How Do I Sign Minnesota Banking Permission Slip

How do i industry sign banking minnesota permission slip

[Music] [Music] well good morning everyone and thank you so much for joining us today um we do recognize that there's other things going on in the uh country today so we're happy that you chose to join us for this non-profit tax and industry update um as christine and i were preparing for this today we kind of look back at the description that we wrote which was probably in late november and realize that what we thought we were going to present back in late november changed somewhat significantly within the last three weeks just due to the new covet legislation so um hopefully what we're able to present to you here today still meets your needs and um yes we will be trying to address as much as possible to give you an update as to where things are today with respect to nonprofit tax um and what to think about and expect for the future so my name's kim hendrickson i am partner and in charge of exempt organization tax here at i bailey um i reside in our minneapolis office location and i'm joined by christine perez and christine is a manager who works with me in exempt organization tax we're both part of our firm's national tax office and christine is out of our boise office so today we're going to start by looking at the ever-popular copit 19 legislation both with a little bit of a look back at what's happened in the in 2020 and then a look forward to 2021 and what we can expect with respect to some of those provisions here in 2021 we're going to talk about some recent exempt organization legislation so in addition to all of the coped 19 legislation treasury has also kept us on our toes with some new updates and final regulations within the last couple of months we'll talk about some tax filing updates some things that you should be aware of as we look at the 2020 filing season and then some trending tax topics so with that let's jump into coven 19 legislation so just to do a real brief recap um just to you know take a step back in time going all the way back to last march so the first legislation that we actually had with respect to colbit when this became a national pandemic was the family's first act that requirement um to provide emergency leave for employees and then to be able to get a tax credit for that leave that was provided then we had the cares act that was the big one that was the one that included our ppp loans that included the employee retention credit the emergency um disaster loans it had some main street lending in there lots of different things that was that were really designed to help stimulate the economy and to help protect people who were being significantly impacted by this pandemic in april the ppp loan became operational you know and the ppp area really was as we look back over the prior year that was probably the provision where we spent the most time working with organizations i'd say as a firm both for-profit and non-profit organizations and helping individuals and organizations figure out what those rules meant how you could get your loans now we're working on how do you ensure that you can get those loans forgiven um so that continues to be an area that we're spending time in then in summer we had the ppp expansion so as you remember we ran out of funds so we those funds had to be expanded and in order to get money into more people's pockets the main street lending program so the main street lending program was designed really for organizations that weren't those small organizations those less than 500 employees but employees that were larger and it was a loan program that was established for those entities not forgivable so it wasn't a forgivable loan but it was supposed to be on terms that were more generous than a normal loan program i think it's interesting to know on the main street lending program um that there was 600 billion dollars authorized under that and by the end of 2020 only about 4 billion was utilized um and the real big issue with the main street lending as it really played out was that it was really difficult to access um and the requirements were really prohibitive so that unfortunately didn't end up being as good of a program as one would have thought and that brings us to december and the consolidated appropriations act which is where we are today so we have this consolidate appropriations act it was signed into law by the president on december 27th it was a great present for those of us that work in this area between our christmas holiday and our new year celebration um and really as we look at the provisions that are in that and this new coveted release legislation what you're going to see is it's a lot of the same things that were in the cares act but either expanded or more importantly a lot of the provisions were actually modified in certain ways either to codify um some of the frequently asked questions and some of the guidance that came out over the course of the last nine months or to truly expand it based on some of the concerns um that were out there with these programs so with that i'm gonna turn it over to christine christine has been our ppp guru um and has spent a lot of time in the last nine months and especially in the last three weeks answering questions with respect to the paycheck protection program so she's going to give us a little bit of a update as to what's new and different with the ppp perfect well thank you kim as kim mentions i've spent quite a bit of time working with organizations as they've gone through both of the first round draw processes last year in 2020 and then now we're looking at this additional funding so really with the paycheck protection program update um you know we did see an additional almost 300 billion of additional pp funding available now that funding is available through the end of march so organizations that are applying for these ppp loans do have until march 31st of this year to apply now when we talk about the loan you know i did see you know kind of when it first came out it was showing as ppp two um i think that led to a little bit of confusion um for a lot of people as to what it meant you know it really is a refunding of the program and it does allow for both first and second draw loans at this time so we've got applicants right now that had a ppp loan in uh 2020 that are now going to be looking at our second draw loans under the program um that was newly created with the update but we also have