Nonprofit

Nonprofit organizations face a myriad of challenges from tax compliance requirements, increased competition for donor funds, creating additional sources of revenue and demands for greater board oversight. Delivering mission critical services has become increasingly difficult against reductions in funding and resources. White Nelson Diehl Evans has a dedicated nonprofit practice with experts who specialize in the nonprofit sector and help our clients achieve their financial goals, while fulfilling their mission.

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Our dedicated nonprofit practice group conducts government A-133 single audits, assists exempt organizations with IRS Form 990 compliance, and provides 403(b) employee benefit plan (ERISA) audit services. White Nelson Diehl Evans is dedicated to providing high quality, client focused services to assist our many customers in the nonprofit sector:

Social Service Organizations
Mission Based Organizations
Private Schools

Churches and Religious Organizations
Foundations

IRS Form 990 Compliance

The IRS Form 990, Return of Organization Exempt from Income Tax, is used by nonprofits that have been organized under the various Tax Exempt Code Sections. Determining which 990 form is required is based on the level of gross receipts and total assets. Organizations that receive less than $50,000 in gross receipts, file Form 990N; for gross receipts less than $200,000 and total assets below $500,000, a Form 990-EZ or Form 990 is filed. Organizations that receive $200,000 or more in income or have $500,000 or more in assets must file Form 990.

These forms have been redesigned in recent years resulting in increased filing errors, according to the IRS. The importance of properly completing the 990 form is significant as the IRS has sent a clear message through the Exempt Organizations Division of the Tax Exempt and Government Entities office, that the number of returns being audited has increased, so a complete and accurate return is in your best interest. Data from the redesigned Form 990 is being used to identify patterns of noncompliance so that the IRS can better target potential offenders.

There are many common mistakes made by nonprofits when completing the Form 990, because reporting is no longer just about the numbers. This is a direct reflection of policy requirements that the Sarbanes-Oxley Act imposed on public companies, and that the IRS is now imposing on nonprofits. Most importantly, the new form asks, more closely than before, about board involvement in establishing and assessing policies supporting proper governance. This includes an expectation that board members are reviewing the completed Form 990.

It is important to note that a nonprofit’s From 990 filing becomes public information and is easily accessible by donors and community. Therefore, it is important that organization portray themselves in the best possible light with a complete and accurate Form 990 filing. White Nelson Diehl Evans supports the mission of our clients by ensuring that all compliance issues are met when completing the Form 990, therefore allowing our clients to focus on their core mission.

Unrelated Business Income Tax (UBIT)

Tax exempt organizations are created under the Internal Revenue Code; the most typical entity type being a 501(c)(3) which includes groups such as: religious, educational, charitable, etc. Other groups may qualify under one of thirty-four other subsections. Generally, income that is derived from the purpose for which the organization was created is exempt from income tax. However, there are certain nonprofit organizations that are subject to tax on unrelated business income. The purpose of taxing such unrelated business income is to prevent unfair competition between the tax exempt organization and a nonexempt entity that would be taxed during the ordinary course of business. As nonprofits seek new ways to enhance their program funding, these lines can be blurred.

What is unrelated business income? The Internal Revenue Service defines unrelated business income in two ways; under IRC 512(a)(1) it is defined as “gross income derived by any organization from an unrelated trade or business regularly carried on by it, less the deductions allowed” and under Code 513(a) it is defined as “any trade or business the conduct of which is not substantially related to the exercise or performance by such organization of its charitable or other purpose.” The related trade or business must be ongoing and regular to be taxed. A one time profit from such activity will not trigger the tax.

Additionally, activities that are performed by unpaid volunteers or that are “principally for the convenience of employees or members”, dividend and interest income and royalties and rents from real property, are exempt from the definition of unrelated business income. At White Nelson Diehl Evans, we help our clients identify when unrelated business income exists, determine how to calculate the tax and identify what special rules may apply. Our industry professionals have the expertise to insure your organization is properly positioned to achieve funding targets in a fiercely competitive environment.

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