IRS Releases 2016-17 Priority Guidance Plan
Last week, the Department of Treasury released its priority guidance plan for 2016–2017. The priority guidance plan identifies and prioritizes tax issues that the agency aims to address through regulations or revenue rulings, revenue procedures, notices, and guidance throughout the upcoming year.
In May 2016 the Council submitted comments to Treasury, outlining issues of importance and urging them to prioritize these in the coming year. The Council's public policy and legal team has a strong working relationship with IRS decision-makers, and we seize every opportunity to communicate the priorities of our members and the philanthropic field to regulators.
The plan includes several items that the Council requested in our comments, including:
- Definition of funds that include advisory privilege but fall outside of the definition of donor advised funds, and the scholarship exception in Internal Revenue Code Section 4966 and 4967;
- Guidance on political activity for section 501(c)(3) organizations; and
- An update to Revenue Procedure 92-94, which governs equivalency determinations for charities overseas.
The plan also includes several items that the Council has spoken on or submitted comments on separately from our priority guidance input, such as final regulations for §509(a)(3) supporting organizations, and guidance to grantors and donors about the extent to which they can rely on the charitable status of organizations that filed and obtained charitable status through the Form 1023-EZ.
For more information on the 2016-17 priority guidance plan, please contact Senior Counsel for Compliance and Policy, Lara Kalwinski.
FASB Releases New Accounting Standards for Nonprofits
Late last week, the Financial Accounting Standards Board (FASB) issued a new standard intended to simplify and improve how nonprofit organizations classify net assets and present financial statements and notes about liquidity, financial performance, and cash flow.
As our readers will recall, FASB is an organization designated by the Securities Exchange Council (SEC) as the authoritative entity responsible for establishing financial accounting standards for nongovernmental organizations.
The new standard would apply to nonprofit organizations including foundations, charities, colleges and universities, health care providers, religious organizations, trade associations and others. Key provisions of the standard will impact the presentation of:
- Net Asset Classes. Revision of net asset classification scheme to two classes, enhanced disclosures for self-imposed limits on the use of resources, and updates to the accounting and disclosure requirements for underwater endowment funds.
- Investment Return. Presentation of investment expenses against investment return on the statement of activities, and elimination of the requirement to disclose investment expenses that have been netted.
- Expenses. Requirement to present expenses by nature as well as function, including an analysis of expenses showing the relationship between functional and natural classification for all expenses.
- Liquidity and Availability of Resources. Qualitative disclosures on how a nonprofit manages its available liquid resources, and quantitative disclosures that communicate the availability of financial assets to meet cash needs for general expenditures within one year of the balance sheet date.
- Statement of Cash Flows. Free choice between direct and indirect methods of reporting cash flows.
For more information, or if you have questions, please contact our policy team at email@example.com.
HHS Resources to Address Health Crises in Your Community
The growing threat of the Zika virus, and the ongoing epidemic of opioid abuse, have many communities worried about their preparedness to respond to health crises. The Department of Health and Human Services (HHS) has put out resources for partners and the public at large to understand the threats posed and the ways stakeholders can respond.
Through the Centers for Disease Control (CDC), you can access the latest information on Zika’s spread and resources to help your community understand and prepare for the threat. Funders grappling with the opioid abuse and related issues may find their resources for state and community planners helpful in understanding the costs of the crisis and how to respond.
So FATF Updated its Guidance: Now What?
In June, the Council celebrated news that the global Financial Action Task Force (FATF) recently updated it’s guidance for how national governments should regulate non-profit organizations (NPOs). Specifically, the guidance in Recommendation 8 no longer claims that non-profits are “particularly vulnerable” to terrorist financing and money-laundering, and instead clearly acknowledges that not all NPOs are at risk and directs countries to undertake a risk-based approach when considering counter-terrorism financing measures.
The Council has long advocated for these changes, in partnership with the global NPO coalition working with FATF.
On September 12th, this global coalition will host a webinar that explains how these changes were developed and what’s next for non-profits and foundations around the world, as governments begin to react to these changes and perhaps enact new domestic regulations of their NPO sector.
Speakers from the US and Europe will share strategies for how to engage governments directly and share next steps in advocacy to FATF on other issues regarding regulation of the nonprofit sector.
