New changes come with a new year. Here are a few of the changes in the law relevant to nonprofit organizations.
Transportation Fringe Benefits
With President Trump’s signing of the federal government spending bill on December 20, 2020, the legislation repealed the Internal Revenue Code provision requiring transportation fringe benefits such as parking and transit passes to employees to be included in unrelated business taxable income. Repeal of the fringe benefits tax is retroactive for taxes that nonprofits have paid or accrued after December 31, 2017. Nonprofit organizations that paid the tax may apply for a refund, although more information is expected from IRS on the refund process.
Excise Tax
The spending bill also included a modification to the excise tax applicable to the net investment income of private foundations. The legislation sets a flat rate of 1.39%, effective for tax years beginning after December 20, 2019.
SECURE Act
The Setting Every Community Up for Retirement Enhancement (SECURE Act) was passed at the end of 2019 as part of a large appropriations bill. The SECURE Act, which generally takes effect as of January 1, 2020, includes many provisions designed to facilitate and enhance savings for retirement. The changes were passed by a bipartisan vote and are helpful for workers who desire to save for retirement. Some of the provisions are helpful to the fundraising efforts of nonprofit organizations and some may not be particularly helpful. Highlights of the provisions that affect nonprofit organizations include:
Required Minimum Distribution Age (RMDs). For individuals who turn age 70 1/2 after December 31, 2019, the RMD age is increased to age 72. Those persons who reached age 70 1/2 during 2019 must still start their RMDs under previous law.
Charitable Rollovers For IRA’s. While the age for RMDs increases to age 72, the qualified charitable rollover provisions remain at age 70 1/2. IRA owners over age 70 1/2 may continue to transfer up to $100,000 each year through a qualified charitable rollover to qualified charities. This transfer may fulfill all are part of an RMD.
Traditional IRA Contributions. Individuals over 70 1/2 with earned income may continue to make contributions each year. Previously, only Roth IRAs could be funded after age 70 1/2.
Stretch IRA Distributions Limited. With the new legislation, inherited IRA s for non-spouse beneficiaries may no longer be distributed over the beneficiaries’ lifetimes. Now, IRA and other qualified plan distributions must be paid out over a maximum term of 10 years. There are exceptions for recipients with disabilities, minors, spouses and individuals who are within 10 years of the age of the IRA owner.
Pennsylvania Charitable Solicitation Act – Volunteer Exemption Update
There are two exemptions in the Charitable Solicitation Act (“Act”) at 10 P.S. §162, et seq.) for charities that solicit contributions using volunteers.
The first exemption is for charities receiving gross national contributions of $25,000 or less annually, without compensating anyone who conducts solicitations. The second is for volunteer fire, ambulance, rescue squads and their affiliates who conduct all fundraising by volunteers, and those volunteers receive no compensation.
Given fines recently imposed on volunteer fire companies who did not register and used outside fundraising help, the Pennsylvania Bureau of Corporations and Charitable Organizations issued a 3 page explanation of the volunteer exemptions (located on the BCCO’s website at this link: www.dos.pa.gov/BusinessCharities/Charities/Resources/Pages/default.aspx under heading “Charitable Organizations”.)
Charities relying on the volunteer exemption for not registering under the Act should carefully review each year whether they continue to qualify for one of the volunteer exemptions. A failure to register under the Act can be a costly mistake (monetary penalties) and can also lead to a cease and desist order which effectively ceases any fundraising for a period of time.
Please do not hesitate to contact us if you have any questions on any of these topics.
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Note: This provides general information regarding matters of interest to tax-exempt organizations. Such information is neither legal advice nor legal opinion concerning particular situations. If legal advice or opinion is required, legal counsel should be consulted.
We would be pleased to address any questions you may have regarding the foregoing or any other tax-exempt issues. For further information, please contact Mike Dutkovich (412-765-0535), [email protected]; Susan Ott (412-745-9900), [email protected]; or Jack Owen (412-765-1020), [email protected].
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