ANNUAL TAX UPDATE & 2014 FORM 990 CHANGES

Transcription

1 THURSDAY MARCH 5, AM CENTRAL TIME ANNUAL TAX UPDATE & 2014 FORM 990 CHANGES Jessica Freeman Manager BKD, LLP Wendy Budde Manager BKD, LLP TO RECEIVE CPE CREDIT Participate in entire webinar Answer polls (if provided) If viewing this webinar in a group, you must o Complete a group attendance form Title & date of live webinar Your company name Your printed name, signature & address o All group attendance sheets must be submitted to training@bkd.com within 24 hours of live webinar o Answer polls (if provided) If eligibility requirements are met, each participant will receive their CPE certificate within 15 business days of live webinar (via ) 2 // experience access 2 1

2 AGENDA 2014 Form 990 & related schedule update International tax issues Update on unrelated business income tax Higher education update IRS focus areas 2014 tax reform bill Q&A FORM 990 & 990-EZ Minor cosmetic changes o Heading, Item B Replaced Terminated with Final return/terminated 4 2

3 2014 FORM 990 & 990-EZ Part IV, line 25a (990) & Part V, lines 40b-d (990-EZ) o Added Section 501(c)(29) organizations FORM 990 & 990-EZ Part V, line 8 o Removed section 509(a)(3) supporting organizations from the question regarding donor advised funds 6 3

4 2014 FORM 990 & 990-EZ Part VII o Accrued bonuses paid within 2 ½ months after year-end do not have to be reported as deferred compensation FORM 990 & 990-EZ 1023-EZ o Three pages long o Gross receipts <= $50,000 & Assets <= $250,000 o Application process may result in more questions on the Form 990-EZ in the future due to loss of information in a full-length 1023 Processing time: 17 months vs. 14 business days 8 4

5 2014 CHANGES TO 990 SCHEDULES Minor cosmetic changes to the following schedules o B Schedule of Contributors o C Political Campaign and Lobbying Activities o D Supplemental Financial Statements o G Supplemental Information Regarding Fundraising or Gaming Activities o I Grants and Other Assistance to Organizations, Governments and Individuals in the U.S. o K Supplemental Information on Tax Exempt Bonds o N Liquidation, Termination, Dissolution, or Significant Disposition of Assets Schedule F (Statement of Activities Outside the United States) o Forms 3520, 3520-A & 5713 are not to be filed with Form 990 Schedules J (Compensation Information) & L (Transactions with Interested Persons) o Adds 501(c)(29) organizations 9 SCHEDULE A Significant changes Doubled in size Overhauled to enhance reporting for 509(a)(3) supporting organizations 10 5

6 SCHEDULE A PART I 11 SCHEDULE A PARTS II & III Instructions for Schedule A, Part II, clarify that an organization may complete Part II even if it checks a public charity box in Part I other than for section 170(b)(1)(A)(vi) 2013 change in classification of higher education institutions o Should use caution in using classification in order to meet Schedule B special rules 2% excess contribution calculation o Commonly miscalculated 12 6

7 SCHEDULE A PART IV Use these schedules as a guide for forming new organizations 13 SCHEDULE A PART V File Form 8940 to request updated Determination Letter Repeal of Type II & III supporting organizations mentioned in 2014 Tax Reform Bill 14 7

8 SCHEDULE H - HOSPITALS Changes to Part V, Sections A & B Part V, Section B, Lines 1 & 2 o Was hospital facility first licensed, registered or similarly recognized by a State as a hospital facility in current taxable year or immediately preceding tax year? o Was hospital facility acquired or placed into service as a tax-exempt hospital in current tax year or immediately preceding tax year? 15 SCHEDULE H - HOSPITALS Part V, Section B, Line 6b o Was hospital facility s community health needs assessment (CHNA) conducted with one or more organizations other than hospital facilities? Part V, Section B, line 7c ( line 5c) o Made a paper copy available for public inspection without charge at hospital facility BKD Insights CHNA Round Two 16 8

9 SCHEDULE H - HOSPITALS Part V, Section B, Lines SCHEDULE H - HOSPITALS Part V, Section B, Line 13 o Combines questions from previous form for lines 9-12 o Includes checkboxes to explain eligibility criteria explained in financial assistance policy (FAP) (similar to old lines 10-12) Removed: State Regulation checkbox New/Revised: Underinsurance Status (rather than Uninsured Discount) 18 9

10 SCHEDULE H - HOSPITALS Part V, Section B, Line 15 (former Line 13) includes new checkboxes indicating how hospital facility s FAP or FAP application form explained method for applying for financial assistance 19 SCHEDULE H - HOSPITALS Part V, Section B, Line 16 (former Line 14) replaced checkboxes with the following 20 10

11 SCHEDULE H - HOSPITALS Part V, Section B, Line 19 (former Line 17) replaced checkboxes with the following Note checkboxes for liens, lawsuits & body attachments were collapsed into a single checkbox 21 SCHEDULE H - HOSPITALS Part V, Section B, Line 20 (former Line 18) replaced checkboxes with the following 22 11

12 SCHEDULE L Interested person definition o For Part I no change o Disqualified persons under Code Section 4958 For Parts II - IV Current or former officers, directors, trustees or key employees required to be listed on Form 990, Part VII, Section A (or Form 990-EZ, Part IV) Creator or founder of organization Substantial contributor For Part III, a member of organization s grant selection committee Family member of any of above 23 SCHEDULE L Interested person definition o For Parts II - IV (cont.) 35% controlled entity of any those previously mentioned, in aggregate Part III an employee (or child of an employee) of a substantial contributor or of a 35% controlled entity Part IV for purposes of reporting management company transactions, a former officer, director, trustee or key employee of organization within last five tax years Update interested person questionnaires 24 12

