Posts made in January 2020

Understanding the 501(c)(3) Public Support Test

We have found the public support test to be among the least understood topics by nonprofits, especially smaller organizations.  But, it is absolutely critical to understand how it works, lest your nonprofit lose its public charity status.

Background

Before we get into the specifics of the public support test itself, it’s helpful to step back a bit and talk about a subject we’ve covered before, namely, private foundations vs. public charities.  Both organizational types are considered tax-exempt 501(c)(3) nonprofits, but the requirements regarding donor support are quite different.  Private foundations are typically closely-governed nonprofits, and the purpose of most private foundations is to fund the work of public charities.  In addition to being allowed to have close control, private foundations also can be closely funded, even by just one individual.  Many family foundations are governed and funded by members of a single family.

Public charities, on the other hand, the preferred organizational choice of most 501(c)(3)s, are expected to have both diverse control and diverse funding.  On the control side, the IRS expects charity boards to have a majority of members who are unrelated by blood, marriage, and outside business ownership.  As for funding sources, charities are required to have a broad base of public support, which is where the public support test comes in.

How It Works

The simplest definition of the IRS public support test states that at least 1/3 (33.3%) of donations must be given by donors who give less than 2% of the nonprofit’s overall receipts.  Exceptions include any gifts received from other donative public charities and/or a government source, such as a state or federal grant.  For organizations that also get funds from sales of goods or services (this is called program revenue), such revenue counts toward the public support test also.

As you can expect with IRS compliance issues, however, it’s much more complicated that it appears.  There are several subcategories of 501(c)(3) public charities, including 509(a)(1), 509(a)(2), 509(a)(3), and 509(a)(4).  We’ll focus primarily on 509(a)(1) and (a)(2).  When an organization first requests 501(c)(3) determination from the IRS, the Form 1023 application asks which subcategory the nonprofit is seeking status under, based on its purpose, programs, and revenue sources.  509(a)(1) status has several sub-subcategories, some of which are self-defining by the organization’s purpose:  church (170(b)(1)(A)(i)), school (170(b)(1)(A)(ii)), hospital (170(b)(1)(A)(iii)).  Others falling into 509(a)(1) are more generically defined by source of revenue (donations and grants), assuming their purpose doesn’t fit a predefined category.  They are considered 509(a)(1)/170(b)(1)(A)(vi).

509(a)(2) are those charities that are not slotted into 509(a)(1) status by virtue of purpose, plus have a mix of donor support and program revenue.

At this point, you may be getting lost in the weeds.  But stick with us…the public support test is calculated differently on Form 990, Schedule A, depending on 509(a)(1) or 509(a)(2) status, and source of revenue.

Let’s consider some examples:

ABC CHARITY, INC. – Scenario 1:

ABC Charity is a 509(a)(1) public charity that receives substantially all of its support from donations from individuals, families, and businesses.  Here’s how the numbers break out.  Assuming the organization brought in exactly $1,000,000 in cumulative donations over the past 6 years, at least $333,000 must have come from donors giving less than $20,000 each (cumulatively) in order to pass the public support test.  Here’s how their numbers broke out:

Total donor support:  $1,000,000

Total support under 2% (< $20,000):  $882,000

Total support above 2% (>=$20,000):  $118,000

Public support percentage:  88.2%

ABC CHARITY, INC. – Scenario 2:

Instead of individual support only, let’s say ABC Charity also received donations from several other public charities.  How does that affect the calculation?

Total donor support:  $1,000,000

Support from public charities:  $425,000

Individual support under 2%:  $115,000

Individual support over 2%:  $465,000

In this case, the public support test is a little more complicated.  Donations received from other public charities is often considered public support, regardless of amount, but not always.  For the most part, the donating charity needs to be a 509(a)(1)/170(b)(1)(A)(vi) organization or a church.  Schools, for example, are 509(a)(1) nonprofits, but donations above 2% do not count as public support.

Assuming the $425,000 above is from other 170(b)(1)(A)(vi) organizations, the calculation on this one is $425,000 + $115,000 = $535,000, for a resulting 53.5% public support.  If not, the $425,000 would have to be further broken out and part of it moved into the “over 2%” column.

XYZ NONPROFIT, INC. – Scenario 1:

XYZ Nonprofit’s situation is different from ABC’s.  While XYZ, a children’s dance school, does gladly accept donations, it also receives part of its revenue from participation fees and from selling tickets to its performances.  As such, it is sub-classified as a 509(a)(2).  Let’s see how their numbers work:

Total revenue:  $1,000,000

Participation fees (program revenue):  $760,000

Ticket sales (program revenue):  $80,000

Individual support under 2%:  $60,000

Individual support over 2%:  $100,000

XYZ’s resulting public support percentage is 90% ($760,000 + $80,000 + $60,000 = $900,000).

There are many more scenarios we could present, but this sample gives you an idea of how complex this can be.  We need to additionally point out that the public support test is calculated on a 5-year cumulative basis, not any individual year.  In addition, the IRS does not require new public charities to demonstrate public support until year 6.

Why Does It Matter?

Failure to pass the public support test will result in your nonprofit having its public charity status retroactively reverted to private foundation.  For the majority of nonprofits, that would be a potentially devastating outcome.  Private foundation status is ideal for those organizations that specifically need that structure.  For charities that find themselves downgraded, however, the consequences include having to file Form 990-PF for 6 prior years, along with the potential for loss of charitable deductibility for larger donors, again retroactively.  Even worse, the organization cannot convert back to a public charity for at least 5 forward years.

There IS a Possible Escape Clause

Even if your nonprofit fails the public support test, it may still be possible to retain public charity status, so long as your public support is at least 10%.  When that happens, charities must fall back on what’s called the facts and circumstances test.  It’s a subjective request to the IRS on Form 990, Schedule A to allow the organization to retain charity status.  The organization must assert that it is operating as a charity, not a foundation, and that they are actively working to get their public support percentage back up to 33% or more.  There’s no guarantee that the IRS will grant the request, but typically they do if the situation seems reasonable.

