Article Archives: Sarah Huang

Posted by: Sarah Huang

The rules and guidance for the employee retention credit (ERC) continue to change as we go. The American Rescue Plan Act of 2021, signed on March 11, 2021, now allows an extension of the ERC through the end of 2021. As organizations continue on the path of recovery from the pandemic, this credit can yield sizeable cash flow to those who qualify.

In addition to the extension of the credit, the IRS released official guidance on the ERC for 2020 and 2021 (Notice 2021-20 and Notice 2021-23). While much of the additional guidance simply repeats the Frequently Asked Questions posted to the IRS website last year,

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Posted by: Sarah Huang

Update: This article was updated on 3/25/2021 to reflect changes brought on by the American Rescue Plan Act of 2021. For more information on the extension, see this article

The Employee Retention Credit (ERC), introduced in March 2020 as part of the CARES Act, was a much-needed funding source for many employers. However, many were ineligible to claim the credit in 2020 as they opted to receive funding through the Paycheck Protection Program instead.

With the recent enactment of the Consolidated Appropriations Act of 2021 and the American Rescue Plan Act of 2021, the rules have changed and the credit has been extended to December 31 ,2021.

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Posted by: Sarah Huang

On August 10, 2020, the Small Business Administration (SBA) opened up its Paycheck Protection Program (PPP) loan forgiveness portal to lenders, which means banks may now process loan applications from borrowers. Unfortunately, given the ever-changing standards and large volume of loans, many lenders have been hesitant to broadly open their own forgiveness platforms until the rules are well established and final guidance has been issued. Additionally, some banks are prioritizing the loan forgiveness process, focusing first on the large balance loans.

Based on what we know so far, this article will provide an overview of the application process and the documents and forms borrowers should have on hand when applying for loan forgiveness.

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Posted by: Sarah Huang

This article reflects the law prior to the passage of the Consolidated Appropriations Act (CAA) in December 2020. As such, certain sections may now be outdated. To learn more about the CAA updates, read our article here.

Often, the focus of Paycheck Protection Program (PPP) loan forgiveness is on whether the proceeds were used for eligible costs. However, what many borrowers fail to recognize is that maximum forgiveness depends also on maintaining your employment and wage levels during the covered period.  Below, we walk through the details of these two requirements and cover the available exceptions when the requirements are not met.

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Posted by: Sarah Huang

This article reflects the law prior to the passage of the Consolidated Appropriations Act (CAA) in December 2020. As such, certain sections may now be outdated. To learn more about the CAA updates, read our article here.

Many Paycheck Protection Program (PPP) borrowers have now started their loan forgiveness calculations and are questioning which expenses are eligible for forgiveness. This article will walk through the four types of eligible expenses and address some of the common questions. As mentioned in our previous article on PPP loans, achieving maximum loan forgiveness requires the following:

  1. Utilize at least 60% of the proceeds for payroll costs during the covered period (previously the threshold was 75%,

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Posted by: Sarah Huang

This article reflects the law prior to the passage of the Consolidated Appropriations Act (CAA) in December 2020. As such, certain sections may now be outdated. To learn more about the CAA updates, read our article here.

As borrowers near the end of their covered period for Paycheck Protection Program (PPP) loans, many questions are surfacing on the forgiveness process.

These uncertainties have arisen from the evolving rules issued since the COVID-19 crisis began. In early June, the Paycheck Protection Flexibility Act (PPPFA) was passed, which modified many PPP loan provisions. The SBA and Treasury have also issued various forms of interim guidance over the past months,

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Posted by: Sarah Huang

On Friday, June 5, the Paycheck Protection Program Flexibility Act of 2020 was signed into law by President Trump. The bill passed the House last week and cleared the Senate on Wednesday with a unanimous vote. It provides increased flexibility to current and future recipients of Paycheck Protection Program (PPP) loans.

Below is a summary of the prior PPP rules and the revisions made in the new bill:

As of June 3, the Paycheck Protection Program has provided over 4.5 million loans to individuals and organizations, resulting in over $510 billion of funding. There is still over $120 billion in loan funds available for disbursement.

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Posted by: Sarah Huang

On April 9, the IRS issued Notice 2020-23 giving not-for-profit organizations relief on tax returns and tax payments originally due between April 1, 2020 and July 15, 2020.

