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Category Archives: Nonprofit Organizations

Nonprofit Organizations – Sales and Use tax refund Q&A

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by Meagan Bullochsales tax

Q:  Do nonprofit organizations have to pay sales or use tax on items they purchase?

A:  Yes.  NC does not exempt nonprofit organizations from paying sales or use tax on items they purchase for use.

 

Q:  Are all nonprofit organizations eligible for refunds of the sales and use taxes paid?

A:  No.  The following entities may file for semiannual refunds of the sales and use taxes paid on purchases of tangible personal property for use in carrying on their nonprofit work:

  1. Hospitals not operated for profit
  2. Educational institutions not operated for profit
  3. Churches, Orphanages, and Other charitable or religious institutions and organizations not operated for profit

 

Q:  What information does the Department of Revenue need to determine whether an organization qualifies for sales and use tax refunds?

A:  A nonprofit organization must furnish the Department of Revenue with a copy of the documents used to create the organization (Articles of Incorporation, Articles of Amendment and Bylaws).

 

Q:  An organization has a Section 501(c)(3) Federal exempt status.  Does the organization automatically qualify to receive sales and use tax refunds?

A:  No.  The Department must review the documents used to create the nonprofit organization to determine whether it qualifies for refunds of sales and use taxes paid.

 

Q:  How does an organization file a claim for refund?

A:  The organization should complete Form E-585, Nonprofit and Governmental Entity Claim for Refund State and County Sales and Use Taxes.

 

Q:  How often do I file the Form E-585?

A: Claims for refund are filed semiannually.  The claim for refund of sales and use taxes paid during the period January 1 through June 30 is due to be filed by October 15th of the same year.  The claim for refund for the period July 1 through December 31 is due to be filed by April 15th of the following year.

 

Q:  What is the organization’s claim for refund is filed late?

A:  Claims can be filed up to three years after the due date.  Any filed later than three years will be denied.

 

Q:  Should the receipts or invoices be mailed with the organization’s claim for refund?

A:  No.  Receipts and invoices should be kept by the organization for a period of three years beyond the date the refund claim id due to be filed or three years beyond the date the claim is filed, whichever is later.

 This article is an excerpt from a bulletin from the Department of Revenue for North Carolina called “State Taxation and Nonprofit Organizations”  For more information, please visit, here, or call our office for additional details.

Meagan Bulloch ([email protected]) is an audit manager at Langdon & Company LLP.  She is focused primarily on non-profit clients.

Small Actions with Big Impacts: Internal Controls for Nonprofits

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by Rebecca Lunn

Given the small size or small budget of many nonprofits, some organizations may find it tempting to skimp on the internal controls of the entity. However, there are many controls that are inexpensive or easy to implement that can create a big impact in your organization.balance pai

For example, although your organization may lack employees, you can involve individuals outside the accounting function, such as the receptionist, in tasks such as opening the mail or logging invoices, to increase segregation of duties. Limiting the number of people with access to checks, limiting check signers, and simply marking invoices “paid” can also strengthen controls around cash disbursements. Developing written policies, such as a code of conduct or capitalization policy, can provide a guideline for employees to follow, creating consistency across the organization. Also, even though it may seem like an unnecessary expense, often using a payroll service to process regular payroll and prepare tax filings is often the most efficient and cost-effective manner for ensuring all laws and regulations are met. Lastly, if your nonprofit has a board of directors, it is important to report the financial position to the board on a periodic basis. This will allow the board to take any necessary actions when things are not operating as planned. Also, keeping detailed board minutes will ensure that formal approval is documented for important decisions affecting the organization. These steps are just a few of the numerous ways implementing simple controls can strengthen your organization.

If your nonprofit needs assistance in developing stronger internal controls, or improving upon existing controls, please contact our firm for more information on how we can help.

Rebecca Lunn ([email protected]) is an Senior Accountant at Langdon & Company LLP.  She specializes in financial and compliance auditing for governments and nonprofit organizations.

