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Summer hours are in effect: Our offices close at NOON on Fridays from May 17th to July 12th
Please note: Our offices will be closed on July 16 and 17 for Employee Appreciation Days.
The U.S. Department of Labor’s new overtime rules, which will make many more employees eligible for overtime pay under the Fair Labor Standards Act (FLSA), take effect December 1, 2016 — and nonprofits aren’t exempt. Even if an organization isn’t covered by the FLSA, its employees may be covered as individuals and thus eligible for overtime. Make no mistake: The new rules could have significant repercussions for the compensation of your white-collar workers — and, in turn, your ability to provide services.
The final rule increases the salary-level threshold for white-collar exempt employees from $455 to $913 per week or $23,660 to $47,476 per year. White-collar employees now can only be exempt from overtime if their jobs meet certain tests for executive, administrative or professional employees, and they also are paid an annual salary of at least $47,476.
The new rule also increases the salary threshold for highly compensated employees (HCEs) from $100,000 per year to $134,004 per year. The HCE threshold is used to evaluate the fairness of contributions to an organization’s retirement plan. HCEs must receive at least the full standard salary amount — or $913 — per week on a salary or fee basis without regard to the payment of nondiscretionary bonuses and incentive payments. But such payments will count toward the total annual compensation. The standard salary and HCE annual compensation levels will automatically update every three years.
The FLSA may apply to 1) businesses or similar entities (what’s known as enterprise coverage), or 2) individuals (individual coverage). Under enterprise coverage, the law applies to businesses with annual sales or business of at least $500,000. For nonprofits, this coverage applies only to activities performed for a business purpose (for example, operating a gift shop). Income from contributions, membership fees, many dues, and donations used for charitable activities don’t count toward the $500,000 threshold.
Under individual coverage, employees may be covered by the FLSA if they’re engaged in interstate commerce or in the production of goods for interstate commerce — regardless of whether an employee is engaging in such activities for a business purpose. For example, an employee is covered if he makes or receives interstate phone calls, ships materials to another state or regularly calls an out-of-state vendor and uses a credit card to buy food for a homeless shelter.
The new rule has obvious budget implications — the money to pay overtime to newly eligible employees will have to come from somewhere. Many have expressed concern that compliance with the rule will lead to the cutting of services.
In addition, according to the National Council of Nonprofits, organizations with government grants and contracts could find themselves in the position of having to cover higher labor costs than were contemplated at the time they entered into the agreements. They’ll be contractually bound to maintain services despite increased costs that might not be covered by the existing arrangements.
The new rule has some notable exceptions. The DOL has stated that teachers are exempt, as well as administrative personnel who help run higher education institutions. For example, academic counselors and advisors and intervention specialists aren’t subject to the FLSA’s overtime requirements if they’re paid at least the entrance salary for teachers at their institution. However, other types of nonprofits won’t be so lucky with their white-collar employees.
The DOL has also indicated that it won’t enforce the higher salary thresholds until March 17, 2019, for providers of Medicaid-funded services for individuals with intellectual or developmental disabilities in residential homes and facilities with 15 or fewer beds. During the nonenforcement period, the DOL will engage in outreach and technical assistance efforts to these providers.
December 1 will be here before you know it. Consult with your financial advisor to determine your best course of action for minimizing the negative repercussions associated with the new salary-level test if the FLSA applies.
Nonprofits have several options available for complying with the new overtime rules. Your options include:
Raising salaries. For employees who meet the duties test, have salary near the new salary level of $913 per week or $47,476 per year and regularly work overtime, you can increase their salaries to meet the new threshold and maintain their exempt status.
Paying overtime above a salary. You could continue to pay newly overtime-eligible employees a salary and pay overtime for any hours in excess of 40 in a week.
Redistributing workloads. You can redistribute workloads to ensure appropriate staffing levels while minimizing overtime.
Adjusting base pay and paying overtime. You could adjust an employee’s earnings to reallocate it between regular rate of pay and overtime compensation. The revised pay may be on a salaried or hourly basis but must include overtime payment when the employee works more than 40 hours in a week.
