Nonprofits Need to Stay on Top of Recent Tax Developments
By Brenda Booth
To stay in compliance with reporting requirements and reduce the potential for tax liabilities, nonprofit organizations need to keep on top of new developments.
The tax environment can change year to year or even month to month: new risks emerge as others become less of a threat to your not-for-profit organization. Over the past nine months, regulatory changes, court cases, and fraudulent activity emerged that may have an immediate effect on your nonprofit. As a result, your organization should review these items carefully to determine if changes need to be made to your operations.
Electronic Filing Proposed for ‘Top Hat Pension Plans
The Department of Labor (DOL) has proposed an electronic filing requirement for nonqualified and 457 plans for management and highly compensated employees. The proposed requirement would have plan administrators file their one time registration statement electronically instead of by mail at www.dol.gov/ebsa/efiletophatplanfilinginstructions.html.
Employers who file the top hat registration statement are then exempt from the annual filing of Form 5500.
Though its only a proposed requirement, the DOL highly recommends that top hat plan administrators use the website to electronically file. Learn More.
Final Regulations Issued for Not-for-Profit Hospitals
At the end of 2014, the IRS and the Department of Treasury released final regulations for tax-exempt hospitals to clarify provisions put in place by the Affordable Care Act (ACA). The ACA established additional requirements that hospitals must meet in order to qualify as 501(c)(3) tax-exempt organizations. These changes added section 501(r) to the Internal Revenue Code, which stipulates hospitals must:
- Conduct a community health needs assessment on a triennial basis
- Establish a financial assistance policy (FAP)
- Limit charges to individuals who qualify for the organizations FAP so that they are similar to the charges billed to patients with insurance
- Make reasonable efforts to ensure individuals are not eligible for the FAP before engaging in extraordinary collection actions
The ACA also added sections 4959 and amended section 6033 of the Code, which require hospitals to report and document that they are meeting the new 501(r) provisions. The final regulations solidify previously released guidance about the ACA provisions and outline the consequences for hospitals that fail to meet them. Learn more.
Fake Charities Among the IRS ‘Dirty Dozen List of Tax Scams for 2015
Groups pretending to be not-for-profit organizations made the IRSs list of the most common tax scams to watch for in 2015. Not-for-profit organizations should be on the lookout for organizations impersonating them. The IRS warned that fake charities often use names that are similar to those of well-known public charities and ask taxpayers for contributions and other personal information, including Social Security numbers. Learn More.
IRS Ordered to Release Digitally Readable Forms 990
Accessing Form 990 data may become easier than ever. A California district court recently ordered the IRS to release digitally readable versions of the Form 990 as part of a Freedom of Information Act (FOIA) dispute. The IRS currently handles FOIA requests by redacting confidential information and converting the forms into image files. The lawsuit claimed that this format makes it difficult to search multiple forms online.
Though only for a select group of not-for-profit organizations, the ruling holds ramifications for other not-for-profit groups. If upheld in other courts or made into a national requirement, not-for-profit organizations will have to be more careful than ever with their Form 990 data. The forms would be easier to search online, which could bring additional scrutiny to sections involving executive compensation and other hot-topic issues. Learn More.
New College Domain Name Available
Educational institutions take note: a new domain name, .college, has been created. Organizations registered as colleges could apply for the .college domain until April 17. Another round of registration for the .college domain is currently open. Domain registration is important from a reputational standpoint. It would be damaging, for example, if another entity posed as a college without authorization and put up information on the .college domain that cast the college in a negative, false or otherwise unflattering light.
New domain names are becoming more common since the Internet Corporation for Assigned Names and Numbers opened up the Domain Name System (DNS). Up until 2011, the types of generic top-level domain names were limited to 22 options, including .edu, .org, and .com addresses. Now, there are more options for these top tier domain names, including a hotly debated .sucks address.
EDITORs NOTE: The IRS will begin selecting which 501(c)(3) organizations to audit based on computer scans that seek to identify inconsistencies and missing information in Form 990 returns. The IRS also will reportedly focus especially on issues that have the potential to create unrelated business taxable income for organizations, expose them to excise taxes, or even endanger their tax-exempt status.
Brenda Booth is a director in the Not-For-Profit & Education Tax Practice at CBIZ Tofias. Email her at BBooth@cbiztofias.com or call 617-761-0729.