organizations that are newly eligible or may not have received a loan in 2020 that are now looking for a first draw loan under the program um with the additional eligible entities that we saw the program up open up for um you know 501c6 that was our big group of organizations but it does also allow destination marketing organizations local newspapers tv radio stations and also housing cooperatives and there are some limitations or requirements that need to be met and we will cover those for 50c 501c6 entities next and you know we also saw an expanded definition of payroll costs you know the act does allow employer group health life disability vision and dental insurance contributions they've specifically said that those are okay we saw the modification of the covered uh period definition so for the ppp loans that we saw last year in 2020 it was a case of you know select an eight week period or you know you're going to use 24 weeks now you can choose a covered period for your loan anytime between that 8 and 24 week period and then lastly we have on here slight change in the treatment of the eidl grants the act essentially eliminates the requirement for those eidl advances those up to ten thousand dollar emergency payments um from being subtracted from the ppp loan forgiveness and the sba has indicated um that if you had the advance amounts previously deducted from your forgiveness amount um that will now be remitted back to the lender along with interest to those organizations let me move this slide all right so um our 501c6 and destination marketing organizations newly eligible um here in 2021 for the first draw loans as of uh the 11th now these um organizations we're going to include our business leagues our chambers of commerce real estate boards boards of trade but the provisions specifically exclude any of these organizations that are professional sports leagues or organizations that specifically promote or participate in political activities now the requirements for this first draw um funding you cannot have more than 15 of your receipts from lobbying activities the lobbying activities may not comprise more than 15 of your total activities um and the lobbying activity costs do not exceed 1 million in your previously or most recently filed tax year ended prior to february 15th so lastly the organization needs to have 300 or fewer employees when we're looking at that count when we talk about the employee count for these requirements we're looking at your average employee count on a monthly basis over your previous 12 month period so most organizations you're going to go in and calculate that based on your 2020 employee levels lastly you know the sba really has not provided some specific guidance at this time when we look at the interpretation of what exactly is lobbying um so it's currently unclear whether an applicant should utilize you know the forum 990 definition of lobbying or what we see from the irs or if you need to go back to the lobbying disclosure act to determine those lobbying activities you know absent for further guidance and we'll probably get clarification you know the irs defines lobbying as an attempt to influence legislation so and as i mentioned eligible for the first draw loans so that is going to be your 2.5 times payroll or a loan up to 10 million dollars our organizations that are eligible for the first draw are not subject to the second draw requirements okay there we go 2021 first draw loans so our eligible entities those are our organizations that were in business as of february 15 2020. um it covers our original applicants again 500 or fewer employees or those that meet the sba size guidelines or requirements and then for our newly eligible entities the 501c6 organizations that cap is 300 or fewer employees the loans again are eligible kind of the same guidelines as before two and a half times your monthly payroll up to 10 million dollars and in calculating the maximum amount that you are eligible for you can use either your 2019 or your 2020 payroll amounts now our first draw loans kind of similar forgiveness provisions look exactly the same other than the fact that you can now use any covered period between 8 and 24 weeks and then we also have those additional expenditures or covered expenditures that have been added in so you do need to use your funds um 60 or more for payroll 40 or less for the other covered expenditure amounts 100 um can be forgiven for your loan and you must meet those fte and salary requirements all right let's see if i can get it back to the slide all right for our second draw loans these are going to be our entities that already received ppp funding in 2020 so you've already received your first draw loan now you're looking for a second loan this year when we talk about the timing for getting this loan technically you must have just received the funds from your first ppp loan before you can apply for a second ppp loan or that second round draw um so there was some new guidance that just came out from the sba they released it last night on the 19th um and they have gone in they've clarified that you know you can technically apply for these two around the same time you could submit your application for your first draw loan and then go in and submit the application for the second draw loan you just have to make sure you've used those first round funds before you receive a second draw you can only receive one second round draw for any organizations that are looking for the funding and you are limited to the 300 employees calculated in the same manner i mentioned before look at your 2020 average payroll count or the last 12 months one of the big items in here is that you have to meet a 25 or greater reduction in gross receipts for 2020. the current rules allow you to go in and compare your quarters so you could look at q1 q2 q3 or q4 of 2020 and compare it to that same period in 2019 the legislation or the rules do allow you to also look at your 2020 annual receipts in comparison to 2020 to determine that amount as well um let's see i will add in here that we've had a lot of questions recently about gross receipts and in calculating the 25 reduction um the first round of guidance that came out really said hey for a non-profit your gross receipts need to be defined in irc section 6033 what does that mean so when we interpreted that we were thinking okay how do you calculate on the form 990 the guidance that was released last night as of 119 does indicate