The DOL doesn’t require or recommend any one approach.
Microsoft’s philanthropic arm has announced that it’ll donate $1 billion in cloud computing resources over the next three years to nonprofits and nongovernmental organizations worldwide. The donation is part of an initiative that includes providing a suite of Microsoft cloud services, expanding access to cloud resources for 900 faculty researchers at universities and reaching 20 underserved communities in 15 countries with broadband connectivity and cloud services.
Microsoft’s goal is to serve 70,000 nonprofits through one or more of the offerings in its cloud services suite by the end of 2017. The company will focus on increasing that number in subsequent years. Nonprofits must work through TechSoup (Microsoft’s partner in the donation program) to satisfy a variety of eligibility requirements to participate. To determine if your organization is eligible, visit http://bit.ly/1RSECd2.
According to the annual “Volunteering and Civic Life in America” report issued by the Corporation for National and Community Service and the National Conference on Citizenship, approximately one in four Americans, or 25.3%, volunteered with an organization in 2014 — which has remained relatively constant since the increase reflected after 9/11.
In addition, 62.5% of Americans engaged in informal volunteering in their communities, helping neighbors with tasks such as watching each other’s children, shopping or house sitting. Notably, the research also found that volunteers are almost twice as likely to donate to charity as nonvolunteers. Almost 80% of volunteers donated, compared with 40% of nonvolunteers.
Your organizations can use information in this report to help fine-tune your volunteer program. To keep your numbers healthy, you also can find out more about your volunteers’ skills and interest, and assign them to tasks accordingly. And you can offer incentives for volunteering, such as greater recognition and free admittance to your events.
A survey conducted by the Chronicle of Philanthropy — the first to measure public confidence in charities since 2008 — has found that two-thirds of Americans have a fair amount of confidence in charities. More than 80% indicated that charities do a “very good” or “somewhat good” job helping people.
A significant number of respondents, however, expressed concerns about charities’ money management. One-third said charities do a “not too good” or “not at all good” job spending money wisely, and 41% said their leaders are paid too much. Notably, half said that, when deciding where to donate, it’s “very important” to know that charities spend a low amount on salaries, administration and fundraising. And 34% said such knowledge is “somewhat important.”
Consider these statistics when you complete your next Form 990 or draft your next annual report. Are you clear about how you help your constituents while you manage your nonprofit’s money wisely?
Stay on top of filing and reporting deadlines with our tax calendar! Our tax calendar includes dates categorized by employers, individuals, partnerships, corporations and more to keep you on track.
In the wake of the most recent recession, many nonprofits are taking a hard look at their sustainability over the long term to be ready to face uncertain economic times. After all, an organization in poor financial health may find itself forced to cut programs and services when they’re needed the most. Fortunately, steps you can take now may help reduce such risks while allowing your nonprofit to fulfill its core mission.
Having a limited number of funding sources is the biggest sustainability challenge for many organizations. U.S. nonprofits typically receive funds from the government, foundations and individual and corporate donors, and often depend heavily on a few funding sources — for example, an annual government or foundation grant.
The danger in such limited reliance was amply illustrated when government and foundation support dried up during the economic downturn, and many nonprofits were forced to close their doors. The problems compounded for nonprofits serving low-income populations that could no longer provide any financial support themselves.
If you don’t have a variety of funding sources, it’s imperative that you branch out. The broader the base, the more stability and protection from economic challenges your organization will have.
A nonprofit needn’t rely solely on outside funders to improve financial sustainability. It might increase revenue by expanding its fee-based service offerings to new locations or populations. For example, an organization that provides services to children with disabilities in schools also could offer the services to children with disabilities in foster homes.
More and more, nonprofits are pursuing formal partnerships with other organizations — sometimes at the prompting of funders — to share costs. Organizations with similar missions and serving similar populations can collaborate to make better use of limited resources while reducing competition for funding. They also can more quickly scale up high-demand programs or services by joining forces.