L&C Promotions

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It is with great pleasure that we announce the following promotions within L&C this year.

Lee Byrd, Audit Manager

Lee Byrd, Audit Manager
[email protected]

Lee joined L&C’s audit department in 2007. She has served on numerous engagements including nonprofit organizations with single audit requirements, as well as healthcare, manufacturing, real estate and small businesses.  She also routinely consults in the areas of accounting and internal controls for clients in these industries. Lee is a CPA.  She graduated from North Carolina State University where she obtained her BSBA and Masters in Accounting.

 

 

 

 

 

 

 

Susan Dean, Tax Manager

Susan Dean, Tax Manager
[email protected]

Susan joined L&C’s tax department in 2009.  Prior to joining our firm Susan served as tax senior with McGladrey and Pullen, LLP.  Susan is an Enrolled Agent with the Internal Revenue Service.  With over ten years of experience in tax, Susan has spent the majority of her career providing services to corporate, pass-thru, non-profit and individual clients. She has significant tax experience with the non-profit industry, trust income tax reporting and multi-state tax filings. Susan obtained her Bachelor of Science and Masters of Science in Accounting from East Carolina University.

 

 

 

 

 

 

 

 

Taylor Elliott, Tax Manager

Taylor Elliott, Tax Manager
[email protected]

Taylor also joined the L&C tax department in 2009.  Prior to joining our firm she served as a tax senior with McGladrey and Pullen, LLP.  Taylor provides tax services to corporate, pass-through, nonprofit and individual clients. She frequently works with owners of closely-held businesses on matters related to tax planning, consulting and state and local taxation.  She has extensive experience in healthcare, bio-medical engineering, manufacturing, construction and real estate. Taylor is a CPA and obtained her undergraduate degree from Meredith College and received her Masters in Accounting from North Carolina State University.

 

 

 

 

 

 

 

Kendall Tyson, Tax Manager

Kendall Tyson, Tax Manager
[email protected]

Kendall joined the L&C tax department in 2011.  Prior to joining our firm she served as a tax senior with McGladrey and Pullen, LLP.  Kendall provides tax planning and compliance, reporting and special projects for closely-held businesses, including physician and dental practices. She also has significant experience with nonprofit tax reporting and multi-state tax filings.  Kendall is a CPA and obtained her undergraduate degree from Meredith College and received her Masters in Accounting from North Carolina State University.

 

 

 

 

 

 

Brittany Powell, Audit Senior

Brittany Powell, Audit Senior
[email protected]

Brittany joined L&C’s audit department in 2013. She has served on numerous engagements including nonprofit organizations with single audit requirements, as well as healthcare and small businesses.  Brittany is a CPA and obtained her undergraduate degree from Campbell University and received her Masters in Accounting from East Carolina University.

 

 

 

 

 

Please join us in congratulating them on their promotions!

Does your Nonprofit Need an Audit?

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baudity Brittany Powell

The National Council of Nonprofits’ Audit Guide (“Audit Guide”) can provide your organization with a starting point for making the decision on whether or not your nonprofit organization needs an audit.

As the Audit Guide points out in its “Does your nonprofit need to have an independent audit?” section, nonprofits may be required to have an audit for various reasons including, but not limited to, compliance with specific grant agreements or loan covenants.  Additionally, a nonprofit organization may be required to have a Yellow Book or Single Audit depending on its level of Federal or State expenditures.  A nonprofit with federal expenditures equal to or exceeding $500,000 is required to have a Single Audit.  As discussed in our February 10, 2014 blog post, this threshold will increase to $750,000 beginning with fiscal years beginning on or after December 26, 2014.  This Audit Guide provides a summary for each state’s audit requirements.  North Carolina requires “a non-governmental entity that receives $500,000 or more annually in state funds” to submit a Yellow Book audit.

However, an audit may not be necessary or cost effective for all nonprofit organizations.  A review, while substantially less in scope than an audit, provides limited assurance over an entity’s financial statements.  Therefore, a review can be a viable, less costly alternative to an audit for some nonprofit organizations.