Notice 2020-23 provides relief for filers of Form 990, Form 990-EZ, Form 990-N, Form 990-PF, and Form 990-T. These returns, along with any tax payments, are now automatically due July 15, 2020. While Notice 2020-23 does not explicitly state Form 990 as a form with relief, it is addressed indirectly. The notice refers to “time-sensitive actions” which, according to Revenue Procedure 2018-58, include acts that are to be performed within the April 1 to July 15 time frame.

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Posted by: Sarah Huang

Issuing a donor receipt seems like a simple task, especially in today’s technological era. Many online giving platforms used by charities issue a receipt automatically, taking the burden off the development staff and reducing a charity’s overhead costs. Around the beginning of each calendar year, charities receive numerous requests from donors for receipts to support a tax deduction on their personal income tax returns. It is crucial that these receipts issued by the charity include all the required elements. Failure to include the proper elements may cause a disallowed tax deduction for the donor.

Am I Required to Issue a Donor Receipt?

Usually the burden of obtaining a donor receipt falls on the donor.

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Posted by: Sarah Huang

Now that a month has passed since President Trump signed the Tax Cuts and Jobs Act into legislation, the ripple effect of the changes is being felt.  The drop in corporate tax rates has a positive impact for many.  However, exempt organizations with outstanding tax-exempt bonds may be facing higher interest rates this year and going forward.

Many bond documents are written with language that includes a provision allowing for an increase in the interest rate charged to the exempt organization if income tax rates decrease.  Initially, the logic of this may not make sense.  If income tax rates decrease, resulting in additional cash –

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Posted by: Sarah Huang

Just because something is called a donation, doesn’t mean it yields a charitable donor tax deduction. In fact, many charities offer programs wherein participants are required to make a “donation” prior to partaking. When trying to determine whether a donor can claim this payment as a deductible charitable contribution, one must evaluate all the facts.

The Internal Revenue Code does not provide a definition for what constitutes a charitable gift. Instead, it provides rules regarding the deduction limits, which types of donations are eligible for a deduction, and the substantiation requirements for the donation itself. For the definition of a gift, one must look to case law.

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Posted by: Sarah Huang

By Sarah Huang, CPA

On June 14, the House passed a bill prohibiting the requirement that Section 501(c) organizations must disclose their donors on Schedule B. Under current law, all organizations exempt under §501(c) must provide the IRS with a listing of any donor that gave $5,000 or more during the tax year. Some organizations qualify for the special 2% rule that increases this $5,000 threshold, thus further limiting the donor disclosure. Except in the case of private foundations, Schedule B is not open to public inspection.

The new bill, H.R. 5053: Preventing IRS Abuse and Protecting Free Speech Act,

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Posted by: Sarah Huang

By Sarah Huang, CPA

Last September, the IRS issued a proposed regulation indicating Treasury would implement a new form for charities to report donations to the IRS. This form would include personal donor information, including their Social Security number and address, so the IRS could match the form with the donor’s income tax return. After receiving much opposition to the potential form, the IRS withdrew the proposed regulation on January 7. See our November 2015 article, IRS Issues New Donor Acknowledgment Proposed Regulations – Benefit or Burden? for more discussion on the proposed regulation.

Many charities and donors see this as a huge win.

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Posted by: Sarah Huang

By Sarah Huang, CPA

Ninety percent of schools had underreported taxable income according to the statistics from the IRS’s final report on the College and University Compliance Project released at the end of April; $170 million in adjustments were made to net operating losses (NOLs). Wages increased $36 million, netting $7 million in taxes and penalties. The list goes on. But what does this really mean to the non-profit sector and what should you do about the results?

The IRS began its study on colleges and universities in 2008 with the goal of gaining a deeper understanding of the sector.

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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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Posted by: Sarah Huang

By Sarah Huang, CPA

It’s that time of the year. The phones are ringing with frantic calls from donors wanting receipts for prior year donations to support a deduction on their personal tax returns.

If your charity is receiving these calls, be aware: the IRS has been taking a harsh approach over the past few years and disallowing charitable donations simply due to the receipt not containing the required information. It’s time to take stock: are your donor receipts in compliance or are they preventing a donor from taking a charitable deduction?

While charities are not subject to IRS penalties for failing to issue donor receipts,

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