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 We recently did some research on the top foundations which support local nonprofit organizations. A few you may find of particular interest are the Bill and Melinda Gates Foundation and The Ford Foundation.

The Bill and Melinda Gates Foundation have three areas of funding research, the Global Development Program, the Global Health Program, and more notably, the United States Program. The United States Program focuses on improving public education, as well as programs for housing/homelessness. However, the foundation accepts a minimal amount of applications from unsolicited organizations. If your program or project does meet the foundation’s criteria, you may begin the grant application process. First, submit an online letter of inquiry (LOI), which should include the project description, financial information, and organization information. If the LOI is accepted, you will be invited to submit a full proposal. After you have submitted a proposal for your project or program, the proposal will be reviewed, and the amount of funding will be determined.

The Ford Foundation is more diverse than the Bill and Melinda Gates Foundation. The foundation’s areas of funding are selected based on their goals that are organized into eight key issues: Democratic and Accountable Government, Human Rights, Social Justice Philanthropy, Economic Fairness and Opportunity, Natural Resources and Sustainable Development, Access to Education, Freedom of Expression, and Sexuality and Reproductive Health Rights. If you wish to apply for a grant from The Ford Foundation, first visit the foundation’s website and determine if your organization meets their requirements. Next, submit an online grant inquiry. Within six weeks your organization should be notified if it is of The Ford Foundation’s interest. The final step is the approval process, which includes meetings, site visits, grant negotiations, administrative and legal review, and a final presentation for the grant approval. The approval process takes about three months.

The Wall Street Journal had an interesting article Monday on corporation’s increasing use of outsourced financial professionals.

McQuadeBrennan’s CFO Service group has been the firm’s fastest growing division. What I see in the Washington, DC marketplace is a shortage of accounting professionals who can tackle the multiple accounting and tax issues that organizations face daily. A private equity group we work with likes to use the term “efficacy” when describing our services.  It’s difficult for management to make assessments of a finance department’s “efficacy”, but they can make judgments on a department’s results. 

Tax returns get filed on time, financial statements are available real-time and most importantly, and what McQuadeBrennan believes is its most valuable service, the financial operations and results are clearly explained to management. 

Attention all business owners that conduct business in D.C.! The District has required all businesses that pay business taxes to have a valid District of Columbia Basic Business License (BBL). In general, if your business has a tax identification number, then you are required to obtain a BBL General Business License.   

There are rolling application deadlines based on your business zip code.  For businesses located in Maryland and
Virginia conducting business in the District, application deadlines will be based on the name of the city you are located. 

Maryland:                                      Virginia:

A-C     February 28, 2009             A-F    July 31, 2009

D-Q     March 31, 2009                G-Z     August 30, 2009

R-Z     April 30, 2009

Certain businesses are exempt from applying for a General Business License.  However, they are required to file an exemption request form. 

The following exemptions apply to businesses:

-  Who are required to maintain licensure by local, state or national certification board or body

-  Not having a Federal Employer Identification Number (FEIN)

-  Having a Basic Business License whose endorsements authorize all current business activities

-  Having a current occupational or professional license for business activities 

For example, health professionals, lawyers, professional service providers, educators, insurance providers, and service providers may file for exemption.

The 2009 Economic Stimulus Plan, officially known as the “American Recovery and Investment Plan”, was signed into law on February 17, 2009.  The bill, historical because of its many attributes, contains several incentives to jump start the economy.  

The following are key previsions businesses will find most beneficial: 

- NOL Carryback: Businesses with 2008 gross receipts of less than $15 million can carryback their current net operating losses (NOL) up to five years instead of two years, as previously allowed.  

- Industrial Development Bonds: The scope of state and local government issued industrial development bonds is temporarily extended to facilities manufacturing intangible property. 

- Bonus Depreciation and Section 179 Limits: For qualifying property purchased during 2009, businesses are allowed to take 50 percent bonus depreciation and Section 179 deductions of up to $250,000, certain restrictions apply. 

- Credit for Hiring “Disadvantaged” Workers:  A maximum tax credit of $2,400 for hiring unemployed veterans or individuals between the ages of 16 and 25 who have not been regularly employed or attending school in the past six months.  

- Reduction in S-Corp Asset Holding Period: The 10 year asset holding period requirement to avoid built-in gains tax on S Corporations has been temporarily reduced to seven years. 

- Transportation Fringe Benefits: The 2009 limit on pre-tax deductions for mass transit benefit has increased to $230 per month from the existing $120 and ties the benefit to inflation for future years.   

