The question of whether a worker is an employee or independent contractor is in the news again, this time with an announcement by the Department of Labor that it will go back to using classification criteria in effect during the Obama Administration.  Background. In January 2021 the Department of Labor (DOL) issued a new framework for determining whether a worker is an employee or independent contractor using the economic realities test under the Fair Labor Standards Act. The new rule, effective in March of 2021, upended years of judicial rulings applying the economic realities test ..read more

A newly released report shows that the current cap on deducting state and local taxes appears to be reducing charitable giving, particularly in states with higher property and sales taxes. Background. Under President Trump’s 2017 sweeping tax legislation called the Tax Cuts and Jobs Act, Congress put in place a limit of $10,000 on the federal deduction for state and local taxes—which previously had been fully deductible. This cap on the state and local taxes deduction (referred to as the SALT deduction cap) impacted Democratic-led states such as New York and California hardest due to their dis ..read more

President Biden has proposed in his fiscal year 2023 budget to clamp down on the ability of private foundations to count donor-advised fund distributions toward their mandatory payout amount. Similar proposals have been floated recently, on the basis that closing this “loophole” would get more funds to operating charities more quickly. Background on Payout Amount. Under Section 501(c)(3), there are two main types of organizations: private foundations and public charities. Private foundations are typically funded by a more narrow base (often a family or corporation), and as such are thought to ..read more

In light of the recent disasters across the Midwest, the IRS, Independent Sector and the National Council of Nonprofits issued a reminder that even non-itemizing taxpayers may take advantage of the charitable donation deduction for cash donations made before year end. Under the temporary law enacted as part of the CARES Act pandemic relief and extended through 2021, individuals may deduct up to $300, and married couples filing jointly may deduct up to $600, for cash donations to charities that ordinarily are not allowed for taxpayers that take the standard deduction. The IRS also reminded taxp ..read more

Tuesday December 7th is Colorado Gives Day, an initiative to increase philanthropy in Colorado through online giving. Since the initiative began in 2007, the Community First Foundation in collaboration with First Bank has raised over $419 million for more than 3,000 Colorado nonprofits. As in years past, the event will feature a $1.6 million incentive fund that proportionally increases the value of every dollar donated. For example, if a nonprofit receives 10 percent of the total donations made on Colorado Gives Day, it will receive 10 percent of the $1.6 million incentive fund. To make donati ..read more

The TE/GE operating division of the IRS earlier this month released its Fiscal Year 2022 program letter, which outlines priorities for the division. Organizations that fall within one of the selected areas may want to spend some time in the next year making sure that they are in compliance. The areas that TE/GE will be focusing on include the following: Strengthening compliance activities including targeting abusive promoter schemes like syndicated conservation easements, auditing of high-income taxpayers with private foundations and retirement plans, abusive charitable remainder trusts, and ..read more

The IRS has posted on its website the procedure for submitting complaints about a tax-exempt organization that may not be operating in compliance with federal tax laws and a link to Form 13909 Tax-Exempt Organization Complaint (Referral). Background. Organizations granted tax-exempt status must abide by the requirements of Section 501(c)(3), specifically the organization must be organized and operated exclusively for exempt purposes. This restriction means that an organization’s assets, resources or funds cannot be used to benefit private individuals, for lobbying activities, or to engage in c ..read more

The Supreme Court in Americans for Prosperity v. Bonita struck down a California law that required nonprofits registered in the state to solicit charitable donations to disclose major donors to the California Attorney General. Specifically, the California law required organizations to file Schedule B to their Form 990 with their annual state registration filing, which contains the names and addresses of major donors. The law imposed penalties and possible suspension of an organization’s registration for failure to do so. The state contended that the information contained on Schedule B was nece ..read more

The Accelerating Charitable Efforts Act (ACE Act), introduced by Senators Grassley and King, aims to restructure the laws governing donor advised funds in order to get donations more quickly to the working charities that need them. Given that over $140 billion in assets are sitting in these accounts, speeding up the flow of these funds into the nonprofit sector could have a substantial impact. Background. Generally, a donor advised fund, or DAF, is a separately identified account that is maintained and operated by a 501(c)(3) sponsoring organization, and contains contributions made by individu ..read more

The IRS announced last week that the Tax Exempt and Governmental Entities Division will be targeting inappropriate worker classifications in its fiscal year 2021 compliance initiatives. The review of worker classification issues will ensure that exempt organizations are not incorrectly treating employees as independent contractors—resulting in underreporting and underpayment of taxes, and improper exclusion from retirement plans. Background. Worker classification as either an employee (a worker dependent on another’s business for work) or independent contractor (a worker in business for themse ..read more