Maintaining an adequate reserve is a key component of financial sustainability, but some organizations still lack such a fund. Even some nonprofits that have reserves haven’t established a formal policy for determining the appropriate amount, maintaining that amount and allocating funds when necessary.
Of course, having multiple funding sources is no guarantee of security — a harsh economy can have widespread consequences that affect multiple sources. Additional strategies that more indirectly affect financial sustainability include the following:
Step up branding. Strategic marketing and branding are key for promoting an organization and achieving stable financial standing, yet many organizations neglect this approach. A brand that clearly communicates a nonprofit’s mission and services helps to establish a solid reputation that builds trust among donors. This can be particularly crucial when funding pools are shrinking.
Evaluate outcomes. Donors and other nonprofit stakeholders are showing greater interest in the outcomes of programs and services and other nonfinancial measures. Often the number of lives improved has a greater impact on funders than the number of dollars spent. And they want to fund programs that are successful. By evaluating and sharing outcomes, a not-for-profit can demonstrate value, effectiveness and accountability.
Outcome evaluation also is an essential tool for decision making. You can use the process to identify underperforming programs and make necessary tweaks or to prioritize expenditures if funding declines or additional funding becomes available.
Assess your financial standing. No organization can accurately evaluate its financial sustainability without timely, comprehensive and accurate financial reporting. How can a nonprofit know how much funding it needs to support its programs and services without knowing how much it costs to operate?
In addition to providing a current picture of financial standing, financial reports should compare actual figures with historical and projected numbers. Some nonprofits also are introducing “dashboards” that give real-time financial data, ratios and trends in easily understood graphic form.
Involve the board. It’s not enough for the board to simply review financial statements before its meetings. Board members also must provide true fiscal oversight and not leave major financial decisions to staff, no matter how trusted and loyal.
Every board member should undergo training on relevant financial issues and be able to understand financial statements. The finance committee should report regularly to the full board and engage in dialogue about their reports and the organization’s financial health. The board shouldn’t merely take a backward-looking view but should also consider the future — for example, taking into account how current trends and developments might affect future plans for funding the nonprofit’s mission.
Plan for contingencies. When budgeting, every nonprofit should take the time to engage in annual contingency planning exercises. How could your organization continue to serve its mission if it suffered a 10% drop in funding? A 20% drop? Evaluating such scenarios in advance can provide valuable guidance and preserve mission-critical programs and services in times of crisis.
Achieving financial stability is a critical part of sustainability and should reflect both the organization’s mission and its financial needs. Your financial advisor can help you objectively assess and improve your nonprofit’s position.
Individual taxpayers who have come close to triggering the alternative minimum tax (AMT) in the past should start planning to minimize 2016 taxes as early as possible. This article will define AMT, how it is calculated, and ways to minimize your AMT liability.
The AMT – a separate tax system that doesn’t allow certain deductions and income exclusions – initially was put in place to prevent wealthy Americans from taking so many tax breaks that they eliminated their tax liability. But even taxpayers who don’t normally consider themselves “upper income” can trigger the AMT. For example, you could be vulnerable if you exercised incentive stock options this year.
AMT calculations can be complicated, but the system basically has two tax rates (26% and 28%) and inflation-adjusted income thresholds for them. An exemption is also available, but it phases out based on income. For 2016, the AMT exemptions are $53,900 for single filers and heads of households and $83,800 for joint filers. The phase-out ranges are $119,700 to $332,100 for single filers and heads of households and $159,700 to $493,300 for joint filers. If AMT income is within the applicable range, a partial exemption is available; if it exceeds the top of the range, no exemption is available.
To determine whether you owe the AMT, you’ll need to calculate your tax under both the regular and AMT systems. If your AMT liability is greater than your regular income tax liability, you must pay the difference as AMT, in addition to the regular tax. The federal AMT rate is 28%, compared to the top regular income tax rate of 39.6 %.
Under the AMT, you can’t take a personal exemption for yourself and your dependents. And you are not allowed to deduct such items as home equity debt interest not used to improve your home; state and local income and property taxes; and miscellaneous itemized deductions subject to the 2% floor.
