403(b) Pre-Approved Retirement Plans

The IRS has recently updated its list of pre-approved retirement irs symbolplans that have received an IRS favorable opinion or advisory letter. This means that the IRS has determined that the plan satisfies the requirements of the Internal Revenue Code Section 403(b).Only certain tax-exempt employers are eligible to sponsor an Internal Revenue Code Section 403(b).  Among those employers which may sponsor such a plan are:

  • Tax-exempt organizations established under IRC 501(c)(3)
  • Public school systems
  • Certain ministers:
    • Employed by a 501(c)(3) organization
    • Self-employed
    • Ministers not employed by a 501(c)(3) organization. but functioning as a minister in their dai8ly responsibilities with their employer.

Choosing a pre-approved plan, may be beneficial to eligible employers over individually designed plans by costing less, knowing that it meets legal requirements and will make necessary updates for you.

Additional resources and information:

What the Johnson Amendment Repeal Discussion Means for Nonprofits

Discussions surrounding repealing the Johnson Amendment has been a hot topic in nonprofit news. This story has gained additional traction after Trump mentioned his plans during his Jan. 18th speech at Liberty University. The major concerns of this amendment repeal are that it would put deductions at risk and damage public trust.

The Johnson Amendment was passed in 1954 and it prevents charitable organizations from engaging in politics. It was introduced by then Senator Lyndon B. Johnson and it was suggested he did so because a charity opposed him in a primary race. The passage of this amendment “…[established] a rationale that, in return for not engaging in partisan politics, charities would continue to receive tax-deductible donations because they focus on contributing to the broader public good rather than narrower partisan interests.”

Supporters of the Johnson Amendment argue that 501(c)(3)s are able to concentrate and achieve their missions when they are not engaged in politics. Nonprofits serve the common good and with a repeal, it would erode people’s trust in who and how organizations help.

Opponents claim that the Johnson Amendment is in violation of the First Amendment. Nonprofits too have the freedom of speech and expression.

A repeal would blur the lines of what is a 501(c)(3) in terms of tax-deductions. Other nonprofits, like 501(c)(4), can engage in politics but cannot receive tax donations. It is possible that more entities and/or political groups would seek tax-deductible status to raise funds for political purposes and for potentially undisclosed donors. Also with the repeal, charities could “…lose the ability to receive tax-deductible donations…” and this would inhibit nonprofits from succeeding at their missions.

Repealing the Johnson Amendment is one option in change of federal law. There could be an executive order that would allow the administration to not enforce the law as long as political activities were ancillary. The IRS however could enforce the law if a nonprofit was engaging in more secular activity. From an opinion news piece, Congress seems hesitant to completely repeal the amendment. However, there is a bill at the House that would “amend the Internal Revenue Code to permit a tax-exempt organization to make certain statements related to a political campaign without losing its tax-exempt status.” This bill is the Free Speech Fairness Act.

What is your take on the Johnson Amendment repeal discussion? How would a repeal or executive order effect your charitable organization?

 

Sources:

Clerkin, Richard. “Repealing the Johnson Amendment could lead to reduced donations to churches and charities.” The News and Observer, http://www.newsobserver.com/opinion/op-ed/article134788344.html. Accessed 6 March 2017.

Hackney, Philip and Brian Mittendorf. “Trump may upend nonprofits with vow to ‘destroy’ Johnson Amendment.” Newsweek, http://www.newsweek.com/trump-upend-nonprofits-destroy-johnson-amendment-557716?_cldee=YW5uZS53YWxsZXN0YWRAYm9hcmRzb3VyY2Uub3Jn&recipientid=contact-75cd000f8e99e311956300155d009001-4e6ebff32b1e4064ade9eceac0048d63&esid=3dd07215-cef9-e611-959c-00155d009001. Accessed 6 March 2017.

“H.R.6195 – Free Speech Fairness Act.” Congress.gov, https://www.congress.gov/bill/114th-congress/house-bill/6195. Accessed 6 March 2017.

 

Nonprofit Updates from the IRS

irsYou may want to skip this post based on the title. However, you know you need to read it and rest assured it will be worth your time.

Short and sweet – the IRS recently updated and released the Form 990-EZ with a new help feature. In the 4 page form, there are small question mark icons. By clicking on the icon, you’d see a help display window. There are 29 of these question mark help icons and address common mistakes that small to mid size nonprofits make when filling out the form. This feature was created to help organizations file a more complete return and reduce the chances of the IRS contacting you. There is also a 47 page document with instructions on filling out the Form 990-EZ if that is helpful to you.

To find the Form 990-EZ with the new help feature and the Instructions for Form 990-EZ click here.

Disclosure Requirements– from DWD “Mission-Minded” blog

Carrie Minnich (2) (576x800)Carrie Minnich’s most recent post is a gentle reminder that nonprofits are required to disclose certain information to the public. The first item is an annual return (990, 990-EZ, 990-PF, and 990-T). Nonprofits have to provide at least three years of returns. The second item is the application for exemption (Form 1023 or 1024) and IRS determination letter.

As Minnich goes on to say, typically a nonprofit will need to provide these two items the day that it is requested. However, for written requests the nonprofit has 30 days to make the documents available. It is perfectly acceptable to charge for photocopies and postage if mailing the materials. Nonprofits may have their annual return, application for exemption, and IRS determination letter on their website to make it readily available for the general public.

If nonprofits do not follow the disclosure requirements for annual returns, they could be fined up to $20 a day with a maximum of $10,000.

To read her full post, click here.

It’s Off the Table: Donor Social Security Numbers

importantOn December 20, 2015 we posted about a proposed federal regulation that would require nonprofits to collect donor social security numbers. Fortunately, the Treasury Department and Internal Revenue Service has announced that they have withdrawn the proposed regulation. A big part of their decision came from the 38,000+ comments from the public against the regulation.

As a group, 215 nonprofits urged for a withdrawal. The National Council of Nonprofits applauded the nonprofits for speaking up and are celebrating the power of nonprofit advocacy.

If the regulation would have passed, nonprofits would have had to submit an annual “Donee Report” to the IRS by February 28th with donors that made contributions of $250 or more. In the report information such as addresses and social security numbers were to be included.

To read the PCNRC’s original post on the topic, click here.

Federal Mileage Rate Change– from DWD “Mission-Minded” blog

Carrie Minnich (2) (576x800)Carrie Minnich, CPA at Dulin, Ward & DeWald Inc. recently posted about federal mileage rate change. The IRS recently released the federal mileage rates for 2016. Both the per mile rate for business and medical or moving purposes decreased. The per mile rate for charitable purposes stayed the same.

2016 rates are as follows:

54 cents per mile for business

19 cents per mile for medical or moving purposes

14 cents per mile for charitable purposes

To see Carrie’s post, click here.

Proposed Nonprofit Federal Regulation

This just in! According to a BoardSource e-blast on December 18, 2015, there is a proposed nonprofit federal regulation. The political newspaper published in Washington D.C., The Hill, reported that nonprofits will need to collect donor Social Security numbers as indicated by a new IRS proposed requirement.

What do you think about this proposed regulation? (Feel free to comment below.) The first big concern seems to be that many nonprofits do not have the resources to secure sensitive information and including from hackers. Tim Delaney, author of The Hill article and President/CEO of the National Council of Nonprofits, mentions that there are over 34,000 comments as of December 16, 2015. There are now nearly 38,000 as of December 22, 2015. The second biggest concern is that people will not give as often, said Delaney.

Read the full The Hill online article, click here.

Read the entire Federal Register with the IRS proposed requirement, click here.