Question

Draft a financial assistance policy (not more than 2 pages) for a not-for-profit hospital that is compliant with the requirements of 501(r), as well as the accompanying plain language summary of the policy (not more than 1 page) for the same hospital. Due by 11:59 PM on the last day of the Module.

Answer 1

wenty-five years ago, I attended the first annual AICPA National Not-for-Profit Industry Conference at the Washington, D.C. Grand Hyatt. There were 14 sessions highlighted by FASB member Robert J. Swieringa’s presentation on recent pronouncements that included Statement 116, Accounting for Contributions Received and Contributions Made, and Statement 117, Financial Statements of Not-for-Profit Organizations. A couple hundred participants attended the conference as I recall, and conference materials were bound in a inch book that I could readily carry back to my office. We’ve come a long way from that humble beginning!

Many of the tax presentations focused on uncertainties from the Tax Cuts and Jobs Act of 2017. But perhaps the most attention-grabbing topic for the 2,000-plus conference attendees was the potential treatment of parking privileges provided to nonprofit employees as unrelated business income. The provision applies to organizations that lease office space as well as organizations that own their buildings and have parking lots. There is still a lot of uncertainty as to how this new tax provision will be applied and whether it applies to parking that is otherwise free to the public or constituents of the nonprofit. Stay tuned, the AICPA Not-for-Profit Section will share information as it becomes available.

More significantly, organizations will no longer be able to offset income from one unrelated business activity against losses from another unrelated business activity. The IRS has not yet clarified what differentiates one unrelated business activity from another. Until the IRS revises the Form 990-T, organizations will need to file 990-Ts for each line of business activity. Also, if any part of a fiscal year falls in 2018, organizations will need to report any 2018 unrelated business activities on separate 990-Ts.

Proposed House bill H.R. 5443 would require electronic filing of all annual Form 990 and Form 8872 (political organization reporting of contributions and expenditures) tax returns. This would allow the IRS to provide tax return data on a more timely basis. The IRS would be required to make these forms and their data available for public inspection in a format that permits data extraction and analysis.

Other Take-Aways

A session titled “CFO’s Cookbook: Recipes for Success” touched on several interesting points. One related to the need to communicate with knowledge and authority but not arrogance. Another was that funding is shifting to organizations that are able to prove desired programmatic outcomes, which is not always easy to do. Nonprofits also need to emphasize financial sustainability and avoid unfunded mandates.

A session on legal issues facing nonprofits indicated that employers are being blamed when they fail to disclose information related to employees that have been terminated for criminal activity such as theft and sexual harassment. What happens when those employees go on to a new employer and commit similar acts? There is reason for concern about liability if the former employer knew or should have known of the risk and failed to act. Even if there is no legal liability, the cost of an investigation and reputational risk (e.g., bad publicity, loss of grants and donations, recruiting quality staff, etc.) can be significant.

Year after year, I find this conference to be a great resource for those immersed in the nonprofit sector. It is a terrific opportunity to learn about major industry developments, network among peers, further develop your practice, and get critical questions answered by experts. The highlights in this article merely scratch the surface of all I took away from the many sessions that were presented. I hope you find them helpful in sparking important conversations with your staff and board members, peers, and nonprofit clients, and I look forward to seeing you at next year’s event.