Tax Issues Facing Non-Profit Health Care
Organizations:
How to recognize and reduce your IRS
exposure and risk
Anne McGeorge,
g , Nat’l Managing
g g Partner-Health Care
(704) 632-3520
[email protected]
September 2, 2009
Association of Healthcare Internal Auditors
2009 Annual Conference
Agenda
• IRS Initiatives and 2010 Work Plan
• Legislative Update
• Form 990
–
–
–
–
–
Governance and Policies
Schedule J: Compensation
Schedule L: Loans
S h d l K
Schedule
K: T
Tax-Exempt
E
t Bonds
B d
Schedule H: Hospitals and Community Benefits
• Q&A
IRS Initiatives
and
C
Current
t Work
W k Plan
Pl
Association of Healthcare Internal Auditors
2009 Annual Conference
IRS Initiatives: 2009-2010
Work Plan
•
•
•
•
•
•
•
•
•
•
Community Benefit
403(b) Plans
Section 409(A) – Deferred Compensation
Tax-Exempt Bond Compliance
Electronic Health Records
Governance Practices
IRS Procedural
P
d l Ch
Changes
Medical Resident FICA
H
Hospital/Physician
it l/Ph i i R
Relationships
l ti
hi
Compensation
R
Recent
t Legislative
L i l ti A
Activity
ti it
Association of Healthcare Internal Auditors
2009 Annual Conference
403(b) Plans
• Final regs issued on July 26, 2007 regarding
IRC Section 403(b) plans for IRC Section
501(c)(3) organizations.
• Audit requirement for 2009 year:
– Requires written plan,
– Tax-exempt entities aggregated as single
employer,
– Nondiscrimination rules changed and
universal
i
l availability
il bili requirement
i
adopted
d
d ffor
deferrals.
Stark II,, Phase III Final
Regulations
• Issued September 5, 2007, effective December 4, 2007
• Final Stark Changes: Effective October 2009
• "Stand in the Shoes" rule – Rules "look through
physician organization” to the individual physicians
– Must rely on direct compensation exceptions
• Recruitment Provisions
• Retention Payments
• Limitations on "per click" arrangements
• Most provisions have Fair Market Value exceptions and
must be “set in advance”
“Red Flags” Legislation
•
•
•
•
•
Legislation enacted in 2007
Effective August 2009
Identity Theft Monitoring and Reporting
T k Force
Task
F
Recommended
R
d d
Senior Executive or Board Member to oversee
hospital’s efforts
efforts.
• Privacy/Protection Policies could save hospitals
millions.
millions
Community Benefits
• Lots of debate in Senate and House of
Representatives
p
about legislation
g
mandating
g
levels of community benefits.
• Tax-Exempt Hospitals would need to quantify
their benefits and report.
• Should benefits be required to equal the value of
a hospital’s tax-exempt status.
• Debate as to how to measure benefits.
Health Care Reform
• Many different stakeholders are voicing their
p
preferences:
– Insurers
– Providers
– Physicians
– Employers
– Patients
agendas.
• All have different agendas
Health Care Reform
• Will it get done?
• Questions loom large:
– Should we have a government run plan?
– Should universal coverage be a goal?
– How can we reduce costs?
– How will the new plan be funded?
• There will be winners and losers, for sure.
The New Form 990
Association of Healthcare Internal Auditors
2009 Annual Conference
The New Form 990
Focus on:
• Governance
• Charity Care
• Policies
Who is looking at your
Form 990?
•
•
•
•
•
•
•
•
•
Congress
Internal Revenue Service
Media
General public (including those who don't like you)
Donors and potential donors
Vendors
P i t ffoundations
Private
d ti
State Attorneys General
Your competitors
Who is looking at your
Form 990?