that the sba has shown you can calculate your gross receipts based on how you calculate gross receipts for your form 990. so that is in reference to section 8 your statement of revenues go in and calculate in that manner um if you wanted to you can take your financial records for the quarter you would line it up with how that is calculated for 990 purposes to prove that 25 or greater gross reduction and then the new forgiveness parameters 150 000 or less also just released by the sba um last night a new loan application the 3508 s form um it replaced the one they had previously that was for small fifty thousand dollars or fewer loans it has now been updated it's a one-page application for loans of 150 000 or less before you move on and that's with respect to the gross receipts did the new guidance indicate whether gross receipts is going to include the pp first round ppps that would you know effectively be usually be treated as a contribution or grant revenue that's a great question so the guidance currently indicates that your first straw ppp loans your edil loans and advances those are excluded from gross receipts at this time so you would pull those amounts out however we do not have good guidance right now as to whether other types of relief funds such as provider relief funds higher education emergency relief funds or state and local grants whether or not those are actually included in gross receipts so i know that the aicpa has some requests out so we're hoping that that guidance will also come soon perfect thanks yes so i already chatted a little bit about loan forgiveness so this is just kind of another um slide of course our nonprofits we're looking for up to 100 forgiveness you need to make sure that you meet the criteria to be eligible so in this case we want maintenance of your fte calculations and your salary levels that's kind of the same as what we saw last year in 2020 there are still the safe harbors and exceptions that can be met for organizations and again we've got the same caps on our payroll and other eligible expenditures spending so the 60 40 split with regards to the documentation this is the same as before when you remit your forgiveness to the lender you need to make sure that you've got your payroll records your quarterly 941 documents um and then for your non-payroll costs be able to substantiate them with account statements agreements invoices receipts canceled checks whatever you can provide to the lender to substantiate those amounts and then remember we've got the new kind of covered expenditures that you can apply so i think for a lot of organizations we're going to be looking for those ppe supplies to protect employees cost for sanitization of your space if you had to do anything to promote social distancing per the osha or cdc or department of health guidelines those costs can all be included now in that 40 percent so for loan forgiveness um for submission um you know you really have until the end of the cover the cover period or your loan um to get that submission in but really you want to get it in within 10 months of the last day of the covered period um so if you select something less than 24 weeks that's going to start the clock running for when you want to get this into your lender when you submit your application for loan forgiveness you know your lender has 60 days to approve your application and then from there once it goes through your lender the sba has 90 days to approve your loan forgiveness and again you do have for a second round draw you know if you've got your first round draw application in great if you don't have it in yet you're still eligible to apply you just need to make sure all the of the loan proceeds are utilized um let's see as i mentioned last night the sba has updated their loan forgiveness applications so they have updated the 3508 the 3508 ez and then that new 3508 s has been updated to reflect the 150 000 in forgiveness and then our last note on here covering the 3510 you know it's still out there um the 3510 goes in and it's essentially kind of a necessity questionnaire for our loans over two million dollars so at this time it only applies to those organizations that are receiving the first round draws um this has been a really controversial form um you know it's got a lot of requirements that were not stated up front at the beginning of the ppp loan program it's a time consuming form the lenders are also requesting this within 10 days of your loan forgiveness application submission um so you know if you do have a first draw loan over two million dollars be prepared um at this time to fill out that form for your lender now we've got a slide here on financial statement treatment um you know i would caveat that the best people to talk about how it's going to be reported on your audited financial statements are going to be our audit teams um and your audit team members um but you know there are kind of a couple different treatments that are going to apply so if you have audited financial statements we're looking at ase 958 605 um and typically what we're going to see is if you have received formal recognition from the sba that your loan is forgiven it is going to be included as a grant for the year you also have an option um under this asc if you have met all of the requirements for forgiveness even though it may might not have occurred by say 1231 you also have that option to report in your revenues or your contributions for the year that that loan forgiveness amount if you are treating it as a cancellation of debt it's other income if your loan will not be forgiven um it is reported on the balance sheet as an unsecured third-party loan loan and you would accrue interest for the year you know we have a kind of a question on here what about organizations that are not audited um you know in this case i would revert back to kind of how the form 990 new instructions were released when we look at part 8 the statement of revenues it does indicate that you can treat online 1e as a government grant the amount that is forgiven in that tax year now when you look at what it asks for what's loan forgiveness it just indicates um that you've met the employee retention criteria and that the funds have been used for eligible expenditures so the position you take make sure that you document it if you are going to include that loan forgiveness in your prior year when it was received we've got some tax considerations so again as i mentioned on our form 990 we're