How to Handle Stock Donations |
It is very common for nonprofit organizations to receive donations of stock, especially at the end of the year as this is an effective way for donors to give to nonprofits that fits into their overall personal tax planning. Many organizations have a gift policy which requires that gifts of stock are liquidated upon receipt to minimize the risk associated with the stock market. If your organization has such a policy and received a donation of stock, the following will help ensure the donor is properly thanked and the transaction is correctly recorded.
Once a donation of stock has been received, a thank you letter should be sent to the donor. This letter should acknowledge the gift of stock, such as the name and number of shares. It should not list the value of the stock received since the organization is not in the business of valuing stock. Also, the donor should have a record of the transaction from the broker. The stock becomes the asset of the organization once it is transferred to the organization, rather than when it is sold. Therefore, in accordance with generally accepted accounting principles (GAAP), once the organization receives the stock, a contribution should be recorded at the fair value of the stock on the date received. If the donor would like to use stock to pay a pledge, the organization will reduce the balance of the pledge receivable by the fair value of the stock on the date it is received. If the fair value of the stock upon receipt of the gift is greater than the pledge receivable balance, the organization will record a contribution for the difference.
If the organization's policy is to immediately sell the stock, any difference between the proceeds received from the sale of stock and the fair value recorded on the date the stock was donated will be recorded as a realized gain or loss on the organization's books. If the organization incurs any fees related to the selling of the stock, that amount should be recorded as investment fees expense.
It is important to make sure the organization is following its gift policy and properly records transactions related to the donation of stock and subsequent sale of stock. Please contact a member of the Hawkins Ash CPAs nonprofit team if you have any questions or need assistance regarding this topic.
 Author: Briana Peters, CPAContact: 920.336.9850 or bpeters@hawkinsashcpas.com
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IRS Withdraws Substantiation Requirement for Certain Contributions
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The IRS has withdrawn proposed regulations issued this past September that would have implemented an optional donee reporting procedure, authorized by Code Sec. 170(f)(8)(D), for substantiating charitable contributions of $250 or more. The regulations had caused controversy because, even though the procedures contained in them were optional, donee organizations that elected to use those procedures would have to obtain, store and send to IRS donor social security numbers, causing a potential identity theft problem.
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Capitalization Policy Under the Final Repair Regulations
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This information may apply to your nonprofit organization if you are subject to Unrelated Business Income Tax (UBIT).
Under the repair regulations, amounts for tangible property (and materials and supplies) that exceed $200 and have a useful life in excess of 12 months must be capitalized for federal income tax purposes and depreciated over the appropriate number of years. These regulations apply to small businesses, including nonprofit organizations with an unrelated business activity.
However, under the de minimis election, a nonprofit organization can substitute its capitalization policy (items expensed if under a certain dollar amount) for the $200 limit. If a nonprofit organization has a written capitalization policy in place before the beginning of the 2016 tax year and does not have an audited financial statement, it may substitute the $200 limit for the amount used in its financial statements, not to exceed $2,500 (safe harbor). Prior to 2016, the IRS allowed a safe harbor of $500. However, if the nonprofit organization does have an audited financial statement and a written capitalization policy in effect before the beginning of the 2016 tax year, then it may increase this amount to up to $5,000. This amount is unchanged from prior years.
If your organization has a capitalization policy, but it is not in writing, you will need to memorialize the policy before the beginning of the 2016 tax year. If you do have a written capitalization policy, now is a good time to review it to make sure it is meeting your needs. If you do not have a capitalization policy at all, it is imperative you put one in writing at the beginning of the taxable year, or you may have to capitalize all tangible property costing more than $200 and lasting more than 12 months.
If you have any questions, please contact your advisor to discuss your specific facts and circumstances and the appropriate capitalization policy to adopt.
 Author: Curt Bach, CPA
Contact: 715.748.1351 or cbach@hawkinsashcpas.com
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Contribution vs. Exchange Transaction: Which is it?
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This is sometimes a common question that nonprofits ask when looking to record revenue. The definitions for a contribution and an exchange transaction are almost diametrically opposed. However, a transaction often has elements of both, making it difficult to break the pieces apart to ensure that it is recorded properly.
In a contribution, cash or assets are voluntarily surrendered by the donor who does not expect anything in return other than the satisfaction of helping a cause. In an exchange transaction, the payee agrees to exchange cash or assets and expects to receive some agreed upon benefit in return. Giving a donation to an annual campaign is an example of a contribution. The organization records contribution revenue upon receipt of the donation. A contract is an example of an exchange transaction whereas the organization accepts cash in exchange for agreeing to complete the services that are outlined in the contract. If the organization receives cash before the contract stipulations are fulfilled, the organization records a liability or deferred revenue as it has an obligation to earn the contract before it can recognize revenue. There is usually a performance report that must be filed periodically with the contract to ensure compliance. Here are two examples that illustrate how difficult properly recording the revenue of a transaction may be. A.) A museum sells tickets for a fundraising dinner. The ticket revenue should be recorded as both event revenue and contribution revenue. The fair value of the meal provided is event revenue, because the purchaser has the expectation to be fed. Contribution revenue is equal to the difference between the ticket price and the value of the meal. B.) A local community theatre holds a fundraising drive where the donor receives a coffee mug for a donation of $100 or four tickets to a play of their choice, valued at $200, for a donation of $1,000. In the first instance, contribution revenue should be recorded for $100, as the donor does not receive anything of nominal value in return for a donation. In the second instance, contribution revenue should be recorded for $800, and ticket revenue should be recorded for $200. Example B shows why it is important to properly capture the activity. If the fundraising drive was successful and no ticket revenue was recorded, a year-end analysis of the profitability of theatre operations would be skewed and may lead management to make decisions based on incorrect information. It is important to take time to evaluate all revenue transactions, especially ones that do not occur on a recurring basis, in order to ensure that they are recorded properly.