It is entirely possible to fall into this situation multiple years in a row.  It is certainly a risk, as this is a subjective IRS decision.  But, we have seen nonprofits take 2 or more years to get back above water and still retain status.  Should your public support test drop below 10%, however, and your nonprofit WILL be downgraded.

Wrapping Up

The public support test is critically important.  Understand how it works, keep great records, and work hard to ensure your charity has at least 33% public support.

What’s New in MIP Versions

What’s New in MIP Version 2020.1.1

The MIP 2020.1.1 release includes key updates to the Federal Tax tab and W4 information screens in Payroll, HR and EWS enabling employees to keep their pre-2020 withholding on file or submit updated 2020 W4 information. New employees and existing employees updating their Federal Tax withholding will be required to use the 2020 W4 method. More details are available in the Payroll, HR and EWS online help.

MIP Fund Accounting™ Improvements

State Tax Updates
◦California
◦Colorado
◦Illinois
◦Iowa
◦Kentucky
◦Maine
◦Maryland
◦Michigan
◦Missouri
◦New Mexico
◦New York
◦North Carolina
◦North Dakota
◦Ohio
◦Oregon
◦Rhode Island
◦South Carolina
◦Vermont

Processing Year-End Forms:

For more information on processing W2s, 1095s, and 1099s, please reference the following guides:
•W2 User Guide
•Aatrix 1095-C Preparation Guide for Payroll Users With HR
•1095-C Preparation Guide for Payroll Users WITHOUT the HR Module
•1099 User Guide

MIP™ Idea Portal

You can find the MIP Idea Portal on the MIP Menu at mipideas.abila.com. This portal contains 20-plus unique categories across MIP for quickly submitting your ideas. You can also vote for other ideas submitted by your peers and check statuses of all ideas.

What’s New in MIP Cloud Version 2020.1

This release demonstrates our commitment to building out industry standard value APIs and offers considerable upgrades, including State Tax Withholding updates, the delivery of value APIs and a number of quality improvements across MIP.

The new, robust set of API endpoints includes:
•All GL endpoints
•Customer API endpoints
•Vendor endpoints
•Chart of accounts endpoints

MIP™ Idea Portal

You can find the MIP™ Idea Portal on the MIP™ Menu at mipideas.abila.com. This portal contains 20-plus unique categories across MIP™ for quickly submitting your ideas. You can also vote for other ideas submitted by your peers and check statuses of all ideas.

What’s New in Abila MIP Fund Accounting™ Version 2019.3
•Reporting: ◦Group Code Tables – Added indexes and statistics to improve the speed in reporting
◦Reports – Financial Statements – Statement of Cash Flows – Added the default format for the <Indirect> method
◦Reports – Financial Statements – Statement of Activities – Added option ‘Include Unposted Transactions’ in the report
◦Reports – Accounts Payable – Vendor Activity – Added filter ‘Zero Activity’ to get vendors with no activity

•Organization ◦Organization Preferences – Activated Account Code Combinations – Removed the single user mode requirement
◦Data Integrity Checks – Removed the single user mode requirement and replaced with a system lock (disallow when posting or close–year is in progress)

MIP™ Idea Portal

You can find the MIP™ Idea Portal on the MIP™ Menu at mipideas.abila.com. This portal contains 20-plus unique categories across MIP™ for quickly submitting your ideas. You can also vote for other ideas submitted by your peers and check statuses of all ideas.

What’s New in Abila MIP Fund Accounting™ Version 2019.2

This release contains quality updates, as well as a number of customer-driven improvements across MIP Fund Accounting™.

MIP Fund Accounting™ Improvements
•Application improvements: ◦Upgraded budget worksheet to allow a save while work is still in a draft form
◦Changed journals to include additional filtering options
◦Vendor reporting- additional report highlighting vendors with no recent activities
◦Form 1099 updates for 2019
◦Financial Statement formatter-addition of Account Type column and filters
◦Modify payroll, so that the ACH file can be regenerated and resent as needed in case of error

•Quality improvements across MIP

MIP™ Idea Portal

You can find the MIP™ Idea Portal on the MIP™ Menu at mipideas.abila.com. This portal contains 20-plus unique categories across MIP™ for quickly submitting your ideas. You can also vote for other ideas submitted by your peers and check statuses of all ideas.

What’s New in Abila MIP Fund Accounting™ Version 2019.1.2

This release contains routine tax updates and quality changes to enable a smooth and efficient tax season across MIP Fund Accounting™.

MIP Fund Accounting™ Enhancements
•Application Enhancements: ◦Continuing enhancement of algorithms around encryption to maximize data security

•2019 Tax Updates: ◦Social Security Maximum Wages and W-2 changes
◦Iowa
◦Georgia
◦North Carolina
◦Maine
◦New York
◦Ohio
◦California

•Quality enhancements across MIP and Drillpoint

MIP™ Idea Portal

You can find the MIP™ Idea Portal on the MIP™ Menu at mipideas.abila.com. This portal contains 20-plus unique categories across MIP™ for quickly submitting your ideas. You can also vote for other ideas submitted by your peers and check statuses of all ideas.

What’s New in Abila MIP Fund Accounting™ Version 2019.1.0

Finance and accounting professionals need a secure, robust system with cutting edge usability, technology and reporting capabilities. In this release, we’ve made key performance improvements and reporting enhancements across MIP Fund Accounting™.

MIP Fund Accounting™ Enhancements
•Application Enhancements: ◦Upgraded security encryption algorithms and system messaging to continually enhance application security
◦Timesheet enhancements to simplify reporting and tracking of large numbers of employees

•2018 Tax Updates: ◦Illinois
◦New Jersey
◦Maryland

•Payroll changes to meet Arizona specific pay law changes
•Quality enhancements across the application

MIP™ Idea Portal

You can find the MIP™ Idea Portal on the MIP™ Menu at mipideas.abila.com. This portal contains 20-plus unique categories across MIP™ for quickly submitting your ideas. You can also vote for other ideas submitted by your peers and check statuses of all ideas.

