Knowledge and Insights
I am happy to report that once again, Kyle, Lovepreet and I visited Washington, D.C. to attend the American Institute of CPA’s Annual Not-for-Profit Conference, held each summer. While there, we packed in a lot of continuing education, discussions with peers, time with clients, and samples of new ethnic foods. The three of us participated in a variety of workshops and sessions covering both tax and accounting updates impacting exempt organizations, including a second conference devoted to private foundations.
The conference started off with a discussion of the economic effect on charities of the 2017 Tax Cuts and Jobs Act (Tax Act) passed by a Republican majority in Congress and signed into law by President Trump. In a nutshell, and as we are all aware, there were a variety of unintended consequences from the Act, such as reporting burdens, contribution disincentives, and ongoing resource drains, to the nonprofit sector. The actual provisions of the Act include higher costs from unrelated business income siloing, new taxes on parking, obsolete mileage rates, and lost donations from the higher standard deduction, to name a few. I always find it fascinating to look at the broader scope and reach of nonprofits, especially considering the tax law changes, a report on which includes the following statistics:
“Nonprofits are a substantial part of the overall economy, with 1.62 million of them registered with the Internal Revenue Service as of 2016. They accounted for almost $985 billion in gross product, 5.5 percent of GDP, in 2014. In 2017, U.S. tax-exempt 501(c)(3) nonprofits accounted for almost 12.5 million jobs, more than 10 percent of the private-sector workforce. Health care and social assistance accounted for two-thirds of nonprofit employment. The $670 billion wages they paid that year were almost 10 percent of private sector wages. The average annual wage for employees in the nonprofit sector in 2017 was $53,667, which was 97 percent of the average wage of all private-sector employers. Nonprofit revenues are concentrated in healthcare charities, which in 2015 accounted for 58.7 percent of reported public charity revenues and 42.9 percent of assets. Of 6,210 U.S. hospitals, of which the largest group, 47.8 percent, is composed of nonprofit charities (the remainder are private, 21.3 percent; state/local, 15.7 percent; or federal, 3.3 percent).”
You can read the full nine-page Joint Economic Committee Report (a pdf), here.
As we think about the next 12 months and how to focus our efforts on the impact to the sector from the Tax Act and other accounting changes, Mercadien pledges to stay ahead of the curve by providing guidance on both fronts. Our cybersecurity seminar held in July at the Grounds for Sculpture provided a wealth of information and food for thought to nonprofits on how to improve controls and protection over technology resources. Our upcoming November 2019 seminar on the new revenue recognition standards will guide clients as they ready themselves for new reporting requirements in their financial statements and tax returns. Speaking of tax returns, we will continue to advise you on tax and other reporting matters to help you minimize compliance risk throughout your organizations.
Enjoy the rest of the year, and if you or your organization need help on any business front, feel free to reach out to any of us here at Mercadien. I’m at firstname.lastname@example.org; Kyle’s at email@example.com and Lovepreet’s email is firstname.lastname@example.org.