Tag: Nonprofits

New Healthcare Tax Credit Should Help Small Businesses, Nonprofits

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

The Internal Revenue Service recently released some information to help companies take advantage of a tax credit provided by the health reform law.

The IRS estimates that about 4 million businesses qualify, and is sending out notices to as many as possible advising them of the tax break. If you haven’t received anything but believe your company may qualify, here’s what you should know:


The credit is available to companies with fewer than 25 employees with average wages of $50,000 or less. The full credit goes to companies with 10 or fewer employees and average annual wages of $25,000 or less. It is not available to self-employed individuals.

The credit covers 35 percent of an employer’s contribution to employee health premiums, so long as that doesn’t exceed 35 percent of the average cost of a health plan in the small group market. For a tax-exempt organization, the credit is 25 percent. Once the health exchanges are set up, the credit increases to 50 percent for businesses and 35 percent for nonprofits. At that time, the credit will only be available to companies purchasing insurance through the exchange.

A company can use the credit to reduce income tax owed and can carry the credit forward 20 years or back one year after 2010. Nonprofits can use the credit against withholding and Medicare taxes owed on behalf of their employees.

A key caveat is that employers must pay for half of the premium. For most workers, especially low-wage employees, a company that does not pay for at least half the premium is offering insurance that is essentially unaffordable. Even 50 percent is most likely not enough to do low-wage workers much good, especially at small companies where health care premiums are more expensive.

The amount of the credit is based on the premiums an employer pays for, so the more generous the coverage, the greater the credit. While premiums paid for owners and their families cannot be counted, those paid for seasonal workers can be. And the IRS has defined “premiums” broadly: not only does it cover premiums for standard medical insurance but it also applies to dental, long-term care and vision insurance-though again, an employer must pay 50 percent of each premium to count it toward the credit.

Calculating the credit probably requires any small employer to consult an accountant to see if the benefits are worth the cost of providing insurance. The tax credit is in effect, allowing employers who are already thinking about health insurance for their employees to factor in the savings as they plan ahead.

As an observer, I think the key issue is whether the credit is enough to offset the rising cost of health insurance. Those costs have hit small employers the hardest. We’ll see if the tax credit makes a difference in reversing the trend among small employers of dropping health insurance for their employees altogether.

IRS Asked to Crack Down on Church’s ‘Troubling Tweets’

You house of worship types are probably used to hearing politically toned sermons coming from your clergy(wo)man but a nonprofit holy house flat out telling its congregation, “Get out there and vote for [candidate soon-to-be caught up in a lurid sex scandal]!” would be venturing into some tricky waters.

Well, the Americans United for Separation of Church and State seems to have caught wind of a church who ventured. The AU claims that the Oasis Church in Los Angeles was openly supporting its Director of Social Justice’s, Alex Jones-Moreno run for reelection to the Greater Wilshire Neighborhood City Council on its website and on Twitter:


Americans United was not amused by this, sending a complaint to the IRS and putting out a press release:

“Oasis Church’s appeals might have been innovative, but they still violate the law,” said the Rev. Barry W. Lynn, executive director of Americans United. “Federal law bars churches and other tax-exempt non-profits from electioneering. The IRS should crack down on these troubling tweets.”

We called the IRS in Los Angeles, who was not aware of the story and we were told the usual yarn of “we can’t comment on individual tax cases,” which we were expecting but the IRS PR folks are always nice people and we like a pleasant voice every now and again.

Anyhoo, we did stumble across the IRS Tax Guide for Churches and Religious Organizations, that says the following on page 5 (our bolding):

Churches and religious organizations, like many other charitable organizations, qualify for exemption from federal income tax under IRC section 501(c)(3) and are generally eligible to receive tax-deductible contributions. To qualify for tax-exempt status, such an organization must meet the following requirements (covered in greater detail throughout this publication):

• the organization must be organized and operated exclusively for religious, educational, scientific, or other
charitable purposes,
• net earnings may not inure to the benefit of any private individual or shareholder,
• no substantial part of its activity may be attempting to influence legislation,
• the organization may not intervene in political campaigns, and
• the organization’s purposes and activities may not
be illegal or violate fundamental public policy.

Now whether Tweeting = “intervene” we’re not sure but Americans United certainly seems to think so. We’d invite any tax-exempt experts to weigh in.

A message left at Mr Jones-Moreno’s Oasis office was not immediately returned.

Americans United Asks IRS to Investigate Los Angeles Church That ‘Tweeted’ Candidate to Victory [AU]

When a Tax Time Bomb Goes Off: Repurcussions Await Some Small Nonprofits

At the end of the day on Monday, May 17, hundreds of thousands of little tax-exempt organizations will to turn into taxable little pumpkins. Under a provision of the Pension Protection Act of 2006, tax-exempt organizations that had been small enough to fall below IRS filing thresholds were required to start filing information reports. The law automatically revokes the exempt status of organizations that fail to file for three straight years. The deadline for that third year is May 17 for calendar-year filers.

Of course many of these organizations are inactive or defunct, but many aren’t. That means thousands of volunteer garden club, school parent organization and social club volunteer treasurers will unwittingly find themselves in charge of filing tax returns for their newly-taxable little corporations.


If you are an exempt organization treasurer or board member, you should find out right now whether your organization has filed. If your organization normally takes in less than $25,000 per year, the filing is a very simple on-line process, mostly just asking for identifying information. Bigger outfits will have to file a version of Form 990. If you need extra time, you can get a three-month extension on Form 8868. Some organizations, mostly governments and religious entities, are exempt from the filing and revocation rules.

But what will happen when these outfits lose their exempt status? They can ask for it back retroactively by filing Form 1023 or Form 1024 and paying a fee from $250 to $800. But many of these outfits will have no idea that they have lost their exempt status. What happens to them?

