Last week I got to attend a TEGE Council Meeting in Dallas, run by a group that convenes with the IRS and other stakeholders important to tax-exempt organizations. The meetings give us a chance to hear what’s going on at the front lines, and what might be coming down the road for exempt orgs. I got a number of takeaways from the day, but the big ones I wanted to share with any of you running exempt orgs were:
– A good number are reporting compensation on their 990’s all wrong, especially compensation that’s deferred. What’s deferred you say? It’s complicated, lol. But for the sake of simiplicity, it’s comp you promise and don’t pay out at the moment. So for example, where you tell an Executive Director you’ll pay them when they leave instead of paying a certain salary now. Thing is, all of this has to be reported, even when it’s just a promise.
– Not enough folks are being thorough with gathering information for the 990s. You should be sending out questionnaires, meeting with the board, talking with staff or certain donors, and sussing out the things people may be forgetting to tell us.
-People are also misinterpreting what it looks like for one organization to “control” another for reporting purposes. The control doesn’t have to be direct, and sometimes it’s as subtle as controlling one org that controls another.
– Anyone who thinks they might be in danger for triggering the “Parachute Payment” under section 4960 needs to talk to an attorney. Just sitting there listening to the nuances stressed me out, and I’m not trying to relive that trauma by replicating those here. One interesting point though is you do not have to pay a million for this to be triggered, instead, you’re looking for the top five paid and running them through a serious of questions. https://www.irs.gov/pub/irs-drop/n-19-09.pdf
– When organizations do cliff vesting, they are inherently creating what could be really large tax bills for themselves and those they’re paying over time. For example, let’s so you guarantee a really large bonus from the start, but require a certain amount of service before payments are made. The tax clock runs from the promise, and when the large sum is paid out in three or five years a huge tax bill will likely come with it. So organizations need to decide whether they should speed up payments, or cover the tax bill for those being compensated.
– Particular attention is being paid to for-profits that have converted to a 501(c)(3).
– The IRS is no longer sending out lists of subordinates for those central organizations under a group exemption filing.
– People are forgetting to send notices before filing for 501(c)(4) still.
– Folks are all jacked up behind what’s happened with 512(a) and many who felt like they were owed a refund, actually ended up owing money once an amended 990-T was filed. But there is relief for those who didn’t file a 990-T originally but do now after 512(a) was put in place. https://www.irs.gov/forms-pubs/increase-in-unrelated-business-taxable-income-by-disallowed-fringe-benefits
– The funding toolbox for philanthropy continues to grow exponentially, as I told ya’ll it would, with foundations like Dell utilizing loans, credit guarantees, and equity investments in their program-related investments. With continued investment in for-profit businesses.
– There are a number of mechanisms to put in place when a foundation invests into for-profits, but it is doable and is increasingly being seen as a way to bolster impact in the charitable space.
This is just a summary, I have two pages of notes along on the PRI discussion the Dell Foundation had. If any of these trigger questions or concerns for you, especially the last two, don’t hesitate to reach out.
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