Article Archives: Jennifer Becker Harris

Foundations have experienced exponential growth in their philanthropy efforts and grant sophistication over the last 10 years. And while this expansion is exciting, many are discovering it comes with growing pains.

Having worked closely with dozens of grantmaking foundations through this process, we’ve found the three most common concerns are now related to their grant compliance process, accounting software functionality, and cybersecurity practices.

Grant Compliance Process

Socially-minded foundations are increasingly looking to make an impact in more creative ways, leading to more sophisticated methods of funding and grantmaking. In the last several years, we’ve seen an evolution in philanthropy as organizations pivot to more program-related investments and grants to for-profits,

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Posted by: Jennifer Becker Harris in UBTI.

This article has been updated to reflect the latest guidance as of 5/26/2021. It was originally published on 6/1/2020. 

On December 2, 2020, the IRS published final regulations on the unrelated business taxable income (UBTI) siloing rules required under the Tax Act of 2017 and section 512(a)(6) of the Internal Revenue Code. Exempt organizations with multiple unrelated trades or businesses have been waiting for the final guidance as it helps define the extent to which organizations will need to silo UBTI activities.

While the guidance leaves several unanswered questions, it does give organizations a road map of how to define and bucket their various trade or business activities.

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On December 20, 2019, President Trump signed the Further Consolidated Appropriations Act, 2020. The bill will, in effect, create a flat net investment income (NII) excise tax rate of 1.39% for private foundations.

Context

Most private foundations are subject to an excise tax on NII, which includes interest, dividends, rents, royalties, payments pertaining to certain security loans, similar investment income items, and capital gains.

Previously, the NII excise tax rate depended on whether the private foundation could meet specific distribution requirements. If the foundation failed to meet the distribution amount, it would then be subject to a 2% excise tax rate.

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By Jennifer Becker Harris, CPA

The last thing many nonprofit leaders want to see is a media article that depicts their charity in a negative light. The vast majority of charities work hard to be in compliance at both the state and federal levels, as their nonprofit corporation and tax-exempt status is an integral piece of how they raise funds and operate. In addition, one of the primary goals of the Revised Form 990 is transparency. This includes shining a light on certain transactions between the charity and insiders or “interested persons”, as disclosures may be triggered on Schedule L of the Form 990.

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By Jennifer Becker Harris, CPA

New international tax developments over the last six months will affect U.S. charities and provide welcomed relief in some areas and added compliance in others. The following is a summary.

Passive Foreign Investment Companies (PFICs)

What is a PFIC?
A foreign corporation is a PFIC if:

  • 75% or more of its gross income is from passive sources, or
  • the average FMV of assets which produce or are held to produce passive income is 50% or more.

Once a foreign corporation is classified as a PFIC,

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By Jennifer Mace, CPA and Jennifer Becker Harris, CPA

U.S. charities are now more than ever diversifying their investment portfolios to include foreign investments, especially foreign program-related investments. They are also offering services on the ground in foreign countries with essential charitable programs.

Most charities are aware of the foreign bank account reporting obligations for those accounts and for individuals with signing authority over such accounts. What charities that invest or operate abroad may not be aware of is the complexity of the federal compliance issues that govern other foreign activities. These activities can involve making grants to foreign entities,

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By Jennifer Becker Harris, CPA

Great news! A local company has chosen your charity as the beneficiary of an upcoming sales campaign. The promotion promises a $1 donation to your charity for each unit sold. NFP call-out box3The company estimates your charity will receive $100,000 as part of the promotion. Your charity’s name will be used prominently throughout the marketing campaign, and because the company sells the product throughout the U.S., it will be excellent publicity for your charity. Now what?

This type of marketing is often referred to as “charitable sales promotion” or “cause marketing.” Charitable sales promotions have exploded over the last decade,

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By Sarah Huang, CPA and Jennifer Becker Harris, CPA

Charities that invest in alternative investments are not immune to the many income, excise, and foreign tax consequences related to the complex investments. A tax-exempt status for U.S. federal tax purposes does not equate to exemption from all taxes.

For instance, if the alternative investment creates ordinary income that is unrelated to the charity’s exempt purpose, the income may be considered unrelated business income. In addition, if the investment is operating in multiple states, the charity may have state filing obligations in those jurisdictions dNFP call-out box 2ue to the ordinary income.

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