Download the What’s New in MIP™ 2019.1 PDF

What’s New in Abila MIP Fund Accounting™ Version 2018.1

Finance and accounting professionals need a high performing system that helps them save valuable time. In this release, we’ve made key performance improvements and reporting enhancements across MIP™. In addition, we’ve launched a new MIP™ Idea Portal, enabling you to conveniently submit new feature and enhancement requests to your Abila MIP™ team.

MIP Fund Accounting™
•Performance Improvements ◦Performance enhancements have been made systemwide
◦Quality enhancements have been made systemwide

•EFT and Payroll Modules ◦Configure whether EFT for AP and Payroll Direct Deposit ACH files have filler rows at the end of the file.
◦Specify if the ACH file should be configured for same-day clearing.

MIP™ Idea Portal

You can find the MIP™ Idea Portal on the MIP™ Menu at mipideas.abila.com. This portal contains 20-plus unique categories across MIP™ for quickly submitting your ideas. You can also vote for other ideas submitted by your peers and check statuses of all ideas.

Download the What’s New in MIP™ 2018.1 PDF

What’s New in Abila MIP Fund Accounting™ Version 2017.2.1

Finance and accounting professionals need a high-performing solution that helps save valuable time and improve decision making. In this release, we’ve made key performance improvements and reporting enhancements across MIP™. In addition, we’ve expanded our MIP™ application programming interface (API) to support product integrations.

MIP Fund Accounting™
•Performance Improvements ◦New default dates for payroll and aged payables reports improve load time

•Reporting Enhancements ◦New filters for posted general ledger (GL) transaction reports

•Expanded API for Cash Receipts Integrations ◦Our REST-based API (application programming interface)can be used for a variety of integration needs
◦Available Product Partner solutions can be found in the Abila Marketplace

•MIP™ 2017.2.1 also contains more than 20 quality resolutions

MIP™ Idea Portal

You can find the MIP™ Idea Portal on the MIP™ Menu at mipideas.abila.com. This portal contains 20-plus unique categories across MIP™ for quickly submitting your ideas. You can also vote for other ideas submitted by your peers and check statuses of all ideas.

Download the What’s New in MIP™ 2017.2.1 PDF

What’s New in Abila MIP Fund Accounting™ Version 2017.2

We understand nonprofit finance and accounting professionals need a high performing system that helps save valuable time. So, in this latest Abila MIP Fund Accounting™ release, we’ve made key performance and reporting improvements across the product. In addition, we’ve launched a new MIP™ Idea Portal for you to conveniently submit new feature and enhancement requests directly to our Abila MIP™ teams.

MIP Fund Accounting™
•Performance Improvements ◦Load time for the void check form has been decreased by initially applying a date filter
◦Transfer of all payroll data to Accounting is streamlined
◦MIP™ database upgrades are faster

•Email Reporting Options ◦When sending reports via SMTP you can provide name information for the sender

•MIP™ 2017.2 also contains over 19 quality resolutions

Human Resource (HR) Enhancements
•HR Reporting Enhancements ◦Employee ID changes are now available in reporting
◦Reporting formatting is standardized across HR reports

•MIP™ 2017.2 also contains more than a dozen quality resolutions specific to HR

New MIP™ Idea Portal

You can find the new MIP™ Idea Portal from the MIP™ menu or at https://mipideas.abila.com. This portal contains 20-plus unique categories across MIP™ for you to quickly submit your ideas. You can also vote for ideas submitted by your peers and check statuses of all ideas.

Download the What’s New in MIP™ 2017.2 PDF

WHAT’S NEW IN ABILA MIP FUND ACCOUNTING™, VERSION 2017.1?

Nonprofit finance and accounting professionals need more visibility into both their finances and personnel. In this release, we’ve expanded reporting capabilities across Abila MIP Fund Accounting™ to improve your ability to track and report on what’s important to your team and stakeholders.

We’ve also enhanced key Accounts Payable workflows, added new administration options supporting your audit trail, and expanded the human resource management features integrated within MIP.

UPDATED ACCOUNTS PAYABLE WORKFLOW
•Designed to save valuable time by providing scalable invoice payments and check printing.
•Easily create batches of invoices to pay and auto-reversals of invoices with voided checks, as well as check address validation on email addresses.

BROAD REPORT ENHANCEMENTS
•Improved ability to filter, provide additional fields, and generate key Accounts Payable, Accounts Receivable, and General Ledger reports.
•This includes debit and credit columns for transaction reports and new print code options for working trial balance reports.

NEW ADMINISTRATION OPTIONS
•Increased visibility into users, security reports, and the organization’s overall audit trail.
•The summary organization audit log will show Accounts Payable status changes and Payroll updates. The User Information report can show security group and user IDs for improved tracking.
•Attachments will default to the recommended encrypted option for users. (Note: SMTP-based email settings are now required in MIP and replace older MAPI email settings.)

NEW PAYROLL AND HUMAN RESOURCE FEATURES
•Payroll – Enhancements include a new form for reprinting paystubs as vouchers. Plus, employee status is now an available filter and field for timesheet reports.
•Human Resources – This module offers a new OSHA claims form with available query and related reports.
•Employee Web Services (EWS) – Gender dropdown is now editable.
•Benefit Enrollment – Usability enhancements and additional query options for enrollment processing are included.

ABILA ADVANCED REPORTING
•Improve the ability to compare your current financial position to budget.
•New dynamic column display option for actual vs. budgeted comparisons is now available.

EXPANDED ACCOUNTS PAYABLE API
•Our REST-based API (application programming interface)can be used for a variety of integration needs.
•Available Product Partner solutions can be found in the Abila Marketplace.

Download the What’s New in MIP 2017.1 PDF

WHAT’S NEW IN ABILA MIP FUND ACCOUNTING™ VERSION 2016.2?