• Consumer groups and watchdog organizations
• Labor unions
• Other nonprofit organizations
Æ IRS website: If you suspect or know of an individual or
company that is not complying with the tax laws
laws, you may
report this activity by completing Form 3949-A. You may fill
out Form 3949-A online …
Æ Check out your organization
organization’s
s Form 990 at
www.guidestar.org
Why Form 990 Is Important –
The IRS
Retaining tax
tax-exempt
exempt status
Form 990 states your case for retaining tax-exempt status
and demonstrates your compliance with the tax rules on an
annual basis:
•
•
•
•
Still organized as a tax
tax-exempt
exempt entity?
Still operated as a tax-exempt entity?
Is there a liabilityy for income or excise taxes?
Have you started the statute of limitations?
Æ Does your Form 990 support your case?
Æ Does your Form 990 confirm your tax-exempt mission?
Why Form 990 Is Important –
The Public
Maintaining your reputation, credibility
and goodwill
Transparency, disclosure and accuracy:
• Form 990 is an “information
information return”
return not a “tax
tax return”
return .
– Form 990 must be complete and accurate – you sign
under penalties of perjury!
– Form
F
990 mustt be
b available
il bl ffor public
bli iinspection.
ti
– Where is your revenue coming from?
– What public good are you accomplishing?
– Where is the rest of the money going?
Æ Form
F
990-T
990 T mustt be
b made
d available
il bl ffor public
bli iinspection
ti
Electronic Filing Will Also
Drive Accuracy
Substantial Penalties for Noncompliance
• Against the organization
– Filing an incomplete or inaccurate Form 990
• $100 per day, limited to $50,000 per return
• Against responsible persons – you?
– Upon notification of an incomplete or inaccurate return
– Failure to provide information within the time allotted
• $10 per d
day, lilimited
it d tto $5
$5,000
000 per return
t
• Fines and imprisonment (egregious cases)
– Willfully not filing returns
– Filing fraudulent returns and statements with the IRS
Preparing Form 990 now and
i the
in
th ffuture
t
The stakes are higher than ever
• Understand Form 990 and Schedule A from both the
organizational and operational perspective.
• Remember accuracy, disclosure and transparency are
keys for preparing an “information” return.
• Ensure that you are complying with all applicable tax
regulations.
• Put policies in place to ensure accuracy and
completeness.
completeness
Æ Be proactive. Completing Form 990 will require more research and
documentation than ever before. This will take tax accountants
working together with operations personnel to ensure compliance.
Start now.
Redesigned Form 990
Expanded Form
Current form - 9 pages and 2 supporting schedules
Revised Form - 11 pages and 16 supporting
schedules
Changes to Form 990 for 2008 –
16 S
Supplemental
l
t l schedules
h d l
Schedule A – Public Charity Status and Public Support
Schedule B – Schedule of Contributors
Schedule C – Political Campaign and Lobbying Activities
Schedule D – Supplemental Financial Statements
Schedule E – Schools
Schedule F – Statement of Activities Outside the U.S.
Schedule G – Fundraising and Gaming Activities
Schedule H – Hospitals
Schedule I – Grants and Other Assistance In the U
U.S.
S
Schedule J – Compensation Information
Changes to Form 990 for 2008 –
16 Supplemental Schedules
Schedule K – Tax Exempt Bonds
Schedule L – Transactions with Interested Persons
Schedule M – Non-cash Contributions
Schedule N – Liquidation,
Liquidation Termination
Termination, Dissolution or
Significant Distribution of Assets
Schedule O – Supplemental Information to Form 990
Schedule R – Related Organizations and Unrelated
Partnerships
Governance
Part VI – Governance, Management and Disclosure
• Number of voting members and how many are
independent.
• Family and Business relationships (Officers
(Officers,
Directors, Trustees, Key Employees).
• Is there delegation of control over management to
outside persons or organizations?
• Did you become aware of a material diversion of
assets during the year?
Governance
Part VI – Governance, Management and Disclosure
• Who elects the governing body?
• Who approves decisions made by the governing
body?
• Are meetings and actions undertaken by the
governing body and committees documented?
• What process was followed to review the 990 and
was the g
governing
g body
yp
provided a copy
py before
filing?
Policies
Part VI – Policies
• Written conflict of interest policy?
– Are potential conflicts required to be disclosed
annually?
