Industries Archives - Page 5 of 44

What your nonprofit needs for a successful capital campaign

Non-Profits|February 8, 2022

Many nonprofits have put major purchases and other ambitious initiatives on hold during the pandemic. But if you need to buy or expand a facility, purchase expensive equipment, or seed an endowment, your organization may not want to wait any longer.

A capital campaign to raise funds can be more difficult at this time — but it’s possible. You just need to ensure your not-for-profit’s stakeholders fully support your goals and are willing to go the extra mile to achieve them.

A small army

Capital campaigns generally are long-term projects — often lasting three or more years. To carry out yours, you’ll need a champion with vision and stamina. Consider board members or look to leaders in the greater community with a fundraising track record, knowledge of your community, the ability to motivate others, and time to attend meetings and fundraising events.

Your leader will require a small army to achieve capital campaign goals. Volunteers, board members and staffers will be required to raise funds through direct mail, email solicitations, direct solicitations and special events. If you need more help, look to like-minded community groups and clients who have benefited from your services.

Fundraising smarts

The biggest challenge of any capital campaign is securing donations. To this end, identify a large group — say 1,000 individuals — to solicit. Draw your list from past donors, area business owners, board members, volunteers and other likely prospects. Then narrow that list to the 100 largest potential donors and talk to them first.

Traditional fundraising wisdom holds that you shouldn’t go public with your campaign until you’ve secured significant “lead gifts” from major donors. The percentage varies, with an organization commonly waiting until 50% to 65% of its fundraising goal is reached before announcing a campaign. Even if you decide not to follow this model, know that it’s generally easier to solicit donations under $1,000 after you’ve already landed several large gifts.

Keep in mind that your campaign will cost money to execute. Fundraising events, marketing materials, consultant fees and other expenses can eat into donations.

The right message

To engage key constituents, break down your ultimate target into smaller objectives. Celebrate as you reach each goal. Also regularly report gifts, track your progress toward reaching your ultimate goal and measure the effectiveness of your activities.

Pay attention to how you craft your message. Potential donors must see your organization as capable and strong, but also as the same group they’ve championed for years. Instead of focusing on what donations will do for your nonprofit, show potential donors the impact on their community.

Remember hidden costs

Is now the time for a capital campaign? It depends on many factors, including your organization’s fiscal health. Contact us for help evaluating your nonprofit’s financial fitness.

Are your social media accounts working for — or against — you?

Non-Profits|January 28, 2022

Social media is an essential tool for not-for-profit outreach, engagement and fundraising. But social media also poses a reputational threat if your organization doesn’t clearly communicate rules for its use and prepare for “emergencies.” If you haven’t already, it’s time to implement some best practices.

Rules of the road

The line between employees’ personal and work lives was already blurry, and the shift to remote work has only exacerbated this effect. This raises the risk of inappropriate posts on personal and organizational accounts.

The best defense is a formal social media policy. The policy should set clear boundaries about the types of material that are and aren’t permissible on both kinds of accounts. For example, it should prohibit employees from posting nonpublic information they’ve learned on the job. Also share the policy with board members and volunteers and emphasize that they could possibly harm your organization with their personal accounts.

Around the clock attention

Social media is 24/7, and incidents can escalate quickly. So be sure to devote the necessary resources to monitor your accounts and others that refer to your nonprofit.

With organizational accounts, check the posts and comments. Both can go viral and create trouble. That said, don’t get drawn into an exchange with a troll who’s posting in bad faith and simply trying to stir things up. Give your staff guidelines to help them determine when to engage and when to let it go. You can establish a zero-tolerance policy for offensive comments or disable comments altogether.

Consider subscribing to a “social listening” tool, such as Sprout Social or Brandwatch, that will alert you when your nonprofit’s name is trending on social media. These tools help you follow what people are saying about your organization and respond to them directly when appropriate.

