Developing News: 2016

Recap

On August 18, 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-14 “Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities.”  ASU 2016-14 requires a number of changes to the financial statements of NFPs. These changes will be effective for fiscal years beginning on or after December 15, 2017.

This article is the sixth in a series discussing the changes required by ASU 2016-14. In this article, we discuss additional information all organizations will need to provide regarding their expenses. 

Background

Not-for-profit organizations (NFPs) have specific requirements on how expenses must be reported in their financial statements.

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Post-Trump Era for Federal and Washington Estate Tax

With the incoming new administration comes changes in tax law. The news media has been sharing bits and pieces of the potential changes, which vary by day and speaker. One expected modification, as espoused by the GOP, is the repeal of the federal estate and gift tax. While this may be welcome news to many voters, it is only a part of the estate tax planning equation. We need to remember that the state of Washington itself imposes one of the highest state estate tax rates in the country.

Yes, the Washington estate tax is slated to continue, regardless of potential changes to the federal law.

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Updated June 12, 2018: Content changed to include the impact of this change on capital campaign activities and capital fundraising.

Recap

On August 18, 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-14 “Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities.”  ASU 2016-14 requires a number of changes to the financial statements of NFPs.  These changes will be effective for fiscal years beginning on or after December 15, 2017.

This article is the fifth in a series discussing the changes required by ASU 2016-14.  In this article,

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Among the issues Washington will vote on in the November election is whether the state should enact the Carbon Emission Tax Act via Initiative 732. The Initiative proposes a tax on the sale or use of carbon. If it passes, Washington will be the first state in the nation to impose a carbon tax.

Overview of the Proposed Carbon Tax

Initiative 732 is modeled after British Columbia’s 2008 Carbon Tax Act. The objective of the carbon tax is to change behaviors by taxing activities that contribute to global climate change. Specifically, the goals of Initiative 732 are to encourage businesses to develop and use alternative energy solutions,

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Recap

On August 18, 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-14 “Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities.”  ASU 2016-14 requires a number of changes to the financial statements of NFPs.  These changes will be effective for fiscal years beginning on or after December 15, 2017.

This article is the fourth in a series discussing the changes required by ASU 2016-14.  In this article, we discuss new accounting and disclosure requirements for underwater endowment funds. 

Background

Endowments are established funds of cash, securities, or other assets to provide income for an NFP. 

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Taxpayers earning revenue from performing services or from licensing intangibles, and doing business both inside and outside of the State of Washington are required to complete an “Annual Reconciliation of Apportionable Income.”

The form must be submitted to the Department of Revenue by October 31st of each year; failing to file the reconciliation may result in penalties.

The Department of Revenue allows businesses to use the prior year’s apportionment factor for reporting current year liabilities. This simplifies the businesses reporting method but then requires the business to do a true-up at the end of the year to determine the current year’s factor based on actual data.

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IRS Tax Scams Abound – Fake CP2000 Forms

IRS tax scams abound: the IRS and its Security Summit partners issued an alert on September 22 about the most recent scam, this one involving a fake email with a fraudulent CP2000 attachment.  The Treasury Inspector General for Tax Administration has been notified and the issue is under investigation.

The CP2000 notice is a common notice mailed to taxpayers via the U.S. postal service.  It is never sent out via email to taxpayers.  According to the notice, key indicators of a fraudulent CP2000 notice are:

  • These notices are being sent electronically, even though the IRS does not initiate contact with taxpayers by email or through social media platforms
  • The CP 2000 notices appear to be issued from an Austin,

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Recap

On August 18, 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-14 “Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities.”  ASU 2016-14 requires a number of changes to the financial statements of NFPs.  These changes will be effective for fiscal years beginning on or after December 15, 2017.

This article is the third in a series discussing the changes required by ASU 2016-14.  In this article, we discuss a new requirement to disclose board designations of net assets.

What is Changing?

The FASB noted that one of its goals with this ASU is to improve information about the various internal and external limitations and restrictions on the resources of NFPs. 

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Recap

On August 18, 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-14 “Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities.”  ASU 2016-14 requires a number of changes to the financial statements of NFPs.  These changes will be effective for fiscal years beginning on or after December 15, 2017.

This article is the second in a series discussing the changes required by ASU 2016-14.  In this article, we discuss changes to net asset classification.

What is Changing?

For the past 20 years, U.S. GAAP has required NFPs to report net asset balances,

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On August 2, 2016, the IRS issued proposed regulations under Internal Revenue Code Section 2704 that could eliminate or significantly reduce the allowable discounts when valuing interests in family-owned entities for gift, estate and generation-skipping transfer tax purposes.

Background

Historically, taxpayers could reduce the value of their taxable estates or the value of taxable gifts by placing assets in family-owned partnerships, LLCs or closely held corporations and claiming lack of marketability and/or lack of control discounts. The combined discounts typically reduced the value of the ownership interests by 25% to 45%.

For example, under current tax law, by placing $10 million worth of assets inside a closely held entity,

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