– Does the organization regularly and consistently
monitor and enforce compliance?
– Is it available to the public? How?
• Written whistleblower policy?
• Written document retention and destruction policy?
Policies
Part VI – Policies
Did process for determining compensation of the
• "Did
following persons include a review and approval
by independent persons, comparability data,
contemporaneous substantiation of the
deliberation and decision?"
– Top Management, Officers, Key Employees
– Describe the process
P li i
Policies
Part VI – Policies
• Joint Ventures
– Written policy to evaluate participation to
ensure tax-exempt
tax exempt status is protected?
Schedule J
When is it required?
• Schedule J is required if there is reportable
compensation provided to:
– A former
f
officer,
ffi
key
k executive
ti or hi
highly
hl compensated
t d
executive of more than $100,000 from you and all
related organizations.
– A former director or trustee of more than $10,000 in that
capacity from you and all related organizations.
• Schedule
S h d l J iis required
i d if th
there iis reportable
t bl
compensation and other compensation provided to:
– Any individual listed in Part VII, Section A, or more than
$150,000 from you and all related organizations.
Schedule J
Requirements
Where required, Schedule J pertains to all officers, directors,
trustees and key employees listed on the core form. Starting
with a check-the-box reporting format, new disclosures are
required for the following:
• Fi
First-class
t l
or charter
h t ttravell (i
(including
l di airplane
i l
or b
boatt
owned by the organization)
• Travel for companions
p
((not for a bona fide business
purpose)
• Tax indemnification and gross-up payments
• Discretionary spending accounts
Schedule J
Requirements
• Housing allowance or personal residence
• Payment for business use of personal residence
• Health or social club dues or initiation fees (not including
onsite facility)
• Personal services (e.g., chef, chauffeur, maid, financial
planner, nanny, physician, tax preparation)
Schedule J
Requirements
Schedule J also requires disclosure through check boxes of
the processes used to establish compensation for the top
executive:
ti
•
•
•
•
•
•
Compensation committee
I d
Independent
d t consultant
lt t
Forms 990 of other organizations
Written employment contract
Compensation survey or study
Approval
pp
by
y board or compensation
p
committee
Schedule J
Requirements
If Schedule J is required, the compensation disclosure must not
only show the base compensation, bonus amount and other
compensation for certain officers
officers, directors
directors, trustees
trustees, key
employees and highest compensated employees, but must also:
g in control p
payments
y
• Indicate whether severance or change
are provided
• Include supplemental nonqualified retirement benefits
• Include equity
equity-based
based compensation arrangements
• Identify compensation contingent upon revenues or net
earnings
• Provide a description of any non-fixed payments
Schedule J
Additional requirements
• Organizations must describe the process for
determining the compensation of the CEO, executive
director or other officers and key employees.
• While the classification of officer is determined by
reference to state law,
law it always includes the
organization’s top management official.
• If an organization is required to attach Schedule J,
disclosing the base compensation, bonus amount
and other compensation for insiders is required, as
well as the process for determining incentive
compensation.
Schedule J
Preparation
• Determine Related Organizations/Disregarded Entities to
identify the universe of individuals that must be
considered.
id d
• Prepare/review explanations of current compensation
arrangements.
– Determine whether arrangements currently include
any of the compensation items that require specific
di l
disclosure.
– Educate board/management regarding new
expanded disclosures and identify any desired
changes to arrangements.
Schedule J
Preparation
• Determine/modify written policies regarding expense
reimbursements and consider requiring substantiation
prior to reimbursing or allowing the listed expenses .
• Review process and data utilized to establish the
CEO/Executive Director compensation to determine if
any modifications are needed (consider complying with
“presumption
presumption requirements”
requirements where possible).
possible)
• Review severance agreements as they must be reported
by individual.
If an organization satisfies the
f ll i criteria,
following
it i a ttransaction
ti
should be considered
reasonable:
• A board of directors or trustees
tr stees composed of
individuals unrelated to the disqualified persons
involved in the transaction approves
pp
the
transaction
• The board or committee obtains and relies upon
appropriate data as to comparability
• The board or committee documents the basis for
the decision
Compensation- Action Items
• Determine Related Organizations/Disregarded Entities to
identify universe of individuals that must be considered.