typically going to see the loan forgiveness reported on there as a government grant on line 1e of statement 8 on the statement of revenues when we think about our public support percentage if we're treating this as a government grant it should have a positive impact the government grant contributions they're not subject to either the excess contributor or the disqualified person rules and it's going to actually increase our public support percentage that we see on schedule a parts one and two um you know if it's treated as a cancellation of debt um and it's not forgiven it would have a negative impact or possible negative impact on our schedule a then as a reminder our forgiven loans uh do not produce a taxable income at this time uh if it's forgiven report it as the government grant and all of your eligible expenditures that did give rise to the forgiveness you would still deduct those and they would go on your statement of functional expenses with that i think i will turn it back over to kim all right so um with the another provision under the sba is the economic injury disaster loan so those idle loans these um these loans have always been out there they're they've always been available for non-profits and small businesses um the difference between the idle loans and the ppp loans a couple different things one there's no forgiveness available for these loans um so it's different from the ppp where you can apply for forgiveness if you do get one of the idle loans they are not forgivable um they are a 30-year fixed loan and there is an automatic deferral of one year on the payments the interest rate on these is a 2.75 percent interest rate so first for and that's specific to nonprofit organizations um the limit on these loans through the cares act was supposed to be two million dollars i think some of the commentary that we've heard and just in talking to different non-profit organizations that it it seemed like 150 000 was kind of an unofficial cap that a lot of organizations didn't get more than that and these loans do need to be used for payroll working capital normal operating expenses now christine mentioned earlier that there was this advanced payment available and the advanced payments really was treated as a grant um so it was a grant of up to ten thousand dollars um they came out with later guidance that that was actually going to be based on the number of employees so organizations with less than 10 employees were getting a thousand dollars per employee organizations with no employees could receive a thousand dollars so that may be an option for some non-profit organizations that wouldn't be eligible for ppp loans because that's based on employee and employee cost so if you are truly just a volunteer organization there could be this opportunity for a grant under the idle payments what we are hearing is that funding was just directly deposited in people's bank accounts a lot of times people didn't even organizations didn't even know it was going to show up they had applied for it but it would just um end up in their bank account and we do have an ex extension of this through the new appropriations act so there is additional funding available um for the idle grant program so there's 20 billion dollars allocated to this and a lot of the funds that are being set aside for this are for some very targeted funding with respect to low-income certain low-income neighborhoods really with the intent of getting money into the hands of those that are most significantly have impacted by the pandemic um so last i had looked and christine i don't know if you've seen different um but this program is not currently eligible it's not open for funding or for application but similar to the other programs we expect it to be up and running soon so if you go out to the sba website there's a big coronavirus um placard out there if you click on that you're going to see the links for both the ppp and the idle program and the new program that i'm going to talk about next which is the shuttered venue program so this the shuttered venue operators grant program is a brand new program as part of the 2021 legislation those of us here in minnesota had heard about this earlier because this was originally the bill was originally called save our stages program so i remember hearing about this being proposed maybe back in september october with the idea of a lot of these live music venues these um you know arts performance centers were really being negatively impacted because they had to be shut down due to the pandemic so um this new legislation appropriates 15 billion of grants um specifically for the the entities that are listed um key to note here we still are waiting for guidance as to what this really is going to look like how it's going to be implemented um they're still sba is indicating they're still in the process of setting up the application process and so they currently are not accepting applications however there is some information out on the sba website and again if you're an organization that falls within the potential to get these rules make yourself familiar with that so you're ready to apply when or if you become eligible so the eligibility requirements for this um it is open for both non-profit and for-profit entities in order to be eligible you need to show that you've had a reduction of of at least 25 of your gross earned income in at least one quarter in 2020 as compared to 2019. now we don't have a definition of gross earned revenue um so whether that is similar to what christine talked about with the ppp where it for nonprofit organizations it would look at your form 990 revenue the fact that they put earned revenue in there makes it quite you know you question whether does that include contributions or does not not include contributions um when we're thinking about a non-profit organization so again more to come on that the organization has to be in the process of or have resumed operations by the date that they get the grant they have to have been in existence in 2019 although there's some some flexibility as to whether you were in existence for the whole year and then there has to be a certification of need so similar to what christine mentioned with the ppp loans for those large for the larger loans this there is going to be a certificate of need um so to be able to show that because of the impact of the um pandemic the organization had significant impact on its ability to operate organizations that are