Those with high incomes are more susceptible to the AMT than others, but AMT liability may also be triggered by:
Fortunately, strategies exist for minimizing your AMT. For example, you might want to delay sales of highly appreciated assets until the next year or use an installment sale to spread the gains over multiple years. You can also try to time the payment of state and local taxes and other miscellaneous itemized deductions for years that you do not expect the AMT to apply. Or you might want to recognize additional income this year to take advantage of the AMT’s lower maximum rate (28% vs. 39.6%).
There is also an AMT credit. If you pay the AMT in one year on deferral items (those that affect more than one tax year, such as depreciation) you might be entitled to a credit for a subsequent year. The credit, however, might provide only partial relief or take years before you can fully use it. Nonetheless, the AMT credit’s refundable feature can reduce the time it takes to recoup AMT payments.
Most taxpayers do not even realize that the AMT is looming until it’s too late to do anything to manage it. Failing to pay the AMT can lead to penalties and interest, so it’s best to determine ahead of time whether it will apply. Talk to your tax advisor now while you still have time to strategize for 2016.
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In a recent blog post to AICPA Insights, guest blogger Tom Pender recognized the importance of not-for-profit organizations' mission and vision but then turned to galvanizing the staff and board to lead. "Having the right staff is critical and having the right board of directors is equally important. Scaling an organization’s impact means not just maintaining core processes, but also constantly sharing knowledge to build the organization’s capacity to affect change. Without leadership to keep the organization focused, staff can fall victim to fighting the daily fires that are a distraction from the larger goal of expanding the organization’s reach."
He gave four considerations to supercharge your board. The full post can be read here.
Paying the proper amount of tax by the annual federal income tax filing deadline isn’t enough to avoid interest and penalties; you must also meet requirements for paying tax throughout the year through withholding and/or quarterly estimated tax payments. If you have income from sources such as self-employment, interest, dividends, alimony, rent, prizes, awards or the sales of assets, you may have to pay estimated tax.
Generally, you must pay estimated tax if both of these statements apply:
If you’re a sole proprietor, partner or S corporation shareholder, you generally have to make estimated tax payments if you expect to owe $1,000 or more in tax when you file your return.
Payments are spaced through the year into four periods or due dates. Generally, the due dates are April 15, June 15, Sept. 15 and Jan. 15, unless the date falls on a weekend or holiday.
Estimated tax is calculated by factoring in expected gross income, taxable income, taxes, deductions and credits for the year. The easiest way to pay estimated tax is electronically through the Electronic Federal Tax Payment System. You can also pay estimated tax by check or money order using the Estimated Tax Payment Voucher or by credit or debit card.
If you’d like assistance determining whether you need to pay estimated tax or calculating your payments, contact us.
The Department of Labor’s new overtime rules, which will make many more employees eligible for overtime pay under the FLSA, take effect December 1, 2016 — and nonprofits aren’t exempt. Even if an organization isn’t covered by the FLSA, its employees may be covered as individuals and thus eligible for overtime. This article addresses the new salary-level tests for exempt workers, the impact on nonprofits and some exceptions to the rules. A sidebar offers four options for compliance.
If a nonprofit isn’t careful, a corporate sponsorship can be deemed paid advertising and the organization could end up liable for unrelated business income tax (UBIT). Although the Internal Revenue Code includes an exception from UBIT for certain sponsorship arrangements, navigating the rules can prove tricky. This article explains the “qualified sponsorship payment” exception, the “use or acknowledgment” provisions and the allocation of sponsor payments. A sidebar discusses the rules for exclusivity arrangements.
In the wake of the most recent recession, many nonprofits are continuing to take a hard look at their sustainability over the long term. This article examines factors that affect sustainability directly, such as the diversity of an organization’s funding sources, and some indirect factors that have an impact on sustainability, including branding, outcome evaluation and contingency planning.
This issue’s “Newsbits” reports on free cloud services offered by Microsoft’s philanthropic arm, a new report that details volunteerism efforts in America, and a survey on the topic of public confidence in nonprofits. 