• Prepare/review explanations of current compensation
arrangements.
– Determine whether arrangements currently include
any of the compensation items that require specific
disclosure.
– Educate board/management regarding new
expanded disclosures and identify any desired
changes to arrangements.
arrangements
Compensation- Action Items
– Determine/modify written policies regarding expense
reimbursements and consider requiring
substantiation
b t ti ti prior
i tto reimbursing
i b i or allowing
ll i th
the
listed expenses.
• Review process and data utilized to set CEO/Executive
Director compensation to determine whether
modifications should be adopted (consider complying
with “presumption
presumption requirements”
requirements where possible).
possible)
• Review severance agreements as they must be reported
present legal
g issues unless
byy individual – mayy p
addressed at time of separation.
Compensation
Action items and best practices
What should organizations do now?
• The board charters an independent committee with executive
compensation oversight.
• The committee hires a compensation consultant directly.
consultant.
• The committee supervises the work of the consultant
• The committee has a total compensation philosophy (pay
and benefits).
• The
Th consultant
lt t utilizes
tili
appropriate
i t d
data
t ffor analysis.
l i
• The committee makes determinations in executive session.
decision making process.
• The committee minutes reflect the decision-making
• All of the appropriate tax forms are fully completed.
Loans
• C
Core F
Form – Part
P t X,
X Balance
B l
Sh
Sheett
– Line 5 – receivables from current and former officers,
directors, trustees, keyy employees
p y
or other related p
parties
– Line 6 – receivables from other disqualified persons as
defined under section 4958(f) and persons described in
section 4857(c)(3)(B)
• Disqualified person – “position to influence”, 5 year
period
• Substantial
S
contributors
• Look at family members and 35% owned entities
• Supplemental Schedules
– Thresholds
• Record keeping
Loans
• Core Form – Part X, Balance Sheet
– Line 22 – payable to current and former officers, directors,
trustees, key employees, highest compensated
employees, and disqualified persons.
• No reference on this line to substantial contributors
– Core Form draft instructions do not provide good
definitions regarding who and what has to be reported.
– Have
H
tto look
l k tto Supplemental
S
l
t l Schedule
S h d l L ffor th
thatt
information.
Loans
• Comparison to existing Form 990
– Previously Schedule A and Balance sheet
– New Form Part IV questions 25, 26, 27 & 28 (Y/N)
– If yes, details on Schedule L
• Cautions
– Schedule O – Explanation of how policies implemented
– Policies to Implement
p
• Rebuttable presumption
Loans
• Schedule L
– Part II – Loans to and from “Interested Persons”
Instructions also provide for reporting of loans:
o Originally between organization and third party
th t were ttransferred
that
f
d tto an iinterested
t
t d person.
o Originally between interested person and third
party
p
y that were transferred to the organization.
g
o How originated appears not to be important, but
ultimately whether there is any debt
outstanding
t t di between
b t
th interested
the
i t
t d person and
d
the organization.
Loans
•
Schedule L
– Part II – Loans to and from “Interested Persons”
– Detail of each loan must then be provided including:

Name of interested person and purpose of loan
Whether the loan is to, or from the organization
The original principal amount of the loan
The balance at the end of the year (including accrued interest
and any applicable penalties/collection costs)
o Note: for Form 990 filers, the total in this column must
equal the amount reported on the Balance Sheet for lines
5, 6 and 22.
Whether the loan is in default, had approval of the board or
a committee, and whether there is a written agreement.
Loans – Action Items
• View all loans to determine reporting requirements and
modifications, if any, that should be considered:
– Ensure arrangements are in writing
– Consider requiring Board approval of all existing loans
to/from interested persons
– Consider adding Board approval as a condition for future
loan transactions with interested persons
• Monitor any loans/advance balances to determine whether
they can be eliminated prior to year-end.
• C
Communicate
i t with
ith iinterested
t
t d persons regarding
di di
disclosures
l
that will be required.