ineligible if they received more than 10 percent of their revenue from federal sources in 2019 again we don't have a definition exactly of what that looks like but anticipate that it does not include any kind of disaster assistance key here is that they can't receive a ppp loan after december 27th so in other words these organizations can't get both a shuttered venue operator and really the sec either a second draw or a first draw loan in 2021 so this is going to become a key thing for organizations is to think about what's going to get you the better answer is it to go for a ppp loan either a first or second draw or is it to go after the shuttered venues grant and then it's um only for employers of up to 500 employees so as you see kind of throughout all of this there is definitely a focus on getting the money to the small businesses um which i guess makes sense since this is run through the sba okay um so how much what can what's available so the funding is limited to 10 million dollars per entity and there are some affiliation rules in there the initial grant is 45 of your 2019 gross earned revenue and then if there is funding still available there's an opportunity for supplemental grants of 50 of that initial grant and that's going to be calculated if your 2021 quarter one revenues are not more than 30 of your 2019 quarter one so definitely you're going to have to be a math person to be able to figure out all of these different calculations and what makes more sense when you're thinking about the shuttered venue versus the ppp eligible costs it's any costs that were incurred from march 1st 2020 through december 31st 2021 um very similar to the costs that were covered under the ppp with one ex couple exceptions but probably the most notable is that this can include payments to independent contractors which is a really key provision as a lot of arts organizations are paying independent contractors so it was key that it didn't only include payroll and then there is a priority dis disbursement here so up to 80 of the funding um is going to be distributed in these different ways so the first 14 days once the program is up and running is going to be for applicants with revenue decline of 90 or more then we're going to go to the second 14 days and that's going to be organizations with a revenue decline of 70 percent and then after that it would be opened up for other organizations now i was out on the sba website yesterday and on the website it actually seems to indicate that these first 28 days are limited to organizations with 50 or less employees now that's not consistent with kind of the wording in some of the actual legislation so i think that's going to be another thing that's going to have to be kind of straightened out here but what i would tell you is if you're one of these organizations read through the requirements make sure you can meet because there's in addition to the eligibility requirements in general each of those five different types of entities have additional requirements within them um so get comfortable with that make sure you understand if you truly are an eligible entity and then be prepared to apply um whenever it fits with this priority distribution all right the employee retention credit so this is a little bit of deja vu so this is one that was out there in 2020 um probably didn't get as much play as the ppp and the primary reason for that is that the initial rules said you could not do both so you couldn't apply for a ppp loan and get the employee retention credit and so most organizations um looked at this and especially if you were a organization with less than 500 employees and decided well that ppp loan was a much better option um the employee retention credit gives a payroll tax credit for organizations who were either fully or partially suspended had their operations suspended during any quarter in 2020 or experienced a significant decline in growth receipts during a calendar quarter um those definitions have changed so we'll talk about that as for 2021 but a key thing to to know at this point is the irs did change that peak that rule with respect to the ppp borrowers so you now can be eligible for the employee retention credit and you can go back to 2020 so if there are payroll costs that you had that were over and above what you used for your ppp loan to justify the forgiveness of your ppp loan those payroll costs could be eligible for the employee retention credit so we do feel that there is some opportunity here for you to think about um 2020 especially if you meet this definition of either fully or partially suspended or have a significant decline so here's what um the what the rates are so effectively this is a credit of a certain amount of eligible wages per employee so for 2020 it was 50 of eligible wages 2021 that goes up to 70 percent um the credit is a refundable credit per employee so in 2020 it was 5 000 per year in 2021 it's only eligible right now for two quarters so that gets us to 14 000 over those two quarters per employee and that's because the limit on the qualified wages you can include per employee in 2020 was ten thousand per year so fifty percent of ten thousand in twenty twenty one it's ten thousand per quarter so for the two quarters we'd have twenty thousand eligible seventy percent of that gets us to the fourteen thousand the key change here really um is this threshold for a large employer so in 2020 a large employer was anyone with over 100 employees in 2021 that changed to 500 employees and why that matters is with respect to who an employer can take the credit for so for large employers they can only take the credit for employees that they were paying who were not providing services so think of people who were furloughed or people who you know you continue to make payments to but they were not working small employers could take the credit for anyone who was was getting paid regardless if they were providing services or not um so that's a real big key differentiator so moving this up this threshold up i think will open the door for a lot more organizations to be eligible the other big thing that's going to change is this threshold for reduction in gross receipts so in 2020 you had to have a 50 reduction comparing to the same quarter in 2019 2021 it's 20 reduction of your 2019 or the prior quarters receipts so that again is going to open the door for a lot more organizations to meet this requirement of an eligible employer so i would advise everyone