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, nonprofits 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. Lobbying and campaign activities There are many categories of tax exemption — each with its own rules. But certain hot-button issues apply to most tax-exempt entities — such as lobbying and campaign activities. Having a Sec. 501(c)(3) status limits the amount of lobbying a charitable organization can undertake. This doesn’t mean lobbying is totally prohibited. But according to the IRS, your organization shouldn’t devote “a substantial part of its activities” trying to influence legislation. For nonprofits that are exempt under other categories of Sec....[ Read More ]
Are you considering buying or replacing a vehicle that you’ll use in your business? If you choose a heavy sport utility vehicle (SUV), you may be able to benefit from lucrative tax rules for those vehicles. Bonus depreciation Under current law, 100% first-year bonus depreciation is available for qualified new and used property that’s acquired and placed in service in a calendar year. New and pre-owned heavy SUVs, pickups and vans acquired and put to business use in 2021 are eligible for 100% first-year bonus depreciation. The only requirement is that you must use the vehicle more than 50% for business. If your business usage is between 51% and 99%, you can deduct that percentage of the cost in the first year the vehicle is placed in service. This generous tax break is available for qualifying vehicles that are acquired and placed in service through December 31, 2022. The 100% first-year...[ Read More ]
Events of the past year put a dent in many not-for-profit’s reserves. Perhaps you tapped this stash to buy personal protective equipment or to pay staffers’ salaries when your budget no longer proved adequate. As the pandemic wanes and economic conditions improve, you’ll need to start thinking about rebuilding your operating reserves. Back on steady ground Assembling an adequate operating reserve takes time and should be regarded as a continuous project. Obviously, it’s nearly impossible to contribute to reserves when you’re under financial stress. But once you feel your nonprofit is on steadier ground, your board of directors needs to determine what amount to target and how your organization will reach that target. It’s also a good time to review circumstances under which reserves can be drawn down. Reserve funds can come from unrestricted contributions, investment income and planned surpluses. Many boards designate a portion of their organizations’ unrestricted net...[ Read More ]
No one needs to tell nonprofit organizations how tough the past year has been. According to the John Hopkins Center for Civil Society Studies, 7.7% of not-for-profit workers — nearly one million people — lost their jobs between February 2020 and January 2021. An even higher percentage of arts and education organizations lost jobs last year. Although the nonprofit sector received higher-than-usual donations in 2020, many nonprofits that sought COVID-19-related loans were shut out. So the new American Rescue Plan Act’s (ARPA’s) provisions for nonprofits are welcome. Let’s take a look at some key elements. Employer tax credits As with 2020’s CARES Act, the ARPA helps nonprofit employers keep employees on their payrolls. The Employee Retention Tax Credit has been extended through December 31, 2021, for eligible employers that continue to pay worker wages during COVID-19-related closures or experience reduced revenue. Tax credits for nonprofits granting paid sick and family...[ Read More ]
The American Rescue Plan Act, signed into law on March 11, provides a variety of tax and financial relief to help mitigate the effects of the COVID-19 pandemic. Among the many initiatives are direct payments that will be made to eligible individuals. And parents under certain income thresholds will also receive additional payments in the coming months through a greatly revised Child Tax Credit. Here are some answers to questions about these payments. What are the two types of payments? Under the new law, eligible individuals will receive advance direct payments of a tax credit. The law calls these payments “recovery rebates.” The law also includes advance Child Tax Credit payments to eligible parents later this year. How much are the recovery rebates? An eligible individual is allowed a 2021 income tax credit, which will generally be paid in advance through direct bank deposit or a paper check. The full...[ Read More ]
Many organizations get stuck in procedural ruts because it’s easier in the short term to continue doing things the way they’ve always been done. But it generally pays to regularly review your not-for-profit’s accounting function for inefficiencies and oversight gaps. You might plan to conduct a review once a year or perform an assessment whenever significant changes, such as staff turnover or the introduction of new software, warrants one. Room for improvement Be sure to consider the following items in your review: Cutoff policies. Your nonprofit should set and adhere to monthly invoicing and expense recording cutoffs. For example, require all invoices to be submitted to your accounting department by the end of each month. Too many adjustments — or waiting for staffers or departments to turn in invoices and expense reports — waste time and can delay financial statement production. Account reconciliation. You may be able to save considerable time at...[ Read More ]
With the competition for donation dollars fierce right now, many not-for-profits are turning to influencers — from Hollywood celebrities to politicians to blog stars — to raise awareness of their organizations and causes. But before your nonprofit solicits influencer support, there are a few things you should know. On the plus side If influencer marketing didn’t work, for-profit companies wouldn’t pay celebrities to tout their products on their social media accounts. These sponsors realize that influencers have ready access to the thousands, if not millions, of people who follow them online. Their followers may consider influencers credible on a wide range of topics. When an influencer promotes a nonprofit, that organization immediately assumes an air of legitimacy with his or her followers. Followers may explore the cause more thoroughly or just immediately click a link to donate. For budget-strained nonprofits, it’s hard to beat the cost-efficiency of influencer marketing. By...[ Read More ]

Nonprofits: Get the word out in 2021

Posted April 23, 2021

Many not-for-profits have been too busy trying to stay afloat to put a lot of resources and energy into public relations. But as the new year begins, you might start thinking about how you’ll promote your organization, mission and programming in 2021. Here are five suggestions: 1. Report regularly. Raise your nonprofit’s profile by releasing news releases often rather than just occasionally. The addition of a key staff member, an operational milestone, a new grant you’ve received or the kick-off of a fundraising campaign, can warrant a press release. Social media platforms are especially useful for publicizing news less formally — not to mention quickly. 2. Choose the best outlet. Focus on outlets that are most likely to use your press releases such as local television stations that cover community news. Get to know producers, editors and publication and broadcast schedules. By taking the time, you can pinpoint the most suitable outlets...[ Read More ]
It’s been almost a year since many not-for-profit organizations sent staffers home — to work remotely. For many nonprofits and employees, remote work has been a positive experience. And as the pandemic fades, you’ll probably need to decide whether employees should remain where they are, return to the office or work a hybrid schedule. Win-win proposition Various surveys have found that working remotely generally lifts employee morale and job satisfaction. After all, working from home cuts expenses related to commuting and work clothing, and the work-life balance is generally more favorable. Employers benefit, too. Higher employee morale and job satisfaction can help your nonprofit recruit and retain talent. There are also cost factors to consider. Nonprofits with even a portion of their workforce working remotely can save on everything from their leases to utility bills to office supplies. What’s more, remote work may boost employee productivity. One Gallup poll found...[ Read More ]
President Biden signed the $1.9 trillion American Rescue Plan Act (ARPA) on March 11. While the new law is best known for the provisions providing relief to individuals, there are also several tax breaks and financial benefits for businesses. Here are some of the tax highlights of the ARPA. The Employee Retention Credit (ERC). This valuable tax credit is extended from June 30 until December 31, 2021. The ARPA continues the ERC rate of credit at 70% for this extended period of time. It also continues to allow for up to $10,000 in qualified wages for any calendar quarter. Taking into account the Consolidated Appropriations Act extension and the ARPA extension, this means an employer can potentially have up to $40,000 in qualified wages per employee through 2021. Employer-Provided Dependent Care Assistance. In general, an eligible employee’s gross income doesn’t include amounts paid or incurred by an employer for dependent care assistance provided to...[ Read More ]