Most will become taxable C corporations or, in some cases, a taxable trust – depending on how they are set up. They will have income – for example, from contributions or dues – and they will be subject to normal Form 1120 filing requirements. If they fail to file, the normal kind and gentle penalties will accrue. Nobody really knows what the IRS will do about all of these little unwitting scofflaws.

And for what? Senator Charles Grassley explained back when the bill was passed in 2006:

The pension bill includes a good package of charitable giving incentives and loophole closers. It makes sense to tighten areas of abuse while increasing incentives for charitable giving. Americans are very generous with their donations. They deserve to know that their money helps the needy, not the greedy. Some individuals are creative about exploiting non-profits’ tax-exempt status for personal gain, and Congress has to be just as smart about shutting down abuse.

So take that, you greedy, abusive volunteer booster club treasurers! @ChuckGrassley has your number.

Cuomo: Espada’s Looting of Nonprofit ‘Reprehensible’

In the largest nonprofit fraud case we’ve ever seen, State Senator Pedro Espada, Jr is getting it from NY Attorney General Andrew Cuomo for perpetrating a $14 million scam using his non-profit as an ATM. Ouch.

Soundview Comprehensive Community Development Corp., a Bronx-based health care non-profit, appears to be little more than a vehicle for Espada’s extravagant lifestyle and Cuomo doesn’t find any of it to be entertainment.


“Siphoning money from a charity would be egregious under any circumstances, but the fact that this was orchestrated by the State Senate Majority Leader makes it especially reprehensible,” Cuomo said in a statement.

Espada’s charity allegedly paid $100,000 for campaign literature, $80,000 on meals for Espada (including $20,000 for sushi – one of JDA’s weaknesses but hey, at least I pay for my own), vacations for the family and $2,500 a month for a co-op rental in the Bronx in which Espada supposedly lives. Double ouch.

If you’re into that sort of thing, you can check out the summons from the AG’s office here.

To date, Cuomo’s complaint is merely a civil one but he has left the door wide open for criminal charges against Espada and 19 others, including family members installed on the charity’s board. Taking a page from the Crazy Eddie fraud handbook, I see.

Espada also allegedly used the nonprofit’s corporate credit card to cover up to $450,000 in expenses that he’s now admitted may have been personal. Snicker snicker, everyone knows the corporate card should only be used for personal expenses if one is trying to fund an affair and hoping the wife doesn’t find out. Duh.

Because being a nonprofit looting Senate majority leader is hard work, Espada took the first 14 weeks of the year off and charged the paid leave to – you guessed it – Soundview. Since its board is packed with friends and family, they approved a $75,000 payout for personal expenses associated with this respite in a lump-sum payment at the beginning of the year.

Espada has responded by claiming Cuomo’s accusations amount to little more than a “witch hunt” meant to advance the AG’s political career. Whatevs.

Meanwhile, Espada’s Senate homies are praying for him. For $14 million bucks, he needs all the Hail Marys he can get, especially since the FBI and IRS raided the clinic this morning. Good luck with that.

Why Lazy Accounting Does Not Work for Churches (Or Anyone for That Matter)

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Just because you’re a church doesn’t mean you shouldn’t have a remedial understanding of payroll, GAAP, taxable income, and right/wrong.

Anthony and Harriet Jinwright, husband and wife pastors from Charlotte-based Greater Salem City of Good church, were warned repeatedly that their lazy accounting could get them in trouble, including by a former consultant in 2001.


Some issues brought up by the consultant include (but aited to and are, of course, alleged violations at this point):

• Church donations going directly to Pastor Jinwright but not subsequently appearing on his tax forms

• Blatant violation of the sanctity of GAAP.

• Expense reimbursements to Pastor Jinwright without benefit of receipts nor an expense plan at the church.

• Mismatched deposit envelopes that did not contain the actual amounts reflected on the outside when deposited.

For the love of sweet baby Jesus, what sort of operation were they running over there?!

It appears to be one part run-of-the-mill scam, one part complicated church theft, although Jinwright refused to acknowledge that any of this could be considered suspicious or, worse, fraudulent. The couple deposited $7 million into their bank account from 2002 to 2007 while only reporting $3.3 million for the tax returns for those years.

The US District Court thinks otherwise and “can I get a witness?” has just taken on a whole new meaning as Jinwright’s former assistant and business administrator – as well as the former consultant – have appeared on the witness stand to discuss Greater Salem’s, uh, holier-than-thou accounting tricks:

Anthony Jinwright was not only pastor of Greater Salem Church but also chairman of the church’s board or directors, with sway over the “business and financial dealings of the church.”

Although the church paid the bishop a regular salary, which it reported on his regular W-2 form, Greater Salem also cut checks directly to the bishop and his wife for: vehicle and housing allowances, retirement income, “tax liabilities,” personal vacation and travel, their daughter’s college tuition and at least two types of bonuses – a bonus at Christmas and a “pastoral anniversary” every February.

Both the Jinwrights also collected separate fees for speaking at other churches around the country.

Now listen, I’m sure Jesus wanted little baby Jinwright to go to college but the problem is that the meeting minutes that supposedly contain an authorization from church board members to pay for said college education have, um, disappeared. Funny, didn’t that happen at Arthur Andersen when Enron blew up?

What’s the lesson here? Churches are no less responsible for their financial affairs than publicly-traded companies and in many ways should operate with greater transparency as they are not only partially-funded by members of the congregation but supposedly on some sort of divine mission.

Do you really want to have to explain to the Almighty why you faked his financials at the pearly gates? Didn’t think so.

Jinwrights: Did they hide millions? Or miss details? [Carolina Weekly]
Other Holy Men:
Former Pastor Figures Eighth Commandment Is Overrated, Steals from Nonprofit