Receipting Donations

Complacency is Not an Option

Each year tax-exempt organizations in the United States receive hundreds of millions of dollars in donations.  Donors contributing to 501(c)(3) organizations are able to deduct their own contributions from their taxes, subject to IRS limitations.  Recently, a higher standard deduction has been put in place through the Tax Cuts and Jobs Act.  This will likely diminish the number of taxpayers and donors who itemize their deductions, making it tempting for charities to decide that receipting donations is no longer important.  However, charities should continue to exercise care in receipting donations for the benefit of the donor.

Most organizations are probably familiar with how to receipt cash contributions since cash is the most common type of donation.  Because of this, organizations may become complacent in receipting cash contributions and fail to properly receipt them to donors.  This is not an area where an organization should become complacent because the IRS requires strict compliance with its gift substantial rules.  Continue reading “Receipting Donations”

Outdated Legal Structure

IRS lifts much of the burden of updating legal structures and re-incorporating in a different state.

Does your organization use a legal structure that is no longer adequate for its needs?  Has your organization moved and lost its connection to the state where it was founded?   If either of these apply to your organization, you may want to consider re-structuring your legal entity under new guidance issued by the IRS.  In Rev. Proc. 2018-15, the IRS announced that a new exemption application is not required if a domestic tax-exempt organization changes its legal structure or re-incorporates in another state.  Under prior IRS guidance, an organization was required to file a new exemption application in order to keep its exemption if it made any of these changes.

This new guidance could be useful for tax-exempt organizations that have been active for many years but have been dissuaded from making needed changes because of how complicated the new exemption application would be.  Continue reading “Outdated Legal Structure”

Supreme Court Opens the Door for States to Collect Online Sales Tax

South Dakota v. Wayfair and Its Profound Effects

The U.S. Supreme Court made sweeping changes to how sales tax laws can be enforced by overturning a 26-year-old precedent.  In South Dakota v. Wayfair, the Court held that physical presence is no longer necessary for a state to enforce sales tax laws against out-of-state sellers.  Countless online retailers have relied upon the “physical presence” requirement over the last three decades to avoid paying sales tax where they had no offices, employees, inventory, or other physical contacts.  The Court held that the “physical presence” rule was no longer sound and that states can tax any activity that has a “substantial nexus,” in this case through “extensive virtual presence” within the taxing state. Continue reading “Supreme Court Opens the Door for States to Collect Online Sales Tax”