to kind of take a look at this cr employee retention credit especially if you were in a situation where your um revenues have decreased or you were sus had your operations suspended e'll touch a little bit on provider relief funds christine and i are definitely not the experts in this thank goodness because we think our life has been crazy those people who are dealing with provider relief funds um i think it's almost weekly it seems like things are going back and forth but the only thing a couple things will mention here is that there was additional funding in the provider relief funds an additional 3 billion we did get information last week that the reporting timeline with respect to provider relief funds has been delayed so the reporting for the prior prior relief the provider relief funds was supposed to start january 15th um through february 15th they have pushed that back organizations can go out to the website and get registered but you can't actually go in and do any of your reporting at this point they also there have been some changes with respect to the lost revenue calculation um originally or within the last month they had indicated you could use the guidance that was released in june 2020 and the frequently asked questions um the the information that came last week gives you three different options which were in that guidance but it's basically that you could use lost revenues between 19 and 20 you could use the difference between your actual revenues and budget if the budget was approved prior to march 27th or you can use any reasonable method so the full impact of this is unknown there continues to be conflicting guidance between what's coming out in guidance what's out there and frequently asked questions um so if this impacts you my my recommendation at this point is um our team that's covering provider relief funds is having a webinar on the 26th the next tuesday go on our website sign up for that they will be able to give all of the information on what's really happening at this time time with respect to provider relief funds and then just a couple other provisions um employment benefits so within the cares act there was a provision to cover 50 of the cost of unemployment benefits for reimbursing employees employers that's been extended through march 31st um the family's first has been extended through march 31st but the mandate to provide leave was not extended but if you do provide that leave you can get the credit and then the repayment of the deferred employee payroll taxes has also been extended through the end of the year then the last thing that we'll touch on with respect to this legislation um charitable giving provisions have also been extended through 2021 so this is the above the line deduction for donations on cash donations the dollar amount for 2020 was 300 for 2021 that was expanded to 300 for singles 600 for married um this really is a key provision that i would encourage organizations to um encourage your donors to take advantage of this this is people are we've been pushing for this and the industry has been pushing for this above the line deduction for a long time now that it's there congress needs to see that people are taking advantage of it or it's going to be hard to ever get it again so really do encourage um donors to take advantage of it um it might not seem like 300 or 600 is that big of a deal but from an overall industry standpoint it really is so with that i'm going to turn it back to christine as you can tell um we there's lots of information here so we're probably going to go a little fast um through the rest of this stuff but um we'll see what we can get through perfect yes we will plan to kind of cruise through some of these slides um so when we talk about some of the more recent legislation um you know 512 a6 or the siloing rules it's been on our radar for a little bit a little while now you know this came in um back in 2017 but they released the final regulations december 2nd 2020 um so you know when you're looking at the siloing rules that's it they're applicable to tax years beginning after december 2nd 2020 however um at this time since it was put in place in 2017 your organization should be looking at either the proposed regulations um that were previously released you should be looking at the final regulations for 512 a6 or you should be using some sort of a reasonable method of siloing your ubti so when we talk about silence siloing we're talking about calculating unrelated business taxable income separately for each of your unrelated trade or business activities of the exempt organization for some organizations this is going to cause a little bit of a headache we can't put everything in one pot for ubi anymore and kind of offset the losses and income from different activities so you know the final regulations that were released they look very similar to the proposed regulations we did a seminar um probably mid 2020 in july where we covered this topic so that's a good reference if you'd like to go back and watch that webinar webinar it covered the proposed regulations the final regulations look very similar um the final regulations indicate that to silo and activity we can still use the two-digit naics codes we still have the investment silo for our activities so certain qualified partnership s-corporation interests and debt finance property will move into one investment silo um our qualified partnership and qualified s corp interests will need to follow the de minimis or the participation tests now in order to be qualified in that investment silo there was that name change it used to be the control test it's now the participation test um and the final regulations still have that primary focus um on our c7s and our vivas and our subs indicating that ubi and the silos are calculated slightly differently um the common example there is kind of the golf course you know the 501c7 golf course you can't go in and group all of your unrelated business activities in one silo you need to separate out your dining you would need to separate your green fees based on two-digit naics codes so kind of we'll quickly go over this slide but really you know when we have the investment silo we're looking at um some of the qualified partnership and qualified s corp interests that we receive so in general we're looking at the k1 received by the nonprofit organization if you're under two percent of the profit interest for the de minimis test um or if you do not hold or