As a financial professional, you need flexible, integrated solutions to help drive your organization’s mission forward. With this release, we’ve expanded Abila MIP Fund Accounting™’s rich REST-based API (Application Programming Interface) to support Accounts Payable integrations.

We’ve also added a new way for you to manage your workforce with an integrated companion to our Human Resources and Employee Web Services (EWS) modules providing employee benefit enrollment online.

EXPANSION OF THE MIP PLATFORM AND LAUNCH OF NEW BENEFIT ENROLLMENT
•New Benefit Enrollment module for your employees – An integrated companion to our Human Resources and Employee Web Services (EWS) modules, this module equips you to offer open enrollment via a Web-based portal for your employees. Manage the initial setup and enrollment processing using highly configurable options that utilize your existing MIP HR benefit plans and employee/dependent data. Your employees are guided through enrollment with instructions you customize to help them review current benefits and elect new choices from offered benefit plan group(s).
•Further API expansion that enables Accounts Payable invoices to be created, edited, and posted from other systems. Our REST-based API can be utilized for a variety of integration needs. Available Abila Product Partner solutions can be found in the Abila Marketplace.

Download the What’s New in Abila MIP Fund Accounting™2016.2 PDF

WHAT’S NEW IN ABILA MIP ADVANCE™ VERSION 2016.1?

With Affordable Care Act (ACA) reporting around the corner, and the ever-present pressures of data integrity and organizational efficiency, managing your financials is a constant challenge. With this MIP release, we focus on key changes to the system to ensure ACA compliance, along with expanded API capabilities for seamless system integrations.

ENHANCED FUNCTIONALITY TO MAINTAIN COMPLIANCE AND STEWARDSHIP
•Protect your organization’s funds with expanded alerting. Continuing to expand on the alerting functionality available to all customers, version 2016.1 includes a new alert for check writing. Should a check be written without an associated Vendor ID, selected members of your distribution list (both within MIP and outside the system) will receive a notification, and can take the appropriate action.
•Synchronize ledger entries and budget transactions with external systems. Continuing to expand the REST-based API introduced in MIP version 2015.2, Abila announces an expanded REST-based API to cut down on time-intensive exporting, data transformation, and importing activities at your organization. With budget transactions now included in the REST-based API, you can configure the API to automatically import and export budget AND general ledger transactions to other systems, whether on-premises or in the cloud.
•Stay in compliance with ACA reporting. Key changes to data transferred between MIP and reporting partners ensure your organization easily complies with crucial reporting requirements.
•Save time and keystrokes with auto- MIP Advance™ now features auto-incrementing of journal entries and other transaction types, decreasing the time spent entering transactions.
•Simple budget transaction entry within the MIP Advance™ user interface to help you create and maintain your organization’s budget in your office and on the road.

Download the What’s New in MIP Advance 2016.1 PDF

WHAT’S NEW IN ABILA MIP™ VERSION 2015.2?

As a financial professional, you’re pressed to maintain accurate data and produce reports on demand. With this release, we’ve delivered a more streamlined user experience and improved usability and efficiency across the product, incorporating feedback from our customers in many of these enhancements. We’ve also opened MIP both on-premises and in our private cloud to securely expand integration capabilities and cut down time spent entering data from other systems at your org.

IMPROVED USABILITY
•Consolidation of Payroll, Administration, Accounting and Requisitions modules into one, easily accessible MIP icon helps you save time when entering transactions or searching for data.
•The ability to customize and save your organization’s HR reports for future reference helps you easily produce frequently used reports.

EXPANDED INTEGRATION CAPABILITIES
•A new Application Programming Interface (API) provides you with the ability to send and retrieve information from other systems without the need for manual entry or even importing or exporting data manually, reducing the potential for error and eliminating time-intensive data processes.

ENHANCED REPORTING
•Advanced Reporting now features a report wizard for easy, step-by-step production of detailed reports and improved placement of key icons for increased usability.

What’s New in Abila MIP™ Version 2015.1?

You’re pressed for time, with limited resources and staff to serve your mission. With this release, we’ve improved MIP’s ability to inform you of changes to your organization’s financials, as well as advise you on how and where to take action.

IMPROVED FUNCTIONALITY TO INFORM AND ADVISE
•Address complex, advanced reporting needs much more quickly and simply with the Advanced Reporting module, with DrillPoint.
•Easily track spending against planned budget with a budget tolerance alert. Set a percentage to budget threshold for your organization and receive notifications when spending hits or exceeds this mark.
•Spend less time troubleshooting and correcting import files. With this release, the rows of your import file that are generating errors are clearly identified in an exception file, so you can easily fix them and reimport.

COMPLIANCE UPDATE
•In accordance with industry standards, Payroll users will now see a pre-note lead time of 3 banking days.

CONTINUED SECURITY ENHANCEMENTS
•Masking of both employee and vendor Social Security Numbers

What’s New in Abila MIP™ Version 2014.6?

Our most recent release, 2014.6, provides users with tools to prevent fraud within their organizations. Fraudulent activity can occur in an organization every day, with the people you trust most. The new features this release delivers will help you put the day-to-day processes in place to help you detect and deter fraud and take action before it is too late:

ABILA MIP™ – FRAUD DETECTION FUNCTIONALITY
•Alerts are created to keep users informed about important activities going on within the application. This includes potential day-to-day fraudulent activities that might otherwise go unnoticed.
•Auditors can more easily navigate your organization’s records and access key information on MIP users and their job function. This can help pinpoint suspicious activity or rights abuse within the organization.
•Ensure terminated employees are no longer allowed to access MIP. Lock out former employers to prevent them from being able to commit fraudulent or damaging activity.
•Organizations are at risk for fraudulent activity when single users consistently work with a vendor for an extended period of time. Easy visibility to specific user and vendor relationships can be very helpful for internal investigation and audit purposes.
•MIP Fund Accounting Version™ 2014.6 allows you to prevent users who should not have access, from being able to view actual account numbers.
•Your organization can decide to have users be forced to change their passwords at specific times or time intervals.
•With custom payroll vouchers now available in email format, a full digital trail allows you to track where payroll information is sent.