Schedule K
IIncreased
d IRS ffocus on post-issuance
ti
compliance if you file a Form 990 and
issue tax-exempt bonds
Beginning in 2008, for tax forms filed in 2009, the IRS requires
any
y organization
g
that answered “yes”
y
to q
question 24a of Form
990, Part IV, to complete and attach Schedule K to Form 990.
– Part I is required for 2008
– Part II through IV are optional for 2008 and required
beginning in 2009
The Schedule K is divided into four parts:
– Part I - Bond Issues
– Part II - Proceeds
– Part III - Private Business Use
– Part IV - Arbitrage
Schedule K
General Information
Part I - Bond Issues: Provide general information for each
outstanding tax-exempt bond issue which
which, both had an
outstanding principal amount in excess of $100,000 as of the
last day of the tax year (or other selected 12 month period)
and
d was iissued
d after
ft D
December
b 31
31, 2002
2002.
Part II - Proceeds: Provide more specific information for the
bonds listed in Part I such as total proceeds, the use of those
proceeds, and the allocation of those proceeds.
Schedule K
General Information
Part III - Private Business Use: Provide information
related to the private business use of the bond issues listed
i P
in
Partt I such
h as lease
l
arrangements,
t managementt and
d
service contracts, research agreements, percentage of the
property
p
p y used in a p
private business use and record
retention policies.
Part IV - Arbitrage: Provide information with respect to
arbitrage such as arbitrage rebate and yield reduction
payments made, hedge contracts and guaranteed
investment contracts.
Schedule K
Why is the IRS Making all these Changes?
• Previous version did not keep pace with changes in the
law and the increasing size, diversity and complexity of
the tax-exempt sector.
• IRS believes there is “significant noncompliance with
recordkeeping and record retention requirements relating
to tax-exempt bonds issued by or for the benefit of section
501(c)3 organizations”.
• Represents an expansion of the IRS oversight in the taxexempt bond area.
• IRS wants to know if tax rules are being followed after the
issuance of tax-exempt bonds.
Schedule K
Why is the IRS Making all these Changes?
• Previously, focus was on the time period leading up to and
including the issuance of tax-exempt bonds.
• Encourages tax-exempt organizations to set up post
issuance compliance policies and procedures to ensure
compliance with bond related tax requirements.
• Detailed reporting requirements provide incentive for
borrowers to be more rigorous in record keeping and post
i
issuance
compliance
li
monitoring.
it i
• This process is expected to be time consuming and
burdensome.
burdensome
• Some believe Schedule K was designed to obtain
information for IRS audits.
Schedule K
Action items and best practices
What should organizations do now?
• Create post-issuance compliance practices and procedures
for tax-exempt bond issues.
• Define facilities and equipment financed by tax-exempt bond
p
proceeds.
• Trace and allocate your tax-exempt bond proceeds.
• Identify and review documents related to your tax-exempt
bonds such as arbitrage certificates
certificates, management and service
contracts, research agreements, etc.
• Confirm you are in compliance with arbitrage rebate and yield
restriction regulations.
Schedule H
Hospitals: Phased in over time – most parts
optional for 2008, for 2009 all parts are required
Required if you operate one or more state licensed, registered
or similarly recognized hospitals (defined by EIN).
– Definition of Hospital – specific to use for Schedule H only
– U.S. entities only
– Direct and Indirect ownership (SMLLCs, Partnerships)
•
•
•
•
•
•
Part I, Charity care and Certain Other community benefits at cost
Part II, Community Building Activities
Part III,
III Bad Debt
Debt, Medicare,
Medicare and Collection Practices
Part IV, Management Companies and Joint Ventures
Part V, Facility Information (required in 2008)
Part VI,
VI Supplemental Information
Instructions for Schedule H are 24 pages, plus 8 worksheets
Schedule H
Hospitals: (Part I) Charity care and other
community benefits at cost
• Do you have a charity care policy and is it written?
• How does it apply to hospitals within your group?
– Uniformly
U if
l applied?
li d?
