The "Non-Profit Revitalization Act of 2013" has passed in the NYS Senate and Assembly
The "Non-Profit Revitalization Act of 2013" which has passed in the NYS Senate and Assembly will raise the gross revenue thresholds triggering the requirement to obtain an independent CPA's audit from $250,000 to $500,000 for and an independent CPA's review from $100,000 to $250,000 starting for fiscal years ending on or after July 1st of 2014. The gross revenue threshold for an independent CPA's audit will escalate to $750,000 on July 1, 2017 and $1 million on July 1, 2021.The Attorney General will have authority to request an independent CPA's audit from nonprofits with gross revenue over $250,000 after reviewing their annual filings. The audit requirement will escalate but the review requirement will stay fixed on $250K. Also, the pending law uses gross revenues to calculate the threshold, which would most likely mean revenues will be calculated without reducing for special events expenses, cost of goods sold and other items. This bill will, in all likelyhood, be signed into law by Governor Cuomo.
The current text can be found here:
IRS Minister Audit Guide
Find full guide here
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Minister-Audit-Technique-Guide#Gift
Although a minister is considered an employee under the common law rules, payments for services as a minister are considered income from self employment pursuant to IRC §§ 1402(c ) and 3121(b)(8). A minister, unless exempt, pays social security and Medicare taxes under the Self-Employment Contributions Act (SECA) and is not subject to Federal Insurance Compensation Act (FICA) taxes or income tax withholding.
Payment for services as a minister, unless statutorily exempt, is subject to income tax, therefore the minister should make estimated tax payments to avoid potential penalties for not paying enough tax as the minister earns the income. If the employer and employee agree, an election can be made to have income taxes withheld. IRC § 3402(p)(3). Even though a minister may receive a Form 1099-MISC for the performance of services, he or she may be a common law employee and should in fact be receiving a Form W-2.
The determination of whether a minister is an employee or an independent contractor follows the same rules as any other industry determination. The challenge with a minister is the same as with any professional. The control test must be applied only after taking into account the nature of the work to be performed.
How a minister is classified for income tax purposes effects how they treat their expenses. A minister that is a common law employee must claim their trade or business expenses incurred while working as an employee as an itemized deduction on Form 1040 Schedule A, which is subject to the 2% -of-adjusted-gross-income (AGI) limitation and alternative minimum tax.
A minister is frequently provided a parsonage or is paid a housing allowance, which is exempt from income tax under IRC § 107. The “allowable” allowance is subject to self employment tax under SECA and IRC § 1402(a)(8). The “allowable” allowance is computed subject to limitations imposed by law as to the amount and the required designation by the employing church which is discussed in detail under the section on the parsonage allowance. Please be aware of the special rules for retired ministers. See 42 U.S.C. § 411(a)(7).
Because of the exemption from income tax for the “allowable” parsonage or housing allowance, the operation of IRC § 265 requires business expenses to be allocated between taxable and non taxable income. Other business expenses discussed in this guide are common to all other professionals.
Some other issues of ministers you may see in a smaller number of cases are:
- The earnings for qualified services a member of an exempt religious order, who has taken a vow of poverty, performs as an “agent” of their church or its agencies, may be exempt from income tax and self employment tax.
- Gifts given to a minister, other than retired ministers, may actually be compensation for services, hence includible in gross income under IRC § 61.
To summarize the topics unique to ministers are:
- Income Issue: Parsonage/Housing Allowance
- Income Issue: Gift or Compensation
- Income/SE Issue: Members of Religious Orders and Vow of Poverty
- SE Issue: Exemption
- SE Issue: Computing SE Income
- Employee or Independent Contractor
- Business Expenses: Operation of Section 265
Please refer to the table of contents for the location of each issue.
Step-by-Step Guide for Starting a California Nonprofit
http://calnonprofits.org/resources/starting-nonprofit/15-launch-articles/65-first-steps-articl
Attorneys Emily Chan and Gene Takagi wrote this guide for the California Association of Nonprofits as part of their pro bono work.
Emily Chan, an associate with the NEO Law Group, was recognized as the 2012 Outstanding Nonprofit Lawyer – Young Attorney by the Nonprofit Organizations Committee of the American Bar Association.
Gene Takagi is managing attorney of the NEO Law Group, an adjunct professor at the University of San Francisco, and contributing editor of the Nonprofit Law Blog.
Info on NYS compliance when amending governing documents
NYS Charities Bureau
CHAR410-A (Amended Registration Statement)
CHAR410-A (Amended Registration Statement for Charitable Organizations) is for organizations already registered with the Charities Bureau that have amended their document attachments (for example, the certificate of incorporation or by-laws), since the last CHAR410 Series form was filed. Registered organizations are required to notify the Charities Bureau within 30 days of such changes.
Copies of all amendments to the following documents previously filed with a prior registration, amended registration or re-registration statement:
(i) the certificate of incorporation, trust agreement or other organizing document, and any amendments; and
(ii) the bylaws or other organizational rules, and any amendments; and
(iii) the IRS Form 1023 or 1024 Application for Recognition of Exemption, if applicable; and
(iv) the IRS tax exemption determination letter, if applicable.