Friday, February 24th, 2017
Last Night’s Hob Nob event proved to be as good as ever! Hosted by the Bradenton Area Economic Development Council (EDC), nearly 900 people attended this beloved event — The ultimate networking experience, centered around a variety of tasty food and beverages. The Mauldin & Jenkins wine booth is always a popular stop! Thank you to everyone who stopped by to say hello, we enjoyed seeing you.
Wednesday, February 22nd, 2017
Bylaws are the rules and principles that define your not-for-profit’s governing structure. Your board and staff need to be familiar with exactly what the bylaws contain — and what they don’t. If they’re incomplete or don’t reflect the organization’s current mission, revising them is critical.
What do they contain?
Your bylaws might cover such topics as the:
- Broad charitable purpose of your organization,
- Size and function of your board,
- Election, terms and duties of directors and officers, and
- Basic rules for voting, holding meetings, electing directors and appointing officers.
Without being too specific, your bylaws also should provide procedures for resolving internal disputes, such as the removal and replacement of a board member. If you’re not familiar with the bylaws, you should get up to speed fast.
How are bylaws changed?
If you want to change your organization’s bylaws, first make sure you have the authority to do so. Most bylaws contain an amendment paragraph that defines the procedures for changing them. Then consider creating a bylaw committee made up of a cross-section of your membership or constituency. This committee will be responsible for reviewing existing bylaws and recommending revisions to your board or members for a full vote.
Your bylaw committee needs to focus on your nonprofit’s mission, not its organizational politics. A bylaw change is appropriate only if you want to change your nonprofit’s governing structure, not its operating procedures.
What else should be considered?
If your nonprofit is incorporated, ensure that any proposed bylaw changes conform to your articles of incorporation. For example, the “purposes” clause in your bylaws must match that in your articles of incorporation. Any new provision or language changes in your bylaws contrary to the objectives and ideals included in your incorporation documents may invalidate the revisions.
Bylaw provisions that suggest you’ve strayed from your original mission also can jeopardize your federal tax-exempt status. Make sure your bylaw amendments are consistent with your tax-exempt purpose. If they represent a “structural or operational” change, report the amendments on your Form 990.
Although bylaws aren’t required to be public, consider making up-to-date bylaws publicly available to boost your organization’s accountability and transparency. Contact us for more information.
Tuesday, February 21st, 2017
Rather than keeping track of the actual cost of operating a vehicle, employees and self-employed taxpayers can use a standard mileage rate to compute their deduction related to using a vehicle for business. But you might also be able to deduct miles driven for other purposes, including medical, moving and charitable purposes.
What are the deduction rates?
The rates vary depending on the purpose and the year:
Business: 54 cents (2016), 53.5 cents (2017)
Medical: 19 cents (2016), 17 cents (2017)
Moving: 19 cents (2016), 17 cents (2017)
Charitable: 14 cents (2016 and 2017)
The business standard mileage rate is considerably higher than the medical, moving and charitable rates because the business rate contains a depreciation component. No depreciation is allowed for the medical, moving or charitable use of a vehicle.
In addition to deductions based on the standard mileage rate, you may deduct related parking fees and tolls.
What other limits apply?
The rules surrounding the various mileage deductions are complex. Some are subject to floors and some require you to meet specific tests in order to qualify.
For example, miles driven for health-care-related purposes are deductible as part of the medical expense deduction. But medical expenses generally are deductible only to the extent they exceed 10% of your adjusted gross income. (For 2016, the deduction threshold is 7.5% for qualifying seniors.)
And while miles driven related to moving can be deductible, the move must be work-related. In addition, among other requirements, the distance from your old residence to the new job must be at least 50 miles more than the distance from your old residence to your old job.
There are also substantiation requirements, which include tracking miles driven. And, in some cases, you might be better off deducting actual expenses rather than using the mileage rates.
So contact us to help ensure you deduct all the mileage you’re entitled to on your 2016 tax return — but not more. You don’t want to risk back taxes and penalties later.
And if you drove potentially eligible miles in 2016 but can’t deduct them because you didn’t track them, start tracking your miles now so you can potentially take advantage of the deduction when you file your 2017 return next year.
Thursday, February 16th, 2017
In recent years, the IRS has increased its scrutiny — including actual audits — of not-for-profits. Do you know what to do if your organization receives an audit letter?
What is an audit?
An audit begins with the initial contact from the IRS and continues until a closing letter is issued. Before closing an audit, an officer of your nonprofit, your CPA and the IRS agent will discuss the agent’s conclusions at a closing conference. Both the conference and letter will explain your appeal rights.
Audits can cover many areas. For example, the IRS may want to learn whether your organization has filed all returns and forms as required by law. Or it might delve into whether your activities have been consistent with your tax-exempt purpose, or whether unrelated business income tax or employment taxes were properly paid.
The igniting spark for an audit might be an IRS examination initiative or project, or complaints to the agency about potential noncompliance. In general, Form 990 plays a strong role in the selection process. For instance, the IRS may apply risk models to your organization’s Form 990 data related to governance or the incidence of fraud.
