GEORGE JOHNSON & COMPANY
Dear Clients and Friends,
In this issue, among many important concepts, our professionals provide insights on the latest issues for nonprofits including:
- Lessons Learned from Implementing ASU 2016-14 – Functional Expenses
- Guidance Released on Taxable Income from Parking and Other Fringe Benefits
- The Uniform Guidance – Five Years and Counting
- IRS Answers Many Questions on New 21% Executive Compensation Tax
- Deadline Approaches for Remedial Amendments for 403(B) Plans
Nonprofit organizations with calendar year ends are working to implement the provisions of Accounting Standards Update (ASU) 2016-14, Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities.
The ASU is effective for annual financial statements issued for fiscal years beginning after December 15, 2017. Specifics of the requirements of the ASU have been highlighted in prior articles in the Nonprofit Standard and can be accessed in the Fall 2016, Winter 2016 and Spring 2017 issues. The ASU can be found here.
As implementation efforts have been undertaken, we have seen one area that is causing more issues than anticipated. This is the presentation of the statement of functional expenses that shows the analysis of expenses by function and natural classifications. As part of developing this information, entities are looking at their current cost allocation methodology as well as what components, both program and natural expense classifications, that they want to include.
GUIDANCE RELEASED ON TAXABLE INCOME FROM PARKING AND OTHER FRINGE BENEFITS
The bill known as the Tax Cuts and Jobs Act, enacted in December 2017, added new Section 512(a)(7) to the Internal Revenue Code (IRC). This new section requires tax-exempt organizations to increase their unrelated business taxable income (UBTI) by the amount paid or incurred for qualified transportation fringe benefits (QTFs) provided to employees.
THE UNIFORM GUIDANCE – FIVE YEARS AND COUNTING
It has been over six years since Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, more commonly known as the Uniform Guidance (UG) was released. The date of December 26, 2013, will forever be seen as the day compliance took on a new meaning for recipients of federal funding.
During this time, entities have worked to establish, update and critically review internal policies and procedures to ensure compliance with the Uniform Guidance. From my clients’ perspective, the amount of resources, both time and money, spent on meeting the new requirements has been staggering. Much progress has been made, but there continue to be key areas where we find that entities encounter issues. A few areas in which we continue to see issues and findings are discussed below:
IRS ANSWERS MANY QUESTIONS ON NEW 21% EXECUTIVE COMPENSATION TAX
On December 31, 2018, the IRS released Notice 2019-09 (the Notice), providing interim guidance regarding Section 4960 of the Internal Revenue Code (the Code) that was enacted on December 22, 2017, by the Tax Cuts and Jobs Act (the Act). The Notice provides the first guidance on new excise taxes that tax-exempt and governmental entities (and their related for-profit entities) may need to pay on the amount of remuneration in excess of $1 million in compensation and any excess parachute payments paid to a covered employee as early as May 15, 2019 (for calendar year entities). Affected organizations must report and pay the tax on recently updated IRS Form 4720.
DEADLINE APPROACHES FOR REMEDIAL AMENDMENTS FOR 403(B) PLANS
Maintaining compliance for 403(b) retirement plans historically has been challenging given the lack of historical regulatory oversight, guidance from the Internal Revenue Service (IRS), and non-profit organizations’ limited resources. But the IRS has taken steps to address this, including publishing a list of providers offering pre-approved prototype plans and creating a remediation period ending in March 2020 for sponsors to self-correct non-compliant plan documents.
In 2007, IRS regulations were updated to require sponsors of retirement plans that fall under the Internal Revenue Code 403(b) to adopt and follow a plan document for their retirement plans as of January 1, 2009. Subsequently, relief was granted to extend this deadline to January 1, 2010. Before this time, many 403(b) plans did not have a plan document outlining specific operational and governing terms of the plan.Read more…
Join GJC in welcoming our newly appointed Staff Accountants and Interns…
Austin Reed is currently studying at Eastern Michigan University and is expected to graduate at the end of the year with a BBA in Accounting. He was honored as the recipient of the Emerald Scholarship, which is a 4-year award. He volunteers with the United Way of Washtenaw County in the income tax assistance program. In his spare time, Austin enjoys playing basketball, seeing live music, and trying out new restaurants with friends.
Welcome Alexandra, Peter, Austin and Xavier to
the GJC Team!
The GJC Team at Forgotten Harvest, Detroit
We are happy to share that our Quality Control Principal, Michael Nicholas is celebrating 32 years of service with George Johnson & Company. He joined GJC in 1986 and has been a Principal since 1994. Aside from being responsible for managing all facets of audits, reviews, other attestation engagements, and tax return preparation services for our clients, Mike also maintains our quality control standards. We are fortunate to have him on our team!
GJC is an Independent Member of the BDO Alliance USA