. If the return isn’t extended, this is also the last day to make 2017 contributions to pension and profit-sharing plans.

Three Tax Tips to Follow When Buying a Business

Jen: This is the PKF Texas Entrepreneur’s Playbook. I’m Jen Lemanski, this week’s guest host, and I’m here with Martin Euson, one of our Tax Directors on our Transaction Advisory Services team.  Welcome to the Playbook, Martin.

Martin: Thank you very much, Jen. It’s a pleasure to be here.

Jen: So, when we talk transaction advisory services I know there are some considerations, tax considerations to make when you’re advising, you know, a business owner on potentially buying another business. What types of things do you tell them?

Martin: Jen, I would say first and foremost it is critically important for any buyer to really understand the form of the transaction, the substance of the transaction, and the structure of the transaction that they are proposing to undertake.  As you might imagine, when you’re thinking about that, you have the legal form and then you also have how the transaction is going to be treated for tax purposes, and they are not always the same. So, it’s really important for buyers to understand where those two roads diverge because all of the future decisions after that really are going to be driven by that distinction.

Jen: And so, what else do you tend to tell people when you’re advising them on things to know about the buy side?

Martin: I would say another important factor is for buyers to really be able to manage and limit their exposure, manage their risk and limit their exposure when we’re talking about the historical tax liabilities of the business that they’re proposing to buy.

Jen: So, what does that mean?

Martin: What that really means is that there is a concept that’s referred to a successor liability, and when a buyer buys another business, depending on how they buy it, they may be assuming any historical tax liabilities that that business may or may not have. If there’s unpaid taxes, in other words, the buyer may step into the shoes of that former owner and then become liable for those taxes.

Jen: Ok, so that’s when they would call us so that we can take a look at the contracts, take a look and give them the proper advice?

Martin: Exactly. That is really going to unfold through a process of tax due diligence. You’re going to have a purchase and sale agreement, you’re going to want to make sure that you have the maximum protection that you can have in that agreement, yes.

Jen: Perfect. Well, it sounds like we need to get you back to talk a little bit more to talk about what buyers need to know.  Can we get you back?

Martin: Absolutely.

Jen: Perfect. To learn more about how we can assist you with potential transactions, visit pkftexas.com/transactionadivosryservices/. And this has been another Thought Leader Production brought to you by the PKF Texas Entrepreneur’s Playbook.

Get Usable Results for Your Nonprofit When Surveying Constituents

To make sound decisions, your not-for-profit’s leadership should periodically survey donors and other constituents. But how do you design a survey to ensure a high response rate and constructive feedback?

Clarify goals

The first step is to define the survey’s purpose. Determine what you want to learn and how you’ll use the data you collect.

If, for example, you’re planning to build a recreation center, ask what activities survey recipients would like to see offered at the new facility. They might give you a wish list of activities, with “swimming” at the top.

But if you already knew swimming was popular and had anticipated this response, your survey results don’t really help your leadership make decisions. Instead, ask more specific questions, such as “What hours and days of the week would you most likely use the pool?” and “How much would you be willing to pay per visit?”

Stay focused and offer incentives

You’ll want to be sharply focused, isolating a single issue or initiative. And keep the survey short. Some experts suggest that, ideally, it should take no longer than five minutes to complete.

Avoid bias and pledge privacy

One of the biggest challenges of survey writing is to draft unbiased questions. Take care not to lead respondents to answers you’d like to hear. Avoid loaded words and strong language, and consider seeking the services of a survey professional to ensure objectivity.

Finally, be sensitive to privacy concerns. Reassure survey recipients that their responses will remain confidential, and honor that promise.

Glad you asked

Getting feedback from constituents on the job you’re doing, or planning to do, is critical to the efficacy of your leaders’ decision making. Contact us for more information.