It's that time of year again... time to start thinking about your organization's tax return filing. Some may not be aware of this annual requirement, or what even goes into this form. We created an FAQ to give a better understanding…
According to Harold Hancock, legal counsel for the House Ways and Means Committee, tax code changes are possible this year for charities and other nonprofits. We talked about this last year (and the year before), but so far, nothing has…
There are few topics that generate more confusion to nonprofit managers than unrelated business income (UBI). It is also one the areas than can cause the most problems for your organization. It can cost you money…even your tax exempt status if not properly handled. In this issue of our newsletter, we will shed some needed light on the subject.
The technical definition of UBI is: Income from a trade or business that is regularly carried on by an exempt organization and that is not substantially related to the performance by the organization of its exempt purpose or function, except that the organization uses the profits derived from this activity. Clear? Not really. A better way to say it is: money generated from any on-going activity of your organization when the activity itself does not directly further the organization’s exempt purpose. Examples are helpful:
Once upon a time, there were two websites, each belonging to a different charity. Our tale follows the adventures of these websites.
The first website…we’ll call it “the good site”…was considered a real asset to its owner. While not fancy or flashy, it was nice to look at and was obviously well taken care of. The content of the good site talked about the charity, the charity’s mission, its programs…it even had nice pictures of some of the volunteers helping the charity’s beneficiaries. And, everything was correct and up to date. The good site was very good indeed.
The other website…we’ll call it “the bad site”…was also considered a real asset to its owner. It was fancy and flashy and quite beautiful to behold. The content of the bad site talked a little about the charity, the charity’s mission, its programs…but, it talked a lot more about the charity’s president, John, and John’s for-profit business. In fact, it was kind-of hard to tell who the website was supposed to be promoting, John or the charity. There were some nice pictures of John, John’s family…even John’s dog…plus lots of conveniently placed “Buy Now” buttons for website visitors to snap up John’s new book. The bad site was very bad indeed.
At the end of most newsletters, we put out the call for “topic requests”. We wanted to get to some reader questions before the year ended. We will try to answer questions like these, that don’t require a whole article, from time to time. If you have article topics that you would like us to cover, email them to us at email@example.com or simply reply to the email newsletter when you receive it. We cannot guarantee your question will be chosen, but we’ll try. On to the questions…
Q) Do all donations need to be spent by year’s end?
A) The quick answer is, no. “Nonprofit” does not mean that at the end of the year there should be no money left in the account. A 501(c)(3) organization can have money left at the end of the year. It would probably be a good idea if it can. Money left over can go toward adding programs, improving existing programs, make up for less funding next year, etc. Never forget that you’re still running a business (of sorts)…you gotta make more than you spend!