control more than um 20 for the participation test your k1 or your investment activity can be siloed um into one activity there are a couple of look through rules if you have a multi-tiered partnership or investment and then also kind of that rule if you have a k1 that is over these limits it does not meet the de minimis or participation test those will need to be looked at under the two digit or ni naics codes for the specific styling partnerships if they're over 20 and they're the same activity you can group them together s-corporations it doesn't work like that each s-corp k-1 that's over the 20 or does not meet your participation of the minimus test you would silo it individually so the final regulations um kind of touched on expense allocations but not great detail um you know the irs always reverts back to saying that you know there's no formal guidance you need to use a reasonable approach for your allocation method the final regulations under 512 a6 um you know they just state in there that if you use gross to gross and it's unadjusted that's typically not acceptable but that's about as far as the guidance went for the expense allocation so just make sure you use a reasonable approach lastly in the final regulations we've got some considerations for nols so when you're looking at the siloing rules there are ordering rules um that apply essentially those noels that um you generated prior to the siloing rules being in place or the pre-2018 nols as they're called those are going to be used first you would use up all of those nols against your total kind of gross income from the year then you would start applying the post 2017 nols or those nols that have been generated by your styling activities and remember styling of noels like they carry over if you cannot use them against that siloed activity you cannot offset them against a different silo and then when we talk about nols just kind of a quick note um you know the tax cuts and job act went and it eliminated the carryback provisions for noels and it also put into place and 80 of taxable income limitation the cares act la march of last year suspended or temporarily suspended some of these rules it allows you to carry back certain noels that are generated through the end of or the beginning of 2021 um carried back five years and it allows you to use up to 100 that 80 limitation is no longer in effect for those nols and you can carry back certain fiscal 2017 nols two years the irs does have some specific guidance regarding nols and the siloing rules and we've provided the link below great um so i'm going to touch on a couple other provisions here so we have the excise tax on executive compensation we receive final regulations um that were released on january 11th they are not effective yet so they're effective as the date that they're published in the federal register which we expect to be which we expected to be yesterday but i'm not sure that i saw that they actually were um issued they expected those to get issued before the new administration took place um so possibly they may have come in today but i think what i'm going to touch on with respect to this um we will be issuing a insights article to go into more detail on what these rules really go into but i think the key takeaway is these this executive compensation tax is a tax on organizations who pay more than a million dollars to any um employee or who have an excess parachute payment so we have a lot of organizations that will say i don't have to worry about this i don't pay anyone close to a million dollars and that's probably true i think the two things to keep in mind and where we see this potentially coming into play or three places one is if you have um deferred compensation plans that could at some point in the future push that individual over the million dollar threshold to if your organization potentially could give a parachute payment to an executive who's leaving um and the excess parachute payment here doesn't hit that million dollars it's based on 300 times the or the individual's normal compensation and then the third place that we're seeing these rules coming into play is with respect to organizations so tax-exempt organizations that may have a related for-profit organization where the individual is being paid by that related for-profit entity um there are the way these rules are written those individuals could get pulled into these rules if they serve on the board of the organization even if or if they're being if they're providing services to the organization even if they're actually not getting compensated by the nonprofit organization the final regulations and the proposed regulations had some clarification and set some exceptions with respect to those types of employees um so that's right down in the second bullet point as far as the exceptions to the definition um but like i said most organizations aren't going to be impacted by this but don't you know close your eyes to it completely because there could be that potential in certain situations the other excise tax that we got final regulations on here in 2020 was the net investment income of certain private colleges and universities um this is a 1.4 excise tax on the investment earnings of these organizations over in the united states there's 40 organizations that are subject to this excise tax so i'm not going to spend any more time on it because most organizations are not impacted by this and then the last reporting requirement we had this year was with respect to schedule b and some issues and rules that had been in play with respect to whether non 501 c 3 organizations had to disclose donors on schedule b and the final rules that came out say that only 501 c 3 and 527 organizations need to disclose the names and addresses all other organizations only need to disclose dollar amounts on schedule b so if you're a non-501c3 that these would impact you there so christine i'll let you touch on um real high level the tax filing updates sure um you know kind of if we're just looking high level um to close out our presentation today it's really that the irs is moving to electronic filing um so if you're not already filing your annual reporting form electronically it's probably coming within the next year for most electronic forms um with respect to applications you know the form 1023 became electronic in april of 2020 and the irs has just released um earlier this month the 1024a um for 501c4 organizations electronic as well and there