Ready to respond

Mistakes — or intentionally damaging posts — can occur despite comprehensive policies. Create a formal response plan so you’ll be able to weather such events. The plan should assign responsibilities and include contact information for several spokespersons. Identify a specific trigger when it’s time to involve the executive director and board and include a list of potential responses, such as issuing a press release or bringing in a crisis management expert.

After a situation has resolved, you’ll want to sit down and review your plan’s effectiveness. Ask what worked and what didn’t.

Avoiding mistakes

You’ve probably seen other organizations mishandle ill-advised posts and attacks from outsiders on social media. Take their experience as an object lesson and put policies in place to help prevent the same from happening to your nonprofit.

Your Board can’t do its Job without Information from You

Non-Profits|November 11, 2021

If your not-for-profit’s board members don’t have the information they need to make decisions, the repercussions can be severe. Board time can be wasted, voting may be delayed and your organization may be unable to act when it needs to. Worse, board members might make decisions based on faulty information, negatively affecting your mission. Here’s how to prevent such outcomes.

For Fiduciary Success

To properly fulfill their fiduciary duties, your board needs certain information. The first is financial. To help your board fully understand your nonprofit’s position, provide it with copies of your Form 990. The board president or treasurer should review this document and approve it before it’s filed.

The board also must get the results of any audit you’ve conducted, salary information for key staff, and monthly and quarterly financial reports showing income and expenses. If your organization provides directors and officers insurance, provide proof to board members.

Share and Share Alike

Board members also need strategic information. This includes reports on your nonprofit’s work, such as how programs are being carried out and how they’re used, progress on event timelines, and membership statistics. If your organization collects information from the audience it serves, provide at least an executive summary of your findings to your board. Occasionally sharing with the board articles that relate to your nonprofit’s mission, locations or audiences also may be useful.

Sharing should go both ways. To help foster teamwork and commitment to the cause, ask that members provide brief bios and other relevant background information. Also publicly share thank-yous when board members make special efforts — whether those efforts are individual (such as securing an event sponsor) or group (performing due diligence on a new executive director).

Funneling Material

To prevent board members from wasting time reviewing irrelevant information, funnel all material through your executive director or another senior manager. Only executive-approved material should be provided to board members. If you have questions about your board’s fiduciary role, please contact us.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

Employers: The Social Security Wage Base is Increasing in 2022

Management Advisory Services & Business Consulting|November 10, 2021

The Social Security Administration recently announced that the wage base for computing Social Security tax will increase to $147,000 for 2022 (up from $142,800 for 2021). Wages and self-employment income above this threshold aren’t subject to Social Security tax.

Background Information

The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees and self-employed workers — one for Old Age, Survivors and Disability Insurance, which is commonly known as the Social Security tax, and the other for Hospital Insurance, which is commonly known as the Medicare tax.

There’s a maximum amount of compensation subject to the Social Security tax, but no maximum for Medicare tax. For 2022, the FICA tax rate for employers is 7.65% — 6.2% for Social Security and 1.45% for Medicare (the same as in 2021).

2022 Updates

For 2022, an employee will pay:

6.2% Social Security tax on the first $147,000 of wages (6.2% of $147,000 makes the maximum tax $9,114), plus
1.45% Medicare tax on the first $200,000 of wages ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return), plus
2.35% Medicare tax (regular 1.45% Medicare tax plus 0.9% additional Medicare tax) on all wages in excess of $200,000 ($250,000 for joint returns; $125,000 for married taxpayers filing a separate return).

For 2022, the self-employment tax imposed on self-employed people is:

12.4% OASDI on the first $147,000 of self-employment income, for a maximum tax of $18,228 (12.4% of $147,000); plus
2.90% Medicare tax on the first $200,000 of self-employment income ($250,000 of combined self-employment income on a joint return, $125,000 on a return of a married individual filing separately), plus
3.8% (2.90% regular Medicare tax plus 0.9% additional Medicare tax) on all self-employment income in excess of $200,000 ($250,000 of combined self-employment income on a joint return, $125,000 for married taxpayers filing a separate return).