• How do you determine eligibility for providing free care?
– Federal Povertyy Guidelines or Other?
• Does your policy provide free or discounted care to the "medically
indigent"?
• Does your budget include amounts for free or discounted care
provided under your policy?
– Unable to provide care due to budget considerations?
• Do you prepare an annual community benefit report?
– Is it available to the public?
Schedule H
Hospitals: (Part I) Charity care and other
community benefits at cost
Schedule H
Hospitals: (Part I) Charity care and other
community benefits at cost
Line 7. Charity Care and Means-Tested programs (show expenses
offset by revenue)
– Charity care at cost
– Un-reimbursed Medicaid
– Other un
un-reimbursed
reimbursed means
means-tested
tested government programs
– Community health improvement services and community benefit
operations
– Health professions education
– Subsidized health services
– Research
– Cash and in-kind contributions to community groups
Schedule H
Hospitals: (Part I) Charity care and other
community benefits at cost
• Worksheets are provided to assist with calculations but
they are not to be filed with the return
return.
• Instructions state: "Bad debt expense is not to be reported
in the Table under any circumstances.
circumstances."
• Medicare related expenses or costs are not to be included
in the table.
Schedule H
Hospitals: (Part II) Community Building Activities
Show expenses offset by revenue:
–
–
–
–
–
–
–
–
–
Physical improvements and housing
Economic development
Community support
E i
Environmental
t l iimprovements
t
Leadership development and training for community
members
Coalition building
Community health improvement advocacy
Workforce
f
development
Other
Schedule H
Hospitals: (Part III) Bad Debt, Medicare, and
Collection Practices
• Section A – Bad Debt Expense, at cost
– Do you follow HFMA statement 15?
– Enter bad debt amount,
amount at cost,
cost attributable to charity care
patients.
– Provide the text of the footnote that describes bad debt expense
g methodology
gy used to determine the
and describe the costing
amounts.
• Section B – Medicare (including DSH and IME): Allowable costs offset
by revenue received.
– Describe the extent to which the shortfall should be treated as a
community benefit and your costing methodology.
• Section C – Collection Practices
– Do
D you h
have a written
itt d
debt
bt collection
ll ti policy
li and
d if so, d
describe
ib
your practices for patients known to qualify for charity care or
financial assistance?
Schedule H
Hospitals: (Part IV) Management Companies
and Joint Ventures
• Joint Ventures of which Exempt Org is partner or shareholder
(includes foreign, but not passive investments).
OR …
• Management Company
– Provided persons who were O, D, T or KE of Exempt Org.
– Physicians of Exempt Organization (employed or staff
privileges).
and owned >10% of ownership
p or p
profits
– And the Management company either

Provided management services to Exempt Organizations, or

Provided medical care or owned or provided property (real,
personal, intellectual) to Exempt Org, or others, for use in
medical care.
Schedule H
Hospitals: (Part IV) Management
Companies and Joint Ventures
List the following information:
– Name of entity
– Description of primary activity of entity
– Organization
Organization'ss profit % or stock ownership
– Officer, Director, Trustee or Key Employee's profit % or
stock ownership
p
– Physicians' profit % or stock ownership
Schedule H
Hospitals: (Part V) Facility Information;
(Check the box) – Required for 2008
• Licensed, registered or similarly recognized under state law as
a 'health care facility'.
• Direct or indirect operation (SMLLC
(SMLLC, Partnership)
Partnership).
Identify facilities by name and address and indicate the type:

Licensed hospital
General medical and surgical
Children's hospital
Teaching hospital
Critical access hospital
Research facility
ER-24
ER
24 hours
ER-Other
Other (Describe: e.g., outpatient physician clinic)
Schedule H
Hospitals: (Part VI) Supplemental Information
• If you don't use the Federal Poverty Guidelines, describe
how you determine eligibility for free or discounted care.
• Describe how you assess community health care needs.
• Describe how you inform and educate patients about
eligibility for assistance.
g g p
• Describe the communityy that yyou serve byy geographic
area and demographic constituents.