What’s New in Abila MIP Fund Accounting™ Version 2014.5?

This tax release contains state withholding tax formulas for the state of Wisconsin. This information is based on changes to tax withholding formulas taking effect on April 1, 2014.

Reminder: to complete the tax update process you may need to manually update your state unemployment tax and/or other tax code rates, wage limits and/or amounts.

Enhancements have been made to our Human Resources and Employee Web Services modules as follows:

Human Resources
•There are new queries for the Timesheet Submit Log and Leave Requests.
•The new Timesheet Form VI is an additional option for the default timesheet in Employee Web Settings.

Employee Web Services
•A new timesheet form (VI) has been added that allows employees to enter time in a grid format. The grid shows all days in a pay period, and all valid cost center and wage code combinations.
•A new form has been added in the Personal menu that allows employees to add their own dependent information.
•Staff Timesheet Pivot Table now has a filter called ‘Role’ that allows you to filter the table to show only the employees for which you are the manager, supervisor, or secondary supervisor.
•The timesheet Entry Log now includes changes to cost centers and earnings codes.

What’s New In Abila MIP™ Version 2014.3?

Abila MIP™ version 2014.3 tax release contains state withholding tables that will be effective for the 2014 calendar payroll year. Changes in state withholding tax formulas apply to:
•Illinois
•Oklahoma
•Oregon
•Massachusetts
•Michigan
•North Dakota
•Puerto Rico
•Vermont

What’s New in Abila MIP™ Version 2014.1?

Abila MIP™ version 2014.1 tax release contains federal withholding tables that will be effective for the 2014 calendar payroll year. The release also contains the latest Federal published tax information, as of 12/11/13.
•The Social Security wage base increased to $117,000 and the Employee Social Security withholding rate remained 6.2%.
•The withholding allowance and the percentage method income tax withholding tables were updated.
•The nonresident alien salary gross up increased.

Additionally, changes in state withholding tax formulas apply to:
•California
•Connecticut
•Delaware
•Kansas
•Kentucky
•Maine
•Minnesota
•New Mexico
•New York
•North Carolina
•Rhode Island

Human Resources Module
•HR Processes now allows you to add a process on multiple dates. For example, an annual performance review can be added one time but the process can reoccur each year.

The new fields related to emailing payroll vouchers are added to Details> W2/Voucher tab.

Abila MIP™ Version 2014 provides Major updates to the Abila MIP™ Mobile App. Other enhancements have been made to Accounts Receivable Billing, Accounts Payable, and include the ability to email Payroll Vouchers.

Download What’s New in MIP version 2014

ABILA MIP™ MOBILE ENHANCEMENTS
•Interactive Reports provide users with the ability to review their Balance Sheet and Statement of Revenues and Expenditures with drill down functionality.
•Interactive Reports allow users to view custom report formats created in the desktop version of MIP for the Balance Sheet and Statement of Revenues and Expenditures.
•Interactive Reports can be viewed on the mobile device or exported to Excel or PDF for sharing with others.
•MIP Reports allow users to review their General Ledger Analysis reports directly on their mobile device or in Excel.
•Users with the available security rights are able to clear User Seats directly from their mobile device.
•Hosted MIP users can view logs of recent backups of their MIP database hosted by Abila.
•On-premises users have the ability to initiate a backup their MIP database directly from their mobile device.

ACCOUNTS RECEIVABLE AND BILLING ENHANCEMENTS
•New reports are available for Accounts Receivable Billing updates include: calculated invoices, calculated finance charges and calculated invoices and finance charges.
•The pre-payment process has been enhanced to a better user experience.
•The addition of a prepayment Transaction Source Code has been created for use with distribution codes.
•Prepayments can no longer be made In Accounts Receivable Credits; users must go through Accounts Receivable Receipts.

ACCOUNTS PAYABLE ENHANCEMENTS
•Users are able to reverse the voids of individual items in a voided batch.
•Users are able to edit an unposted batch and access the session if a check is voided by mistake.

ALSO INCLUDING THE ABILITY TO EMAIL PAYROLL VOUCHERS

What’s New in Abila Human Resources Version 2014?

Please note: You must be on the Abila MIP Fund Accounting™ v2014.0 or higher before upgrading HR and EWS to v2014.0.0

HUMAN RESOURCE ENHANCEMENTS
•The Check For Updates menu item in Help is no longer available. Future updates to the HR product will be made available via Abila Auto Update.
•Timesheet Approver is now an option in the Employee info query.
•Users will now see a Required checkbox if an HR Process is set as required in the HR Processes setup.
•A Process Log is now created when Regular/Supplemental Timesheets are loaded in HR. This will allow users to see who and when timesheets were loaded.
•Audit records are created when HR processes are assigned to employees.
•When job codes are assigned to employees the exempt and OT eligible defaults flow through to the employee record.
•Mass updates can now be made to EWS Employee Web Settings. Mass update options include: Default Cost Center, Default Earnings Code, Default OT Earnings Code, Cost Center for OT, Default DT Earnings Code, Default Leave Cost Center, Default Earnings Code for Leave, Timesheet Approver.
•Double Time is now included as a part of the Earn|Def map in the timesheet import process.
•Employee Certifications that are expired are now grey so you can tell which ones are expired which ones are active.
•The Report Writer now has a default data set for HR processes.
•The Web Timesheet by Cost Center Report now has a grand total on the report.

What’s New in Abila Employee Web Services Version 2014?

EMPLOYEE WEB SERVICES ENHANCEMENTS
•The Timesheet I now has the option to have OT and no Unpaid Breaks
•When an HR process is assigned to a user, the user will receive a message in the message center alerting them of the task to complete.
•A message will be sent to the employees’ message center one week prior to the start date of a leave request. This will keep employees from forgetting to enter their leave time for an approved leave request.
•Travel Date has been changed to Expense Date to better describe all expense entries in the expense entry form.