More than One Employer

What happens if an employee works for your business and has a second job? That employee would have taxes withheld from two different employers. Can the employee ask you to stop withholding Social Security tax once he or she reaches the wage base threshold? Unfortunately, no. Each employer must withhold Social Security taxes from the individual’s wages, even if the combined withholding exceeds the maximum amount that can be imposed for the year. Fortunately, the employee will get a credit on his or her tax return for any excess withheld.

We Can Help

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

Opportunities and Challenges: Valuation in the Age of COVID-19

Estate & Wealth Transfer Planning|November 3, 2021

Valuation and estate planning go hand in hand. After all, the tax implications of various estate planning strategies depend on the value of your assets at the time they’re transferred.

The COVID-19 pandemic has had a significant impact on the value of many business interests and other assets, which may create some attractive estate planning opportunities. It also presents unique challenges for valuation professionals. As a result, it’s more important than ever to involve experienced valuation experts in the estate planning process.

What are the Opportunities?

With the value of many assets depressed (in many or most cases temporarily), now may be an ideal time to gift them, either directly to family members or to irrevocable trusts and other estate planning vehicles. Transferring assets while values are low also allows you to use as little of your gift and estate tax exemption as possible, maximizing the amount available for future gifts or bequests. As the economy fully recovers and assuming your asset values rebound, your beneficiaries should enjoy substantial growth outside your taxable estate.

What are the Challenges?

The pandemic has created a situation that’s truly uncharted territory for the valuation profession. Unlike other economic crises in recent years, most of the damage to the economy resulted from business closures and restrictions and other measures designed to help contain the virus.

For business valuations, the current environment presents several challenges, including:

Known or knowable. A fair market valuation generally doesn’t consider “subsequent events” — that is, events that occur after, and weren’t “known or knowable” on the valuation date. Experts generally agree that the COVID-19 pandemic wasn’t known or knowable as of December 31, 2019. Yet for valuation dates after that, determining whether the pandemic was known or knowable and should be considered in valuing a business or other asset can be a formidable task.

Valuation approaches. Generally, valuators consider all three of the major valuation approaches: the income, market and asset approaches. The pandemic may affect the relative appropriateness of each approach and the amount of weight they should be assigned.

For example, market-based methods, which rely on data about actual transactions involving comparable businesses, may be less relevant today if the underlying transactions predate COVID-19 (although it may be possible to adjust to reflect the pandemic’s impact).

Many valuators are emphasizing income-based methods, such as the discounted cash flow (DCF) method, which involves projecting a business’s future cash flows over a defined period (such as five years) and discounting them to present value. The advantage of DCF is that it provides a great deal of flexibility to model a business’s expected financial performance based on current conditions as well as assumptions about its eventual return to “normal” over the next several years.

Regardless of the method or methods used, it’s important for valuators to consider a business’s available cash and expected cash needs to assess its viability as a going concern. These considerations will be critical in evaluating a business’s risk and the impact of that risk on value.

What’s it Worth?

Depressed asset values can create attractive estate planning opportunities. While the pandemic has dropped the value of some assets, others haven’t been affected or have even increased in value. Contact us with questions regarding the valuation of your assets.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

Getting Personal for Fundraising Success

Non-Profits|November 2, 2021

According to a recent survey conducted by fundraising platform FrontStream, the vast majority (87%) of Americans say they’re donating to charity in 2021. And almost 20% claim they’re giving more this year than they did in 2020. However, remaining uncertainty surrounding COVID-19 and the economy is making fundraising challenging for many not-for-profits right now.

Social media and mobile apps have made asking for donations easier in some ways. However, one of the most effective strategies for raising money remains the personal appeal. Donors consistently are more likely to give if the request comes from a friend, colleague or family member who’s committed to your mission. Use this fact to put your nonprofit on stronger financial footing.

Board Members are Usually Best

All of your organization’s stakeholders can promote your nonprofit and request support from their contacts. But development staffers aside, board members generally make the most effective fundraisers because they’re knowledgeable about your organization, passionate about your mission and typically have a wide range of contacts in business and philanthropic circles.

