webinar slides: state and local tax issues for nonprofits
TRANSCRIPT
CBIZ & MHM Executive Education Series™ State and Local Tax Issues for Nonprofits: Best Practices in
Navigating Income, Sales, Use, UBIT and Charitable Registrations
Presented by: Craig Klein and Tarra Curran February 19th and
March 4th
2 #CBIZMHMwebinar #CBIZMHMwebinar
To view this webcast in full screen mode, click on view options in the upper right hand corner.
Click the Support tab for technical assistance.
If you have a question during the presentation, please use the Q&A feature at the bottom of your screen.
Before We Get Started…
3 #CBIZMHMwebinar #CBIZMHMwebinar
This webcast is eligible for CPE credit. To receive credit, you will need to answer periodic participation markers throughout the webcast.
External participants will receive their CPE certificate via email immediately following the webcast.
CPE Credit
4 #CBIZMHMwebinar
Today’s Presenters
Craig Klein, CPA Managing Director, CBIZ MHM 617.761.0509 | [email protected] Craig, a CBIZ Managing Director in the Not-For-Profit & Education Practice, has over 20 years experience in the tax industry working with eeducational institutions, health and human services providers, associations, foundations and other complex not-for-profit organizations. Craig assists clients with the preparation and review of tax returns, advice and planning regarding unrelated business income, transactions, state and local taxation and international tax planning.
Tarra Curran, CPA, MST Managing Director, CBIZ MHM 617.761.0505 | [email protected] Tarra is a CBIZ Managing Director in the Tax Group and leader of the New England State and Local Tax Practice. She has more than 15 years of experience in the tax industry and has managed state and local tax services for major corporate clients including comprehensive multi-state income tax planning, nexus reviews, state due diligence reviews, state acquisition and disposition structuring, state income tax and sales/use tax audit management, as well as multi-state voluntary discloser projects.
5 #CBIZMHMwebinar
Agenda Introductions
Case Study Facts
State & Local Considerations Income Tax & Unrelated Business Income (UBI) Sales / Use Tax Payroll Tax Risk Mitigation
Charitable Solicitation Considerations
6 #CBIZMHMwebinar
Case Study Facts “NFP” is a Massachusetts college recognized by the IRS as
having 501(c)(3) status
NFP employs adjunct faculty
NFP has an online education program that it plans to grow. NFP has identified potential online faculty candidates that reside in the following states: Florida Washington
NFP operates a bookstore that is both on campus and online
NFP has invested endowment funds in limited partnerships
7 #CBIZMHMwebinar
Income Tax & UBI Considerations
Will establishing employees in Florida or Washington trigger income tax/unrelated business income (UBI) considerations? Florida
o If the activities of the new hire exceed “mere solicitation” related to the sale of the College’s product, then income tax nexus has been established As the College does not sell a product, this protection does not apply
o As a general rule, once nexus has been established, the College becomes subject the state’s income tax provisions and a filing requirement is triggered
o College must determine whether Florida has a “traditional” income tax/UBI tax structure. Does Florida exempt “related” sales which are in furtherance of the organization’s mission? Has Florida adopted UBI tax provisions? Fact: Florida exempts “related” sales but imposes a state-level tax on UBI Note: Not all states follow this model
8 #CBIZMHMwebinar
Income Tax & UBI Considerations Florida (cont’d)
o College must determine how Florida’s state-level UBI will be measured
Apportionment considerations (payroll, property and sales factors) Consider only UBI-related payroll, property and sales, versus… Enterprise-wide payroll, property and sales
9 #CBIZMHMwebinar
Income Tax & UBI Considerations Washington
o Business & Occupation (“B&O”) tax
“Mere solicitation” rule does not apply
Physical presence rule
Economic nexus rule
o No apportionment of B&O tax
Tracking of the specific streams of income to Washington
Consider impact of online students in Washington
10 #CBIZMHMwebinar
Sales / Use Tax Considerations Sales tax nexus is generally triggered when there is a physical
presence in the state In state employee In state independent contractor Traveling employees
Once sales tax nexus is established, the organization becomes
subject to the state’s sales/use tax provisions and filing requirements are triggered All items sold to end users should be analyzed to determine taxability
If items being sold are taxable, the organization is obligated to collect and remit sales tax unless an exemption applies
Consider online bookstore sales to state residents
Consider use tax on college provided computer equipment used by faculty for online instruction
11 #CBIZMHMwebinar
Sales / Use Tax Considerations Filing frequency Monthly, quarterly, annually Local filings may also be required (e.g. Colorado). This may necessitate
significantly expanded recordkeeping and compliance requirements.
Use tax considerations Exempt purchaser under 501(c)(3)
Documentation Purchases of supplies for course curriculum
The Marketplace Fairness Act, which would require all sellers not qualifying for a small-seller exception to collect and remit sales tax on “remote sales” of goods and services where the seller would not otherwise be considered to have collection/remittance/filing responsibilities
12 #CBIZMHMwebinar
Payroll Tax Considerations Withholding requirements Florida (no personal income tax) Washington
Withholding should generally be done in the location where
the employee performs their services Reciprocity?
Unemployment insurance State wage base New business rate
13 #CBIZMHMwebinar
Risk Mitigation What if the organization determines that it had an employee
in Florida or Washington for the last several years? Exposure due to non-triggering of statute of limitations Risk mitigation
Negotiated settlement Voluntary disclosure
Direct with the state Multistate Tax Commission
“Trailing” nexus
14 #CBIZMHMwebinar
Best Practices and Recommendations Conduct a risk assessment Understand the jurisdictions in which you operate
Consider impact of out-of-state employees
Consider potential tax exposures including income tax, sales tax, payroll tax, etc.
Measure exposures where applicable
Consider modes for coming into compliance
15 #CBIZMHMwebinar
Charitable Registration 39 states and Washington, D.C. have enacted charitable
solicitation statutes
Specific requirements vary by state
In general, statutes require organizations to register with the state before they solicit the state’s residents for contributions
Exemptions may apply to educational organizations, though criteria for exemption vary from state to state
Your organization may be required to register in multiple states
16 #CBIZMHMwebinar
Charitable Registration Raising funds using the Internet?
The Charleston Principles describe how state charity officials view internet solicitations http://www.nasconet.org/wp-content/uploads/2011/05/Charleston-Principles-
Final.pdf Provides framework regarding:
Entities that are domiciled within the state, and separately…
Entities that are domiciled outside the state
17 #CBIZMHMwebinar #CBIZMHMwebinar
Questions?
18 #CBIZMHMwebinar #CBIZMHMwebinar
Join us for these courses: First Quarter Accounting and Financial Reporting Issues
Update – Offered on March 24, April 2 Eye on Washington: Quarterly Business Tax Update 1st
Quarter – Offered on April 30, May 5, May 6 To register for these upcoming webcasts, click here.
Read these related news items: Mitigate Your Risk of UBTI Web Presence & Internet Concerns: Fundraising
If You Enjoyed This Webcast…
19 #CBIZMHMwebinar #CBIZMHMwebinar
Connect with Us
linkedin.com/company/ mayer-hoffman-mccann-p.c.
@mhm_pc
youtube.com/ mayerhoffmanmccann
slideshare.net/mhmpc
linkedin.com/company/ cbiz-mhm-llc
@cbizmhm
youtube.com/user/BizTipsVideos
slideshare.net/CBIZInc
MHM CBIZ