Beyond Financial Oversight: Expanding the Board’s Role in the Pursuit of Sustainability

This article is reprinted from NPQ’s spring 2011 edition, “Governing amid the Tremors.” It was first published online on April 26, 2011.

Throughout the ten years prior to the recession, it seemed that whenever anyone talked about boards and finances in the same sentence they were making a point about accountability. They were warning us that our Form 990s were now on GuideStar, so we’d better make sure that our boards were reading them. They were telling us to have an audit committee and a “Conflict of Interest” policy. They were telling us that we should study Sarbanes-Oxley and apply whatever we could to our own boards. They were making constant reference to a handful of nonprofit fraud cases, suggesting that this was what awaited us if our boards did not get very serious about oversight and accountability.

Now, as community-based organizations continue to weather the severe, and in many cases permanent, shifts in their operating environments caused by the recession, those accountability concerns seem downright quaint. The truth is that one of the roles that most decently functioning boards play quite well is providing financial oversight. Compared to other board functions, financial oversight is relatively clear: there is a dedicated officer role, the treasurer; nearly all boards have a finance committee; and there are tangible products such as an annual budget to approve, financial statements to distribute, and an auditor to select.

The problem is none of those tangible products in and of themselves has anything to do with nonprofit sustainability. And it is sustainability that is keeping executive directors up at night, not financial oversight. In a new book I coauthored, Nonprofit Sustainability: Making Strategic Decisions for Financial Viability, my colleagues and I define sustainability as being both programmatic and financial:1

Sustainability encompasses both financial sustainability (the ability to generate resources to meet the needs of the present without compromising the future) and programmatic sustainability (the ability to develop, mature, and cycle out programs to be responsive to constituencies over time).

In other words, board finance committees can look at annual budgets, financial statements, and audits forever, but if some group of board members is not considering those financial results in light of the organization’s programming mix and its results, then their efforts are very unlikely to contribute to sustainability.

Our boards, not unlike many of our staffs, are artificially siloed into groups that consider financial results, groups that consider programmatic results, and groups that consider fundraising results. Yet, for those of us without an endowment or many wealthy annual donors, program results in large part drive financial results. It is how many clients we case-manage that yields a particular contract reimbursement. It is how many units of housing we build that yields a particular developer’s fee. It is how popular our new play turns out to be that yields a particular box office revenue. And just as critically, it is how many people respond to our direct mail campaign and to our special event invitation that determines how much subsidy we can raise for programs that don’t cover their own costs. Put another way, if the board finance committee doesn’t like the financial results it is seeing as it provides oversight, what is it going to do about it? It has to look to the programs and the fundraising activities of the organization to yield different financial results; that’s the only way to make the financial statements say anything better.

So while financial oversight is absolutely critical, it is hardly sufficient. Boards of directors charged as stewards of an organization have to be fundamentally knowledgeable about and actively engaged in the business models of the organizations they govern. And nonprofit business models are typically the antithesis of siloed; they are instead a very interdependent mix of programs and fundraising activities that work together to achieve a set of impacts and financial results. How engaged are most boards in that interdependence? And if they are not engaged, how can they meaningfully assist with the dogged pursuit of sustainability in which so many of their executives find themselves?

The complex challenges facing community-based nonprofits require that we shift our mental model from boards being primarily about financial oversight and accountability, to boards being concerned in an ongoing way with the financial sustainability of their organizations.

Is Your Board Sustainability-Focused?
If you are considering making the pivot from an oversight orientation to a sustainability orientation, consider using these discussion questions to start off the conversation at your next board meeting:

  1. How financially literate are we as a group? If we have knowledge gaps, how will we work together to close them, and by when?
  2. Is our finance committee engaging in the key business-model questions facing our organization, or is it focused primarily on monitoring budget variance and preparing for the audit?
  3. What major sustainability decisions are before us as an organization, and how will we structure our board and committee-meeting agendas over the next three to four months to ensure we make those decisions effectively?
  4. Overall, how healthy is our organization financially? Is it healthier today than it was three years ago? Why or why not? When our board terms end, where do we want to leave the organization financially?
  5. How strong is our partnership with staff leadership around issues of sustainability? Are we sharing information and ideas across staff and board in a way that truly leverages our individual and collective strengths and networks as board members in the sustainability pursuit?

When pivoting a board of directors from a strictly oversight orientation to a sustainability orientation, there are a number of things to consider. For instance, a board with a sustainability orientation requires board members who are financially literate. By this I mean that everyone has, or is actively developing, an understanding of the financial statements they receive. They have the fluency, for instance, to ask how a core program is performing both financially and programmatically. If only two or three people on the board can read the financial data, the board is unlikely to have holistic conversations that take both mission impact and financial return into account. With a sustainability orientation, financial statements become a useful tool in the ongoing discussion of where the organization should go next rather than merely reports that the treasurer assures everyone she has reviewed on their behalf.

Practically, this means that board chairs and executives need to team up in creating a board culture that expects and supports financial literacy from all members. During the recruitment and orientation of new board members, thorough and transparent discussion of the organization’s business model and its current financial challenges and opportunities should be central. A board with a strong sustainability orientation will most likely pass on the potential recruit who uses stale language such as, “I am not a numbers person. I leave that stuff to the treasurer.” The response should be, “Our board is focused holistically on the sustainability of this organization, so everyone engages with our financial results. We will train you and support your development as a financial leader, but you have to be committed to our stance on this point to be successful on this board.” In addition to this kind of strategic recruitment and orientation, board chairs and executives should prioritize financial training opportunities and consider mentoring among board members to support members who are in active development of their financial literacy. Once a year, all board members should receive a one-hour refresher on how to read and interpret the organization’s particular set of monthly financial statements.