You can support their efforts by making sure they have the proper information and training. Consider equipping them with a wish list of specific items or services your nonprofit needs. Keep in mind that not all of their friends or family members may be in a position to make a monetary donation. However, some people may be able to contribute goods (such as auction items) or in-kind services (such as website maintenance).

Effective Methods

When making a personal appeal to prospective donors, your board members should, when possible, meet in person. Letters and email can save time, but face-to-face appeals are more effective. This is especially true if your nonprofit offers donors something in exchange for their attention. For instance, they’re more likely to be swayed at an informal coffee hour or cocktail gathering (contingent, of course, on local COVID-19 threats and restrictions).

It’s also important for board members to humanize your cause. Say that your nonprofit raises money for cancer treatment. If board members have been affected by the disease, they might want to relate their personal experiences as a means of illustrating why they support your organization’s work.

Even when appealing to potential donors’ philanthropic instincts, it’s critical to mention other possible benefits. For example, if your nonprofit is trying to encourage business owners to buy ad space in your newsletter, board members could explain that your supporters are a desirable demographic, both in terms of spending power and an eagerness to “buy local.”

Work Every Channel

Although personal appeals are extremely effective, don’t dismiss any fundraising technique — particularly if it’s low- or no-cost and is easy to use, such as social media. The most successful nonprofits work every available channel to increase interest and donations. Contact us to discuss your fundraising challenges and goals.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

4 Ways to Refine your Cash Flow Forecasting

Management Advisory Services & Business Consulting|October 26, 2021

Run a business for any length of time and the importance of cash flow becomes abundantly clear. When payroll is due, bills are piling up and funds aren’t available, blood pressure tends to rise. For this reason, being able to accurately forecast cash flow is critical. Here are four ways to refine your approach:

1. Know when you peak. Many businesses are cyclical, and their cash flow needs vary by month or season. Trouble can arise when an annual budget doesn’t reflect, for example, three months of peak production in the summer to fill holiday orders followed by a return to normal production in the fall.

For seasonal operations — such as homebuilders, farms, landscaping companies and recreational facilities — using a one-size-fits-all approach can throw budgets off, sometimes dramatically. To forecast your company’s cash flow needs and plan accordingly, track your peak sales and production times over as long a period as possible.

2. Engage in careful accounting. Effective cash flow management requires anticipating and capturing every expense and incoming payment, as well as — to the extent possible — the exact timing of each payable and receivable. But pinpointing exact costs and expenditures for every day of the week can be challenging.

Businesses can face an array of additional costs, overruns and payment delays. Although inventorying every possible expense can be tedious and time-consuming, doing so can help avoid problems down the road.

3. Keep an eye on additional funding sources. As your business expands or contracts, a dedicated line of credit with a bank can help you meet cash flow needs, including any periodic shortages. Interest rates on these credit lines, however, can be high compared to other types of loans. So, lines of credit typically are used to cover only short-term operational costs, such as payroll and supplies. They also may require significant collateral and personal guarantees from the company’s owners.

Of course, a line of credit isn’t your only outside funding option. Federally funded small business loans have been widely offered during the COVID-19 pandemic and may still be available to you. Look into these and other options suitable to the size and needs of your company.

4. Invoice diligently, run leaner. For many businesses, the biggest cash flow obstacle is slow collections. Be sure you’re invoicing in a timely manner and offering easy, convenient ways for customers to pay (such as online). For new customers, perform a thorough credit check to avoid delayed payments and bad debts.

Another common obstacle is poor resource management. Redundant machinery, misguided investments and oversized offices are just a few examples of poorly managed expenses and overhead that can negatively affect cash flow.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

Nonprofit Restructuring has Become Easier, but Not Without Challenges

Non-Profits|October 20, 2021

A few years ago, IRS Revenue Procedure 2018-15 changed the rules regarding not-for-profit restructuring. If you’ve participated in a restructuring in the past, you’ll be relieved to know that in many cases it’s now easier. Even so, if recent challenges have led your organization to consider restructuring, it’s important to work with a professional advisor, such as a CPA.