will be an ability to submit the 2848 power of attorney forms and the 8821 for the representatives that's going online so that should be an easier portal access to get those signed and submitted to the irs and then lastly we've got a couple changes to the forum 1099 reporting um you'll be working with the boss services team but really um you know the 1099 was split for reporting purposes this year and they've moved up a couple of the dates for getting those forms submitted great then with respect to some trending tax topics um the slides will be available to everyone if you don't if you didn't get them at the beginning of the presentation um they will be available at the end of the presentation or after this so we um you know i think there's good detail in the slides so we won't touch on all of them i i do want to just touch on the irs and treasury comes out every year this was as of november and they say here's what our priorities are going to be so their priorities through june 30th of 2021 was to finish some of the um implementations of the tax cuts and jobs act so we did see um that was the push for getting all of these regulations issued there's some guidance that's coming out with respect to group rulings we do have a slide in here on that but really what it means is moving forward they are going to change the rules with respect to what types of organizations can get a group ruling which basically means smaller organizations can fall under a parent entity or and not have to apply for their own standalone tax exempt status a lot of organizations that currently have this would be like the boy scouts of america or there a lot a number of the church organizations have a group ruling we don't anticipate the changes will impact their the organizations that currently have group rulings um there will be some grandfathering in but there will be changes moving forward some guidance on when llcs can qualify as 501c3s final regulations on supporting organizations um these have been proposed for four maybe five years um they are saying that we are going to get final regulations but this has been on their priority guidance for four or five years some guidance for private foundations investments in partnerships where disqualified persons are also partners and then regulations um for excise taxes on donor advice funds so there's another slide in here but donor advised funds definitely continue to be an area of significant discussion and concern with and the primary issue here is with respect to the fact that there's no requirements for payouts so effectively a donor can take a tax deduction by putting money into a donor advice fund and those funds never have to be distributed and actually used by charity so we anticipate there could be some payout requirements coming out there um just quickly on some irs initiatives where they've said they're going to focus their compliance efforts um hospitals with unrelated business income and particularly where there's been losses shown i am aware of at least a couple hospitals who have already started an audit with respect to this so the irs is looking at this c7 non-member income exempt organizations that were operated as for-profits and converted to exempt organizations what's the difference what are you doing different now that you're an exempt organization private interment self-dealing continues to always be something they're looking at um with the the exempt organization unit is now combi ed with the um paper or the employment tax units so there is always work being done on worker classification backup withholdings and they continue to use data driven approaches by looking at the forms that are filed and having certain red flag type questions that that trigger examinations or trigger compliance checks there's the group exemption donor advice funds um we just put in quickly here irs is definitely backlogged as many of us are with respect to um you know the shutdown that happened returns aren't being processed as quickly as they usually are they're not being um sent to guidestar they're not being put on the irs website so um we have a link here if you want to understand what's happening at the irs you can go to that website um and then in the healthcare arena we consider continue to see exemption challenges how are 501c3 hospitals operated any differently than for-profit hospitals what are they doing with respect to debt collection what are they doing with respect to charity care and lastly we'll leave you with our favorite irs.gov resources so the first one is tax exempt organization search many organizations are familiar with guidestar where you can see full copies of 990s that have been filed the irs actually has a good place on their website now where they are also uploading um are uploading 990s they're uploading organizations determination letters so um guidestar now does have a limit on the number of times you can pull returns so if you're tax geeks like us and you're pulling people's 990s on a regular basis there is some limit there so we now find that this tax-exempt organization search is a great place to go the irs also is issuing snapshots which are designed to be training type um articles on on specific topics with respect to tax exempt organizations they probably put out five or six of them last year and there's some pretty good technical information um if that topic tends to pertain to your organization and then just where's my application for tax event status if you're an organization who's waiting to hear on your tax exempt status i there is a place on the website where you can find that and i believe that currently they're saying that they're looking at applications um that were filed before may 25th of 2020. so i need to take a quick a breath here um you know trying to get through all of those hot topics in an hour is a lot of information thank you for hanging in there with us we are happy to take additional questions through the q a function and like we mentioned we will make sure to get back to you specifically on those questions that you have answered so with that thank you again for joining us um please feel free to go to the i bailey website for additional information um things are getting posted there almost daily with respect to legislation there's articles and there's webinars um you know keep yourself informed and uh here's our contact information if you have any questions that come up after this feel free to reach out to either christina [Music] you