To signal and reinforce this sustainability stance, chairs and executives should consider renaming their finance committees and adding nontraditional members—folks who are financially literate but who have program or fundraising as their primary orientations, for instance. A board committee called “Finance and Sustainability” that is composed of both finance experts and programmatic folks actively engaging with the business model’s concerns will support the pivot to a “beyond oversight” board. When a diverse group of members is reviewing and discussing the numbers, not only can it go beyond merely reporting to the full board how close to its budget the organization is or is not, it can also frame for the board the questions of “why?” and “what might we do about it?” With this approach, the treasurer role evolves from that of a CPA, who is among the only people able and willing to review financials, to a full leadership role that supports the full board’s meaningful focus on the complex questions and difficult decision making of the sustainability pursuit.

Another key shift required for a sustainability orientation is the normalizing of profit. Profit, like program impact, is fundamental to sustainability. A board of directors that is uncomfortable budgeting for surplus and unwilling to face the brutal facts about the prospects for profitability of core activities is not operating with a sustainability orientation. It is important not to conflate profitability with earned income, however. Many community-based nonprofits achieve profitability—that is, consistent annual surpluses—through a mix of earned and donated income. A special event can be just as profitable as a fee-based service to the community. The key is for boards to be looking for profit wherever it can be generated in the model, and to be ensuring that, as a set, the organization’s activities yield more than they consume.

Through the recession, many leaders have had to face the reality that they can no longer subsidize core activities that do not cover their own costs. The fact that an activity is core to an organization’s mission and very needed by its constituency does not necessarily mean that the organization can afford to keep it in its business model. So many executives I talk to now lament not having faced those realities sooner. I attribute this reticence to act on unsustainable deficits in part to boards of directors not deeply engaging in why and how their organizations were incurring deficits. That is, they didn’t deeply understand which activities in their business models were losing money, and how much; instead, they talked in macro terms about the organization’s overall “not hitting budget.” Part of pursuing sustainability is determining the desired profitability of every core activity—programmatic and fundraising. While most community-based organizations will elect to subsidize a handful of money-losers—allow the profits from an annual event to offset the losses in the government-funded job training program, for instance—the board should be very clear on these decisions and ensure that those subsidy decisions do not result in deficits for the organization overall.

The nature of financial plans and reports shifts too with a sustainability orientation. Ironically, the classic tools of annual budget, monthly financial statements, and an audit can actually keep a board focused on oversight rather than business model sustainability. When boards focus too much on annual budget variance, for example, I find that they are often not sufficiently engaging in projection. Rather than focusing all of their analytical energy on how close the organization is to numbers it predicted six or eight months ago, members of the Finance and Sustainability Committee want to be anticipating the next several quarters’ results, too. We spend too much time providing oversight on things that already happened, and not enough time considering the financial road ahead. For-profits engage in rolling projection, and I believe that nonprofits should do this as well.

Rolling projection moves the board of directors away from the silly obsession with “hitting the year-end budget” and toward the capacity to make earlier and better decisions given the economic forces happening in real time. Fiscal years are artificial time frames. All major decisions will have economic impact far beyond the current fiscal year. Put another way, it is just as important to have a good July as it is to have a good June. When boards focus only on predicting the coming twelve months (annual budget), monitoring variance from that increasingly outdated prediction (monthly financial statements with budget variance), and reviewing the past year’s statements (audit), they risk not actually engaging in the pressing and emerging business issues facing their organizations right now. Again, financial oversight is critical but insufficient for sustainability.

A board that is focused on sustainability will be working a handful of key business-model issues all the time. In this economic climate, very few community-based organizations do not have to rethink some aspect of their business models. The Finance and Sustainability Committee members will partner with staff leadership to articulate those issues and find meaningful ways for the full board to understand them and, where possible, contribute to their resolution. For instance, the committee may come to the realization that the organization needs to close or transfer its drop-in program for teen dads because, while valued by the community, it has lost money for three years in a row, and its government contract is unlikely to survive the next round of county budget cuts. A committee member can partner with the executive director to craft a presentation to the full board, laying out the data and framing the key questions for board decision making: Are we prepared to end this program, and if so, by what date? Are there elements of this program that we can transfer to a collaborator or competitor? Are there financial implications of closing this program that we need to understand (for example, laying off staff, alienating a key funder, or losing the contract’s modest contribution to defraying overhead costs)? One board member can be engaged in reaching out to another community organization about the potential for program transfer; another board member can join the executive director in breaking the news to the government funder; and so on. In this fashion, the full board is actively engaged in decision making and execution on a business-model issue essential to the organization’s sustainability.

For too long, too much of our boards’ finance focus has been on reviewing the past. For many nonprofits, this meant decision making was too slow in the face of the mounting recession. Modest reserves were depleted, and organizations were left exceedingly vulnerable during a time of great community need. The lesson of the recession is that boards must engage not only in financial oversight but also in the pursuit of sustainability. To do this well, boards have to be composed of financially literate members who engage in real-time analysis and focus on answering the complex business-model questions their organizations face today.

Notes

  1. Jeanne Bell, Jan Masaoka, and Steve Zimmerman, Nonprofit Sustainability: Making Strategic Decisions for Financial Viability. San Francisco: Jossey-Bass, 2010.

IRS improves online Withholding Estimator to reflect new W-4 for 2020

The Internal Revenue Service unveiled an enhanced Tax Withholding Estimator on its website Tuesday, designed to help workers fill out the new W-4 withholding form and hopefully avoid the problems seen last year when many taxpayers found themselves owing more taxes or receiving less of a tax refund than they expected.

The new Tax Withholding Estimator incorporates the changes from the recently revamped Form W-4, Employee’s Withholding Certificate, that employees can fill out and give to their employers this year.

The IRS is encouraging taxpayers to find out if they need to adjust their withholding by using the Tax Withholding Estimator to do a Paycheck Checkup. If an adjustment is needed, the Tax Withholding Estimator offers recommendations on how to fill out their employer’s online Form W-4 or provides the PDF form with key parts filled out.

To assist workers with more effectively adjusting their withholding, the enhanced Tax Withholding Estimator offers a customized refund slider that enables taxpayers to select the tax refund amount they prefer from a range of different refund amounts. The exact refund range shown is customized based on the tax information entered by that user.