That was Then

Under previous IRS rules, tax-exempt organizations were required to file a new exemption application when they made certain changes to their structure. Filing this application created a new legal entity.

To apply for new exempt status, nonprofits had to file a final Form 990 under their initial Employer Identification Number (EIN), obtain a new EIN and apply for exemption for the new entity. In addition to being a time-consuming and often expensive process, the new nonprofit risked failing to receive its tax-exempt status. The process also required changing the EIN on all bank and investment accounts.

This is Now

Now in many situations restructuring nonprofits are required only to report significant organizational changes on their Forms 990. To be eligible, the restructuring must satisfy certain conditions. Your organization must be:

A U.S. corporation or an unincorporated association,
Tax exempt as a 501(c) organization,
In good standing in the jurisdiction where it was incorporated or, in the case of an unincorporated association, formed.

And your reorganization must do one of the following: change from an unincorporated association to a corporation; reincorporate a corporation under the laws of another state after dissolving in the original state; file articles of domestication to transfer a corporation to a new state without dissolving in the original state; or merge a corporation with or into another corporation.

The “surviving” organization must carry out the same exempt purpose that the original organization did. For a 501(c)(3) organization, the new articles of incorporation must continue to satisfy the IRS’s organizational test that requires your nonprofit’s organizing documents to limit its purposes and use of its assets to exempt purposes.

Special Circumstances

Note that there are additional limitations. For example, the new rules don’t apply if your surviving organization is a “disregarded entity,” limited liability company (LLC), partnership or foreign business entity. Also, surviving organizations still have reporting obligations — for instance, to report the restructuring on any required Form 990 for the applicable tax year. And, these rules apply only to federal income tax exemptions. Your state’s laws could require you to file a new exemption application.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

Associations Should Prioritize Common Interests, Not Individual Services

Non-Profits|October 5, 2021

Watch out, nonprofit trade associations! If your group is a 501(c)(6) organization, your activities could potentially threaten your tax-exempt status. To ensure you’re in compliance with IRS rules, you need to routinely review your member offerings and any business you might conduct.

Support Common Interests

Trade associations exist to promote their members’ common interests and improve business conditions or “one or more lines of interest.” Typically, associations get into trouble when they interpret terms such as “promote common interests” and “improve business conditions” too broadly. For example, they might provide customized sales training for only some of their members. But associations don’t qualify for tax-exempt status if they exist only to perform services for individual members.

Another potential violation is engaging in business that’s normally carried out on a for-profit basis. And groups that are primarily social or that exist to promote a hobby generally don’t qualify for 501(c)(6) status.

Don’t Favor Individual Members

To avoid IRS scrutiny, you must be able to differentiate between qualified and nonqualified activities. For example, you are generally allowed to:

Attempt to influence legislation relating to the common business interests of your members,
Test and certify products and establish industry standards,
Publish statistics on industry conditions to promote your members’ line of business, and
Research effective business practices to share with your members.

But you should limit activities if they benefit specific members rather than your industry or profession as a whole. These might include selling advertising in member publications; facilitating the purchase of supplies for members; and providing workers’ compensation insurance to members. Your association’s “primary purpose” is key. Most 501(c)(6) groups perform some activities that don’t primarily serve common interests. But these activities should be limited in scope and number.

Be Careful with Unrelated Business

Even when certain activities don’t threaten your exempt status, performing services for members can trigger unrelated business income tax (UBIT). Typically, members pay for such services directly, instead of through dues or other common assessments. Depending on the services your association provides and the revenues raised, additional reporting may be required and you may owe UBIT.

Stop and reassess if you’re performing more services, or more substantial ones, for individual members. Instead, you might want to consider forming a separate for-profit organization to offer those services.

Observing Limits

It’s not always easy to differentiate between acceptable and unacceptable association activities. To help you remain on the right side of the IRS and preserve your tax-exempt status, contact us with questions.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

Is a Health Savings Account Right for You?