Field vs. correspondence
If your initial contact letter schedules an agent to visit, the IRS is conducting a field audit, which falls into one of two categories:
- General program exam, which typically is conducted by a single IRS agent, or
- Team Examination Program audit, which focuses on large, complex organizations and may involve a team of examiners.
If, on the other hand, your initial IRS letter asks you to deliver documents to an IRS office by mail, the agency is conducting a correspondence audit. An agent generally will perform the audit via letters and phone calls to your officers or representative. If a correspondence audit grows more complex or your nonprofit doesn’t respond to requests, it can turn into a field audit.
The IRS might also contact you to announce a compliance check. This isn’t an audit; it’s a determination of whether your organization is adhering to record-keeping and information reporting requirements. However, a compliance check can lead to an audit.
Don’t do it alone
Receiving an audit letter can be scary, but your nonprofit doesn’t need to go through the process alone. Contact us for immediate help.
Tuesday, February 14th, 2017
Last year you may have made significant gifts to your children, grandchildren or other heirs as part of your estate planning strategy. Or perhaps you just wanted to provide loved ones with some helpful financial support. Regardless of the reason for making a gift, it’s important to know under what circumstances you’re required to file a gift tax return.
Some transfers require a return even if you don’t owe tax. And sometimes it’s desirable to file a return even if it isn’t required.
When filing is required
Generally, you’ll need to file a gift tax return for 2016 if, during the tax year, you made gifts:
- That exceeded the $14,000-per-recipient gift tax annual exclusion (other than to your U.S. citizen spouse),
- That exceeded the $148,000 annual exclusion for gifts to a noncitizen spouse,
- That you wish to split with your spouse to take advantage of your combined $28,000 annual exclusions,
- To a Section 529 college savings plan for your child, grandchild or other loved one and wish to accelerate up to five years’ worth of annual exclusions ($70,000) into 2016,
- Of future interests — such as remainder interests in a trust — regardless of the amount, or
- Of jointly held or community property.
When filing isn’t required
No return is required if your gifts for the year consist solely of annual exclusion gifts, present interest gifts to a U.S. citizen spouse, qualifying educational or medical expenses paid directly to a school or health care provider, and political or charitable contributions.
If you transferred hard-to-value property, such as artwork or interests in a family-owned business, consider filing a gift tax return even if you’re not required to. Adequate disclosure of the transfer in a return triggers the statute of limitations, generally preventing the IRS from challenging your valuation more than three years after you file.
Meeting the deadline
The gift tax return deadline is the same as the income tax filing deadline. For 2016 returns, it’s April 18, 2017 (or October 16 if you file for an extension). If you owe gift tax, the payment deadline is also April 18, regardless of whether you file for an extension.
Have questions about gift tax and the filing requirements? Contact us to learn more.
Thursday, February 9th, 2017
If your not-for-profit is “stuck” and you’re not sure how to move forward, consider adopting some for-profit business practices. The essential missions of businesses and nonprofits are different, but the ways to achieve them often are the same.
Make a plan
The strategic plan — a map of near- and long-term goals and how to reach them — lies at the core of most for-profit companies. If your nonprofit doesn’t have a strategic plan or has been lax about revising an existing one, make this a top priority.
Set objectives for several time periods, such as one year, five years and 10 years out, paying particular attention to each strategic goal’s return on investment. For example, consider the resources required to implement a new contact database relative to the time and money you’ll save in the future. Working through the financial implications of ideas can help you avoid the kind of initiatives that sound good in theory but are unlikely to provide returns.
Next, your annual budget should follow your strategic plan. For-profit businesses use budgets to support strategic priorities, putting greater resources behind higher priority projects.
Businesses also routinely carry debt, believing that it takes money to make money. Nonprofits typically do everything in their power to avoid operating deficits. Unfortunately, it’s possible to operate so lean that you no longer meet your mission. Building up your endowment, applying for a loan or even creating a for-profit subsidiary could provide you with the funds to grow.
Pay for experience
Most for-profit companies budget for experienced leadership. Although nonprofits typically can’t pay their executives as much as businesses do, you can ensure that compensation is competitive relative to other organizations.
Paying for experience is particularly critical when you’re embarking on major fundraising campaigns or looking to expand your program outreach. You may even want to consider candidates from the for-profit world, who might bring greater marketing and financial management expertise and new ideas to the table.
Take baby steps
Translating for-profit business practices to your nonprofit won’t necessarily be easy, so start with baby steps. If you need help, please contact us.
Wednesday, February 8th, 2017
Incentive stock options allow you to buy company stock in the future at a fixed price equal to or greater than the stock’s fair market value on the grant date. If the stock appreciates, you can buy shares at a price below what they’re then trading for. However, complex tax rules apply to this type of compensation.
Current tax treatment
ISOs must comply with many rules but receive tax-favored treatment:
- You owe no tax when ISOs are granted.