Based on the refund amount selected, the Tax Withholding Estimator will give the worker specific recommendations on how to fill out their W-4. The new feature permits users who prefer either larger refunds at the end of the year or more money on their paychecks throughout the year to have just the right amount withheld to meet their preference.

The new Tax Withholding Estimator also offers a number of other improvements over last year’s version, including one enabling anybody who anticipates receiving a bonus from their employer to indicate whether tax will be withheld. On top of that, improvements added last summer by the IRS continue to be available in the latest version of the app, including mobile-friendly design, handling of pension income, Social Security benefits and self-employment tax.

The Tax Cuts and Jobs Act of 2017 eliminated a host of traditional features of the Tax Code, including the personal and dependent exemptions that had long been the key ways that employees were filling out their W-4 forms. The IRS was slow to revise the W-4 form after some early draft versions of the W-4 prompted complaints that it was asking for too much information, such as about a spouse’s income. The IRS finally released a new W-4 form last month (listen to our podcast episode Meet the new W-4 to hear more about it). But that was too late for many taxpayers who discovered last tax season that they ended up owing thousands of dollars on their tax bills when they were accustomed to receiving tax refunds every year. Even though the Tax Cuts and Jobs Act reduced the overall tax burden for most taxpayers, the actual tax cut for many workers was so small that many people never noticed the difference on their paycheck, particularly if other items like health insurance went up.

The changes may be even more dramatic this year. Starting in 2020, the IRS noted, income tax withholding is no longer based on an employee’s marital status and withholding allowances, tied to the value of the personal exemption. Instead, income tax withholding is typically going to be based on the worker’s expected filing status and standard deduction for the year. In addition, workers can choose to have itemized deductions, the Child Tax Credit and other tax benefits reflected in their withholding for the year.

The IRS stressed the importance of people who have more than one job at a time (including families in which both spouses work) to adjust their withholding to avoid having too little money in taxes withheld from their paychecks. The revamped Tax Withholding Estimator promises to provide a more accurate way to do this. As in the past, employees can also opt to have their employer withhold an extra flat-dollar amount each pay period to cover, for example, the income they receive from a gig economy side job, self-employment income, or other sources that aren’t subject to withholding.

Nonprofit Tax Alert: Parking Tax REPEALED

As part of a bipartisan year-end spending and tax package agreed to this week, Congress repealed IRC Section 512(a)(7) that required tax-exempt organizations to pay a 21% unrelated business income tax (UBIT) on qualified transportation benefits provided to employees (the “Parking Tax”).

President Trump is expected to sign this legislation today to avoid a partial government shutdown at midnight December 20. Once signed, the repeal of the “Parking Tax” is retroactive to the original date of enactment. Taxpayers should be able to file amended Form 990-T to claim a refund for any UBIT paid related to providing qualified transportation benefits to their employees after December 31, 2017.

The legislation also amends IRC Section 4940 private foundation excise tax on net investment income to a single rate of 1.39%. The 1% or 2% tax rates have been eliminated. This single rate rate of 1.39% will be effective for tax years beginning after the legislation’s date of enactment.  The new rate is effective for tax years beginning after December 20, 2019.

For additional details, refer to the law (H.R. 1865, Division Q, AKA the Taxpayer Certainty and Disaster Tax Relief Act of 2019, SECs. 207 and 302) or visit irs.gov/charities-and-nonprofits.

As always, let us know if you have any questions.

IRS issues 2020 standard mileage rates

The optional standard mileage rates for business use of a vehicle will decrease slightly in 2020 after increasing significantly in 2019, the IRS announced on Tuesday (Notice 2020-05). For business use of a car, van, pickup truck, or panel truck, the rate for 2020 will be 57.5 cents per mile in 2020, down from 58 cents per mile last year after increasing from 54.5 cents per mile in 2018. Taxpayers can use the optional standard mileage rates to calculate the deductible costs of operating an automobile.

Because the law known as the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, suspended the miscellaneous itemized deduction under Sec. 67 for unreimbursed employee business expenses from 2018 to 2025, the notice explains that the standard mileage rate cannot be used to claim a deduction for those expenses during that period.

However, self-employed taxpayers can deduct automobile expenses if they qualify as ordinary and necessary business expenses. And an exception to the disallowance of a deduction for unreimbursed employee business expenses applies to members of a reserve component of the U.S. armed forces, state or local government officials paid on a fee basis, and certain performing artists. They are permitted to deduct mileage expenses on line 11 of Schedule 1 of Form 1040, U.S. Individual Income Tax Return, (an above-the-line deduction) and may continue to use the 57.5 cents-per-mile business standard mileage rate.

The standard mileage rate also can be used under Rev. Proc. 2019-46 as the maximum amount an employer can reimburse an employee for operating an automobile for business purposes without substantiating the actual expense incurred.

Under Notice 2020-05, driving for medical care or for certain limited moving expense purposes for members of the armed forces may be deducted at 17 cents per mile, which is 3 cents lower than for 2019.

The TCJA repealed the moving expense deduction for individual taxpayers from 2018 to 2025, except for U.S. armed forces members on active duty who move pursuant to a military order and incident to a permanent change of station to whom Sec. 217(g) applies.

The rate for service to a charitable organization is unchanged, set by statute at 14 cents per mile (Sec. 170(i)).

The portion of the business standard mileage rate that is treated as depreciation will be 27 cents per mile for 2020, 1 cent more than 2019, one of the few amounts that is increasing.

To compute the allowance under a fixed-and-variable-rate (FAVR) plan, the maximum standard automobile cost is $50,400 for 2020 for all automobiles (including trucks and vans), the same as in 2019. The FAVR amounts were recalculated in 2018 after the TCJA retroactively amended the bonus depreciation rules. Under a FAVR plan, a standard amount is deemed substantiated for an employer’s reimbursement to employees for expenses they incur in driving their vehicle in performing services as an employee for the employer.

As always, please contact us should you have any questions.