Tax Prep, Planning & Strategy|September 30, 2021

Given the escalating cost of health care, there may be a more cost-effective way to pay for it. For eligible individuals, a Health Savings Account (HSA) offers a tax-favorable way to set aside funds (or have an employer do so) to meet future medical needs. Here are the main tax benefits:

Contributions made to an HSA are deductible, within limits,
Earnings on the funds in the HSA aren’t taxed,
Contributions your employer makes aren’t taxed to you, and
Distributions from the HSA to cover qualified medical expenses aren’t taxed.

Who’s Eligible?

To be eligible for an HSA, you must be covered by a “high deductible health plan.” For 2021, a high deductible health plan is one with an annual deductible of at least $1,400 for self-only coverage, or at least $2,800 for family coverage. For self-only coverage, the 2021 limit on deductible contributions is $3,600. For family coverage, the 2021 limit on deductible contributions is $7,200. Additionally, annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits can’t exceed $7,000 for self-only coverage or $14,000 for family coverage.

An individual (and the individual’s covered spouse) who has reached age 55 before the close of the year (and is an eligible HSA contributor) may make additional “catch-up” contributions for 2021 of up to $1,000.

HSAs may be established by, or on behalf of, any eligible individual.

Deduction Limits

You can deduct contributions to an HSA for the year up to the total of your monthly limitations for the months you were eligible. For 2021, the monthly limitation on deductible contributions for a person with self-only coverage is 1/12 of $3,600. For an individual with family coverage, the monthly limitation on deductible contributions is 1/12 of $7,200. Thus, deductible contributions aren’t limited by the amount of the annual deductible under the high deductible health plan.

Also, taxpayers who are eligible individuals during the last month of the tax year are treated as having been eligible individuals for the entire year for purposes of computing the annual HSA contribution.

However, if an individual is enrolled in Medicare, he or she is no longer eligible under the HSA rules and contributions to an HSA can no longer be made.

On a once-only basis, taxpayers can withdraw funds from an IRA, and transfer them tax-free to an HSA. The amount transferred can be up to the maximum deductible HSA contribution for the type of coverage (individual or family) in effect at the transfer time. The amount transferred is excluded from gross income and isn’t subject to the 10% early withdrawal penalty.

Distributions

HSA Distributions to cover an eligible individual’s qualified medical expenses, or those of his spouse or dependents, aren’t taxed. Qualified medical expenses for these purposes generally mean those that would qualify for the medical expense itemized deduction. If funds are withdrawn from the HSA for other reasons, the withdrawal is taxable. Additionally, an extra 20% tax will apply to the withdrawal, unless it’s made after reaching age 65 or in the event of death or disability.

As you can see, HSAs offer a very flexible option for providing health care coverage, but the rules are somewhat complex.

As always, please do not hesitate to call our offices for additional information and to speak to your representative about how this could affect your situation.

What your nonprofit needs for a successful capital campaign

Are your social media accounts working for — or against — you?

Your Board can’t do its Job without Information from You

For Fiduciary Success

Share and Share Alike

Funneling Material

Employers: The Social Security Wage Base is Increasing in 2022

Background Information

2022 Updates

More than One Employer

We Can Help

Opportunities and Challenges: Valuation in the Age of COVID-19

What are the Opportunities?

What are the Challenges?

What’s it Worth?

Getting Personal for Fundraising Success

Board Members are Usually Best

Effective Methods

Work Every Channel

4 Ways to Refine your Cash Flow Forecasting

Nonprofit Restructuring has Become Easier, but Not Without Challenges

That was Then

This is Now

Special Circumstances

Associations Should Prioritize Common Interests, Not Individual Services

Support Common Interests

Don’t Favor Individual Members

Be Careful with Unrelated Business

Observing Limits

Is a Health Savings Account Right for You?

Who’s Eligible?

Deduction Limits

Distributions

Our Services

Our Industry Expertise

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