13 SCHEDULE L Other 2014 Schedule L instructions changes o Uniform reasonable efforts definition that applies to all parts (not just Parts III & IV) o Part I (excess benefit transactions): identify in Part V organization manager(s), if any, that knowingly participated in excess benefit transaction o Part II (loans): clarification that split-dollar life insurance arrangements described in Regs are loans reportable in Part II o Part IV (business transactions): new reporting exception for transactions with publicly traded corporations in ordinary course of business, on same terms as are generally offered to public 25 SCHEDULE R Clarifications o Part V (Transactions with Related Organizations) Not required to list transactions with disregarded entities 26 13

14 INTERNATIONAL TAXATION ISSUES Foreign Account Tax Compliance Act (FATCA) o Effective July 1, 2014 o Any US organization, including any not-for-profit organization, needs to consider if they have any documentation requirements (Form W-8), reporting requirements (Form 1042-S) &/or withholding tax requirements in connection with payments to foreign persons. Specifically, new FATCA rules expand on documentation, reporting & withholding tax requirements in connection with certain financial payments to foreign entities. Forms W-8 & 1042-S were substantially revised to accommodate these new FATCA rules 27 INTERNATIONAL TAXATION ISSUES Foreign bank accounts Form FinCEN Form Report of Foreign Bank & Financial Accounts o Required by U.S. persons, which includes exempt organizations, who have financial interest in or signature authority over foreign financial account whose value exceeds $10,000 at any time during calendar year o Effective for calendar year 2013, this form is required to be e-filed using Treasury Department s BASE e-filer system or by your tax preparer o Penalty for not filing report ranges between $10,000 to $100,000 o For further information, visit Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial- Accounts-FBAR 28 14

15 IRS DIRTY DOZEN LIST OF TAX SCAMS FOR 2015 FILING SEASON 1. Aggressive phone scams 2. Phishing 3. Identity theft 4. Return preparer fraud 5. Offshore tax avoidance 6. Inflated refund claims 7. Fake charities 8. Hiding income with fake documents 9. Abusive tax shelters 10. Falsifying income to claim credits 11. Excessive claims for fuel tax credits 12. Frivolous tax arguments 29 TAX ON UNRELATED BUSINESS INCOME/512(B)(13) Form 990-T o In general, interest, rent, royalties & annuities paid to tax-exempt organizations from controlled entity are treated as UBI to tax-exempt organization o Pension Protection Act provided that if payment to tax-exempt organization by controlled entity is no more than fair market value, then payment is excludable from tax-exempt organization s UBI o This provision ended December 31, 2013 o Provision was extended December 2014 & is retroactive to January 1, 2014 o Exclusion from UBTI for qualifying specified payments extended for one year for payments received or accrued before January 1, 2015 Review related entity transactions for potential reporting 30 15

16 HIGHER EDUCATION UPDATE Unrelated Business Income o Repair regulations where the unrelated activity has depreciable assets Deferred Compensation o Substantial risk of forfeiture Accountable Plans o Proper tax treatment for employees Private Letter Ruling o Importance of properly structuring for-profit entities to consider UBI & impact on exempt status Price vs. Commissioner, T.C. Memo o Profit motive determination 31 IRS PRIORITY GUIDANCE PLAN Contains 317 projects Rev Proc updating grantor & contributor reliance criteria Rev Proc to update Rev Proc for EO Select Check Published? 16 pertain to exempt organizations Regs for streamlined application process Rev Proc for procedures for issuing det letters for organizations that submit 1023EZ Prop Regs related to political campaign intervention Final regs on 501(c)(29) exemption applications Final regs under 501r for charitable hospitals Add'l guidance on 509(a)(3) organizations Guidance under 512 regarding expense allocation Guidance under 4941 regarding PF's investment in partnership w/ disqualified persons Final regs under 4942 & 4945 for making good faith determinations Final regs under 4944 on program-related investments Guidance on excise taxes on donor advised funds Guidance under 6033 related to contribution reporting Final regs under 6104(c) Final regs under 7611 related to church tax inquiries and exams 32 16

17 CAMP PROPOSAL/2014 COMPREHENSIVE TAX REFORM BILL Proposal to make e-filing of Form 990s for all tax-exempt entities mandatory Proposal to allow individual taxpayers to deduct charitable gifts made after close of tax year but before April 15 Elimination of Type II & Type III supporting organizations exemption Excise tax on certain private colleges & universities. This bill proposes 1 percent excise tax on net investment income of many private colleges & universities Proposed excise tax of 25 percent on excess executive compensation over $1 million Simplifying private foundation excise tax to flat rate of 1 percent 33 WHITE HOUSE BUDGET PLAN PROPOSAL Proposed budget for FY 2016 Proposes a limitation to the value of all itemized deductions, including charitable gifts to 28% for individuals earning more than $200,000 & married couples earning more than $250,

18 MACHINE READABLE FORM 990 FY 2016 budget proposal, submitted by White House during February 2015, if enacted, would require Internal Revenue Service (IRS) to finally release 990 data in an open, computable format, facilitating large-scale analysis & greater transparency of not-for-profit sector. Without these reforms, we will continue to face gaps in our understanding of a sector that makes up 5 percent of the nation s GDP & more than 10 percent of all private sector employment Cited from The Aspen Institute, 35 Questions? 18

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20 Thank You! Jessica Freeman Wendy Budde