- You owe no regular income tax when you exercise ISOs, but there could be alternative minimum tax (AMT) consequences.
- If you sell the stock after holding the shares at least one year from the exercise date and two years from the grant date, you pay tax on the sale at your long-term capital gains rate. You also may owe the 3.8% net investment income tax (NIIT).
- If you sell the stock before long-term capital gains treatment applies, a “disqualifying disposition” occurs and any gain is taxed as compensation at ordinary-income rates.
So if you were granted ISOs in 2016, there likely isn’t any impact on your 2016 income tax return. But if in 2016 you exercised ISOs or you sold stock you’d acquired via exercising ISOs, then it could affect your 2016 tax liability. And it’s important to properly report the exercise or sale on your return to avoid potential interest and penalties for underpayment of tax.
Future exercises and stock sales
If you receive ISOs in 2017 or already hold ISOs that you haven’t yet exercised, plan carefully when to exercise them. Waiting to exercise ISOs until just before the expiration date (when the stock value may be the highest, assuming the stock is appreciating) may make sense. But exercising ISOs earlier can be advantageous in some situations.
Once you’ve exercised ISOs, the question is whether to immediately sell the shares received or to hold on to them long enough to garner long-term capital gains treatment. The latter strategy often is beneficial from a tax perspective, but there’s also market risk to consider. For example, it may be better to sell the stock in a disqualifying disposition and pay the higher ordinary-income rate if it would avoid AMT on potentially disappearing appreciation.
The timing of the sale of stock acquired via an exercise could also positively or negatively affect your liability for higher ordinary-income tax rates, the top long-term capital gains rate and the NIIT.
Keep in mind that the NIIT is part of the Affordable Care Act (ACA), and lawmakers in Washington are starting to take steps to repeal or replace the ACA. So the NIIT may not be a factor in the future. In addition, tax law changes are expected later this year that might include elimination of the AMT and could reduce ordinary and long-term capital gains rates for some taxpayers. When changes might go into effect and exactly what they’ll be is still uncertain.
If you’ve received ISOs, contact us. We can help you ensure you’re reporting everything properly on your 2016 return and evaluate the risks and crunch the numbers to determine the best strategy for you going forward.
Tuesday, February 7th, 2017
Greg Morgan, one of M&J’s Atlanta partners, had a unique opportunity come his way that would cause any Braves fan to turn green with envy. As the previous Chairman of the Cobb Chamber of Commerce, Greg was offered a sneak peak of the Braves new home, Suntrust Park! He, along with his wife Ruth, Jeff Fucito (Atlanta’s partner-in- charge) and Steve Byrne (Atlanta partner) toured the facilities and even had a chance to scope out the view from Mauldin & Jenkins’ season tickets.
“The Braves announcement that they were moving to Cobb County came in 2013 when I was Chairman of the Cobb Chamber of Commerce. During the Cobb County Board of Commissioners meetings related to the move and the signing of the memorandum of understanding, I spoke several times on the Chamber’s behalf in favor of the move to Cobb. Theresa Smith, Marketing Director for New South Construction, one of the primary developers for the Braves offered a tour when the time was right. We decided the time was right and took her up on her offer. Rob Ragan, also of New South Construction, guided us on the tour. We had a great time!” – Greg Morgan
Friday, February 3rd, 2017
Our Atlanta office is celebrating the Super Bowl with a Falcons Friday Feast! Let’s go Falcons! Beat the Patriots!
Thursday, February 2nd, 2017
Your not-for-profit’s board members likely lead busy lives, so they may not get to every board meeting. That’s why it’s essential to organize periodic board retreats that bring everyone together in a relaxed setting.
Board retreats enable participants to get past the mundane topics of regular board meetings and delve deeply into specific issues. To take advantage of this opportunity, do the following:
1. Get participant buy-in. Don’t spring a fully planned retreat on your board without first making sure everyone agrees to the merit of the session and its goals.
2. Choose the time and place carefully. Once the board agrees to a retreat, turn your thoughts to logistics, which will vary depending on your objectives. An afternoon at a local restaurant may be ideal if the board needs to brainstorm some creative, new fundraising options. Broader agendas or confidential topics will require more time and privacy — perhaps several days at an offsite location.
3. Create a detailed agenda. Start your agenda at the end by asking what outcome you want to come away with at the close of the retreat. If, for example, you’d like to end the meeting with a five-year strategic plan, your agenda might start off with time to review the history of your organization and competitive research from other nonprofits. From there, build in time to brainstorm where your donors, beneficiaries, members and other important constituencies may be in five years.
4. Make a postretreat plan. Some of the most important work will happen after the retreat. That’s why you need to recap all decisions and commitments and make a plan to put your work into action before the board scatters. Follow up by sending members a written summary of retreat discussions and add action items to future board meeting agendas based on those plans.
Focused and engaged
A board retreat can help ensure that board members are engaged and focused on the issues that matter to your nonprofit. Contact us for more information on governance issues.