Exclusive from our colleagues at the National Council of Nonprofits.
Principles on New Funding Mechanisms Announced
The National Council of Nonprofits this week published “Principles for Consideration of New Funding Mechanisms,” designed for use by foundations, nonprofits, governments, and for-profit entities when considering launching pay-for-success initiatives, social impact bonds, or other new funding mechanisms. The new arrangements typically involve private investment to fund experimental social interventions. Governments promise they will pay back the investors with interest or profit if the intervention proves successful in improving outcomes and saving money that the governments would otherwise be expected to spend.
As interest in pay-for-success initiatives and social impact bond programs have spread in recent years at the local, state, and federal levels, these experiments have had mixed results. Research shows that the new funding mechanisms are neither the cure-all remedy for every social problem or public funding short-fall as promoted by some nor the guaranteed disaster in every circumstance warned against by others. Rather, they are nuanced tools that can be appropriate in certain situations.
The Principles from the National Council of Nonprofits seek to help parties contemplating alternative funding arrangements set expectations and avoid unintended consequences as they try to address community problems. “Based on the results of several experiments in recent years, the Principles can aid in decisions about how to structure future partnerships – or to determine whether these funding mechanisms may not be right for a particular project or community,” said Lisa Maruyama, President and CEO of the Hawai`i Alliance of Nonprofit Organizations and Chair of the National Council of Nonprofits’ Public Policy Committee in releasing the Principles.
Philanthropy Taking on Governments to Promote Nonprofits and Communities
Philanthropy in New York has stopped waiting for state and local governments to follow federal law and is speaking out. At issue is the public position taken this month by the board of Philanthropy New York in support of governments reimbursing nonprofits for their indirect costs in providing services on behalf of the governments.
The federal law is clear: nonprofits must be paid their indirect costs when federal funding is in the payment mix. Specifically, the Uniform Guidance of the Federal Office of Management and Budget (OMB) expressly requires pass-through entities using any federal funds (typically states and local governments, as well as some larger nonprofits) and all federal departments/agencies to reimburse a nonprofit for the reasonable indirect costs it incurs in performing services under written agreements with governments.
In early August, the board of directors of Philanthropy New York, the association of grantmakers in and around New York City, issued two powerful resolutions in support of full implementation of the Uniform Guidance. The first official statement expresses disapproval over the fact that state and city government “have not implemented contracting procedures that are consistent with the new rules and continue to develop [requests for proposals] and contracts with overhead rates that are significantly less than those to which nonprofits are entitled by the federal rules.” The statement concludes: “Philanthropy New York urges New York State and New York City to immediately act in compliance with the OMB Guidance on Indirect Costs.”
But the leaders didn’t stop with saying “follow the law” as written; they also called for other common sense efficiencies. The OMB Uniform Guidance does not apply to grants and contracts that are funded solely with non-federal dollars. Philanthropy New York’s second official statement encourages the governments to go farther and “integrate contracting procedures that will consistently reimburse nonprofits for their full federally-approved indirect cost rate or, for nonprofits that don’t have one, a negotiated rate in accordance with federal cost principles or a minimum rate of 10 percent of total [modified] direct costs.” “Allowing nonprofits to submit budgets that include appropriate indirect costs on all contracts would not only advance the spirit and intent of OMB Guidance on Indirect Costs,” the statement explains, “it would also increase predictability in government contracting, and would have the long-term effect of increasing the fiscal stability for the nonprofit sector – an important goal for both the philanthropic and government sectors.”
Council Releases 2015 CCSF Report
The fourth annual Study of Investment of Endowments for Private and Community Foundations® (CCSF) is now available to Council members for free download — a $1,000 value.
The 2015 CCSF marks the fourth year of collaboration between the Council on Foundations and Commonfund Institute—and reconfirms our joint commitment to providing the field with an authoritative annual resource for foundation investment practices.
Top findings show that two years of low investment results have reduced foundations' trailing 10-year returns to the 5.1-5.9% range.
Download the full study today to help you make informed investment decisions to help your foundation meet its charitable mission—and weather the high-volatility, low-return environment many analysts predict will be the norm over the next few years.