2022 Non-Profit Tax Update

As we are into the second half of the year, we would like to inform you of some key information relating to the Internal Revenue Service (IRS) and Exempt Organizations:

IRS Updates

• Employee Retention Credit: If your organization is expecting a refund for the employee retention credit and hasn’t received it yet, you should be aware that once the IRS has received the application, the IRS anticipates that it will take approximately 30 weeks to move along the process. If your credit is under $100,000, the application can be immediately processed. If your credit is over $100,000, the application will require a secondary review before processing.
• Parking Tax Refund Processing: If your organization anticipates a parking tax refund, note that the refund process is still in progress for some organizations. The delay is due in part to these being paper filings. Unfortunately, due to the repeal of the tax, these refund filings have triggered some audits.
• Secured electronic file sharing/ email permissions and electronic signatures accommodations have been extended to October 2023. The IRS continues to work on improvements to information sharing that do not involve phone calls.
• Form 1024 must be filed electronically after April 4, 2022.
• Remember all Form 990 Series returns must be e-filed; work with the e-help desk via the phone number sent with the e-file rejection. All ultimately must be accepted electronically.
• The IRS is in the process of reorganizing as mandated by the Taxpayer First Act. Check out the latest IRS blog on the subject:  https://www.irs.gov/newsroom/taxpayer-first-act-irs-modernization
• For further insight into the IRS, check out the Taxpayer Advocate Service 2023 Objectives Report to Congress released June 22, 2022

Other Matters to Monitor:

• Remote Employees: Does your organization have remote employees residing in other states? Such arrangements may trigger the need to obtain authorization to do business in those states, may trigger charity registration and tax exempt/EO tax returns in those states, and may result in your organization requiring to follow that state’s laws with respect to your operations. There could be significant consequences for non-compliance, and there may be different requirements for temporary versus permanent employees. Remember to consider these factors before agreeing to a remote employee in another state.
• Accelerating Charitable Efforts Act: The Accelerating Charitable Efforts Act (House Bill HR 6595) was introduced in February of 2022 in the House of Representatives (and was previously introduced in the Senate in June 2021 as Senate Bill S 1981). The goal of this bill is to reform tax laws that cover charitable donations to donor-advised funds and to ensure philanthropic funds are made available to working charities within a reasonable time period. Specifically, the bill, if enacted into law, would: aim to address the mismatch between deduction and distribution of assets, minimize ongoing donor control, and discourage warehousing of charitable assets; modify tax rules relating to donor advised funds (DAFs); disallow as a qualified distribution by a Private Foundation (PF) of any grant to a DAF; require disclosures on Form 990-PF of contributions made to DAFs; there would be new deduction rules for different categories of DAFs with the imposition of limitations on donor deductions for contributions; there would be a new excise tax on undistributed contributions held in DAFs, depending on the type of DAF; and there would be new public support rules requiring public charities that receive a grant from a DAF to treat the grant (for support test purposes) as a contribution from a PF instead of PC exceptions for community foundations.

We will continue to monitor the progress of this bill.