If you are considering an audit or review for your nonprofit, contact someone at our office to help you determine the engagement type that best fits your organization’s needs.  See the Audit Services & Consulting section of our website for more information about audits, reviews, and other services we provide.

Brittany Powell is a Senior Accountant with Langdon & Company LLP.  She specializes in audit, serving a wide variety of nonprofit organizations.

IRS Unveils New Form for Organizations Applying for 501(c)(3) Tax-Exempt Status

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by Taylor Elliott

On July 1, 2014, the Internal Revenue Service (IRS) released Form 1023-EZ as part of its efforts to streamline the application process for organizations seeking tax-exempt status.  The form is specifically designed for charities who wish to be classified as exempt under section 501(c)(3).  An organization must meet several criteria in order to be eligible to apply using the form, including a gross receipts test of $50,000 or less as well as an assets test of $250,000 or less. The form instructions outline additional criteria, including an eligibility worksheet that helps charities determine whether the form is right for them through a series of yes and no questions.

The IRS has indicated that the overall goal in developing Form 1023-EZ is to reduce the time and paperwork associated with providing a charity a determination as to its tax-exempt status. Previously, the IRS has been intensely criticized for a lengthy and cumbersome 1023 application process that includes an application backlog that is many months behind. Until now, all organizations, regardless of size, have been subject to the same 23-page form filled with a seemingly endless list of tedious questions, many of which are not relevant to smaller, simpler charities. After soliciting feedback from impacted parties, the IRS was able to whittle down to Form 1023-EZ, a three-page form containing only the most essential questions pertaining to determination of tax-exempt status of smaller organizations. According to IR-2014-77, as many as 70% of applicants are expected to be eligible to use this form, not only slashing the time spent by those charities in completing the application but also minimizing the time spent by the IRS in reviewing their files. The electronic filing requirement  is  also expected to increase the efficiency of the process. An application fee of $400 must be electronically submitted with the application as well.

For questions about this form or the tax-exempt application process in general, please contact our office.  We would love to discuss with you the ways that Langdon and Company LLP can help your organization obtain and maintain a tax-exempt status.

Taylor Elliott is a tax manager with Langdon & Company LLP. She specializes in tax compliance and planning, working with several not-for-profit organizations in the Triangle area.

Special Rules Regarding Gifts In Kind

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Non ProfitThere are special IRS rules pertaining to gifts in kind for the recipient nonprofit and the donor.

The  recipient nonprofit organization can only acknowledge the date of receipt, description of the property, and its standing as a public charity eligible to receive donations from the public.  The assertion of the value of the property rests entirely on the donor.

The donor claiming a charitable deduction must comply with several steps. For any property donated with a purported value > $5,000, certain formalities must be followed in order to support the claiming of the charitable deduction by the donor.  These formalities fall to the donor to ensure full compliance and are summarized in the following steps: Continue reading Special Rules Regarding Gifts In Kind

Extensive Non Profit Fraud

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Non ProfitA recent Washington Post article brought to light numerous instances of fraud by non profit organizations as well as the misuse of Form 990 disclosures. It is believed that over a thousand non profit organizations reported a “diversion” of assets and funds totaling close to $500 million. The losses were attributed to various types of embezzlement, theft, fraudulent investment practices and the unauthorized expenditure of funds. Between 2008 and 2012, ten of the largest non profit companies in the country showed extensive levels of fraudulent activity. Continue reading Extensive Non Profit Fraud

Overview of Possible FASB Changes in Non-Profit Reporting Rules

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Non ProfitThe Financial Accounting Standards Board recently evaluated the way in which non-profit organizations record and report their financial information and is seeking to make changes that would enable charities to provide more accurate financial information to the general public.

To start with, FASB board members have created a draft document that can be used as a formal operating measure to evaluate any organization that is set up to serve the public good.

Continue reading Overview of Possible FASB Changes in Non-Profit Reporting Rules