 Author: Sandy Jensen, CPA
Contact: 608.784.7737 or sjensen@hawkinsashcpas.com
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It's an Election Year: Tread Carefully
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With the presidential election coming up this fall, now is a good time to review the rules regarding charitable organizations' involvement in political campaign activities.
Tax-exempt 501(c)(3) organizations are prohibited from directly or indirectly participating in or intervening in any political campaign on behalf of (or in opposition to) any candidate for elective public office. The price of doing so is high: excise taxes and possible loss of tax-exempt status. However, tax law allows organizations to conduct nonpartisan activities that educate the public and help people participate in the electoral process. Before your organization gets into the political arena, you need to know how to walk the line between the approved and prohibited activities.
Getting Out the Vote
Organizations can hold voter registration drives, publish voter election guides, host public forums, and conduct get-out-the-vote drives as educational activities. But take care not to cross over into political campaign intervention.
If you use a voter guide, conduct your activities in a fair and impartial manner and cover a wide range of issues. Focusing only on issues of interest to your organization could be viewed as an attempt to influence the election of a candidate sharing your views. Ranking candidates in voter materials and selectively presenting incumbent candidates' positions or records or comparing those positions and records with those of other candidates also cross the line.
Introducing the Candidates
While your organization can't contribute to a political campaign fund or support or oppose a candidate verbally or in writing, you may host a public candidate forum. To help ensure the forum is fair and impartial:
- Invite all qualified candidates
- Have the questions prepared and presented by an independent nonpartisan panel
- Ensure the discussion covers a broad range of issues of interest to the public
- Give each candidate an equal opportunity to speak
- Make sure the moderator and sponsor refrain from commenting on the questions, answers, and candidates
Talking the Issues
Your organization may advocate for or against issues as long as that advocacy furthers your mission--even if the issues divide candidates in an election. To avoid running afoul of restrictions against lobbying, ensure your message doesn't encourage the public to make a comparison between a candidate's position on an issue and the organization's.
Also, review the political intervention rules with board members and leaders who routinely speak on behalf of your organization. Stress that they must state clearly that any partisan statements made in public are their personal opinion and do not reflect the views of the organization.
Out on the Web
Be aware that statements posted on your organizationís website are treated the same as statements in print materials and other media or made in a public forum. And, while links to candidates' websites are not expressly prohibited, they can get your organization in trouble if you don't:
- Link to every candidate's official website
- Present links in an educational context and for informational purposes only
- Present links in a consistent, unbiased manner
 Contact: Chuck Krueger, CPA
920.684.7128 or ckrueger@hawkinsashcpas.com
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Access Nonprofit Resources on the New HawkinsAshCPAs.com
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In December, we launched our new website: HawkinsAshCPAs.com. We're very excited to provide this valuable resource to you and hope you find it worth bookmarking.
Introducing Our Blog CPA-HQ CPA-HQ is your headquarters for insights from our CPAs and other accounting professionals. Our CPAs and accounting professionals write timely articles on topics including tax, business, retirement, nonprofit, payroll, general accounting, QuickBooks and more. Click here for articles written for nonprofits. If you missed an article in one of our newsletters, or just looking to learn, you'll find it here.
We offer updated maps with directions to our eight offices, an easy-to-use job listing, and all of the links and information you need from our old website. Throughout the website, you'll notice many pictures of our employees.
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Green Bay Botanical Garden Undertakes $4M Expansion
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The Green Bay Botanical Garden is nothing short of a community treasure. So, in an effort to generate more revenue to further its mission of connecting people and plants, as well as provide more value to the community, the organization is embarking on a $4M expansion project, The Grand Garden.
Slated to open spring 2018, The Grand Garden project hopes to develop 2.5 acres of existing garden space which includes an amphitheater to host touring acts and local talent which will accommodate more than 1,500 people in a casual, outdoor setting. It will provide support facilities to house restrooms, concessions, catering and classrooms, and showcase the organization's nationally recognized horticultural collections.
 "With the completion of our 2010 capital campaign, which gave us our Education Center, we've doubled our annual attendance," said Susan Garot, Executive Director of the Green Bay Botanical Garden. " We're anticipating growth from this campaign as well."
Fundraising plans are in the works and will continue throughout spring and summer of this year. Opening festivities will include the nationally touring exhibit with Lego bricks called Nature Connects. This will be its first showing in Wisconsin.
Green Bay Botanical Garden opened for business in 1996, and through the development of programming and events, like its ever-popular winter WPS Garden of Lights, has grown to annually attract more than 130,000 visitors. A recent St. Norbert College economic impact study found the Garden's impact on the community will exceed $6M this year. While providing 83 jobs per year, the community invests time and energy as well. Each year 450 or more volunteers support all phases of the Garden's operations. Learn more about Green Bay Botanical Garden by visiting its website: www.gbbg.org.
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New Law Changes Wisconsin Sales and Use Tax Rules for Construction Contractors
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A new law should help government and nonprofit entities take full advantage of their tax-exempt status in connection with construction projects. The new Wisconsin law allows contractors to purchase materials tax-free for construction projects undertaken by certain tax-exempt government and nonprofit entities. This will simplify the material purchasing process both for the tax-exempt owner and for the contractor. If your nonprofit entered into construction contracts on or after January 1, 2016, this new law applies to you.
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