• Describe your community building activities.
Schedule H
Hospitals: (Part VI) Supplemental Information
• Describe how you further your exempt purpose by
promoting community health (e.g., open medical staff,
community
it board,
b d use off surplus
l ffunds,
d etc.).
t )
• If you are part of an affiliated health care system,
describe the role of affiliates in promoting the health of
the communities served.
• If app
applicable,
cab e, identify
de y the
e sstates
a es in which
c you file
ea
community benefit report.
Schedule H
Action items and best practices
• Even though the majority of the information is not required for
2008 returns, begin gathering the information now.
• Forms
F
and
d IInstructions
t ti
available
il bl att
www.irs.gov/charities
• Review the information and assess how it will be viewed by
the public.
• Develop internal processes to gather complete and accurate
data.
– Consider assigning responsibility to a management
member.
– Consider
C
id assigning
i i responsibility
ibilit tto a b
board
d member.
b
Contributions and Grant Making
•
•
•
•
Core Reporting – Where are the questions hiding?
Supplemental Schedules – Thresholds and disclosures
Compliance – Series of Y/N questions – “Correct” answers
Governance – Policies and procedures disclosures
– Contributions
C t ib ti
off C
Cash
h
– Contributions in-kind
– Domestic Grants
– Foreign Grants
Fundraising &
Special Events:
–
–
–
–
Compliance with donor acknowledgement
Understand what is and isn’t in this category
Understand timing and reporting
Set up procedures for gathering information
p
y
contemporaneously
– Insure quid pro quo donor receipts are issued
• Gaming:
– Compliance with state regulatory agencies
– Compliance with federal reporting requirements
Written Substantiation
• Pre- PPA >$250 cash contribution
• Post
P t – PPA allll cash
h contributions
t ib ti
– Less than $250 donor can use bank records
but donors may no longer use detailed written
logs
• Quid Pro Quo > $75 with value
What is Written
Substantiation?
•
•
•
•
Document from charity
Name of EO and Donor
Date of donation (Date of postmark)
Exact amount of cash or description of property
– Do Not provide value
• Quid pro quo – Do provide value
Line 43 "Other
Other Expenses"
Expenses
Reporting Requirements
"Miscellaneous"
Miscellaneous cannot exceed 5% of line 44
• For health care organizations, payments to health care
professionals who are not employees.
• Investment advisors and other professional fees (do not include
fundraising fees, accounting fees, or legal fees).
• Penalties,
P
lti
fi
fines and
d jjudgments.
d
t
• Unrelated business income taxes.
• Insurance and real estate taxes not attributable to rental
property or reported as occupancy expenses.
• Other expenses, identify by type of expense.
• Payments or reimbursements of travel and entertainment for
certain government officials and their family members.
Assistance to Individuals
• Schedule I, Part III – Complete if aggregate is > $5,000
– Group by type of grant or assistance
– Number of individuals in group
– Total
oa a
amount
ou o
of cas
cash g
grants
a s in g
grouping
oup g
– Total amount of non-cash assistance in grouping
– Method of non-cash valuation
– Description of non-cash assistance
– Cash assistance only described in column (a) Type
Closing remarks
Key action items
• Create a strategy to ensure Form 990 compliance
involving the right people and process.
process
• Ensure that your Form 990 return is accurate and
reflects positively on your organization since it is
a public document.
• Involve management, your board and audit
committees appropriately.
QUESTIONS?
Tax Professional
T
P f
i
l Standards
St d d Statement
St t
t
This document supports Grant Thornton LLP’s marketing of professional services, and is not written tax
advice directed at the particular facts and circumstances of any person. If you are interested in the subject of
this document we encourage you to contact us or an independent tax advisor to discuss the potential
application to your particular situation. Nothing herein shall be construed as imposing a limitation on any
person from disclosing the tax treatment or tax structure of any matter addressed herein
herein. To the extent this
document may be considered to contain written tax advice, any written advice contained in, forwarded with,
or attached to this document is not intended by Grant Thornton to be used, and cannot be used, by any
person for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.