- COBRA Premium Subsidy: Includes 65% federal subsidy of COBRA premiums for involuntarily terminated employees for a period of up to nine months. To qualify for this premium subsidy, an employee must be involuntarily terminated between September 1, 2008 and December 31, 2009 and earn less than $125,000 if single, or $250,000 if married.  

Key previsions beneficial to individuals: 

- AMT Patch Extension: The existing alternative minimum tax (AMT) fix is extended for another year increasing exemption amounts up to $46,700 of an individual’s income and $70,950 of a couple’s income for 2009. It also allows the use of nonrefundable personal credits to avoid the alternative minimum tax. 

- Education Tax Credits: The Hope education credit limit is increased from $1,800 to $2,500 for all four years of college tuition. In addition, the credit will cover costs of textbooks and would now be 40 percent refundable. Also, computer related expenses are considered exempt under the new 529 College Savings Plan rules. 

- First-time Homebuyer’s Credit: A refundable tax credit increase of 10 percent of home value up to a maximum credit of $8,000 for purchases made before December 1, 2009 (November 30, 2009). The credit is forfeited if purchaser sells the house within three years. Certain income limitations apply.

- Credits for Residential Energy Efficiency Improvements: Tax credits are increased 30 percent up to a $1,500 maximum credit for home energy efficiency enhancement purchases, such as new furnaces or insulation. 

- Deductions for Car Buyers: Vehicles purchased in 2009 costing up to $49,500 qualify the car buyer to take above-the-line deduction for state, local and excise taxes as well as interest on their car loan. Phase out begins at $125,000 for individuals and $250,000 for married filing jointly.

I wrote the following piece with Ms. Kate Carr, President, Cardinal Bank DC.   The Washington Post published the piece, “How to Make D.C. an Economic Powerhouse (Hint: Tax Less)”, in the Outlook Section, Close to Home editorials on Sunday, February 8, 2009. As business leaders in the District, we can’t underestimate the importance of our proposal to the business community.  

No Corporations Need Apply 

The economic crisis has forced state and local governments throughout the country to review their increasingly stressed budgets and seek new sources of revenue. In December, the District’s unemployment rate hit 8.8 percent, compared to the national rate of 7.2 percent, a 16-year high. Personal income taxes provide the city with 17 percent of its revenue, its largest single revenue source. By contrast, corporate and franchise taxes are projected to make up just 4.3 percent of the District’s revenue in 2009.    

In considering its own stimulus package, the D.C. Council should review the structural impediments to job growth in the District. How can the District position itself to take advantage of the enormous opportunities presented by the federal government’s role as the world’s largest financial shareholder and general contractor since the New Deal?    

For-profit corporations are painfully absent from the District’s economic landscape. At 9.975 percent, the District has the third-highest state or local corporate tax rate in the country. For a company considering operating in the District, it’s an absolute deal-breaker. Economists have noted for years the phenomenon that higher tax rates often result in lower tax revenue. The District’s corporate tax policies have the same impact on its economic growth and diversification that NINA (“No Irish Need Apply”) signs had on the unemployed Irish in the 1900s: Don’t bother operating a business in the District. Our tax rates will make sure you’re not competitive.    

The D.C. Council would be wise to consider the expanded role of the U.S. government in managing the largest economy in the world, and what that role could mean to the District. The stimulus package now before Congress will dwarf those of the New Deal. And it’s likely to attract institutions and corporations from around the world who want to participate in the massive spending involved. The Tax Foundation, a nonpartisan policy research group, consistently rates neighboring
Virginia as having one of the most favorable corporate tax environments in the nation. (The District and Maryland are consistently among the worst.) Tysons Corner has plenty of capacity to handle the expected influx of businesses wanting to do business with the U.S. government, and Virginia is ready to accommodate them and their jobs.    

Eliminating the District’s corporate income tax could have a profound impact on the future of the District. Job growth, increasing property assessments, and revitalization throughout the city would be immediate. The economic crisis and the role the federal government is expected to play in the country’s recovery present the District with opportunities that no other city in the country has. Think Dubai; it has oil. The District has the federal government. The District’s tax structure, especially its corporate tax, prevents it from assuming a position of economic leadership in the region and the country. Markets are mobile, and businesses will locate where they have the greatest economic advantage. The District needs an economic advantage.    

The national crisis needs a deliberate, quick and bold response. If the District doesn’t act soon, it may as well post signs on all major roads into the city: No Corporations Need Apply.                 

- Brian McQuade

- Kate Carr

In December 2008, the Nonprofit Operating Reserves Initiative Workgroup released the white paper, “Maintaining Nonprofit Operating Reserves, An Organizational Imperative for Nonprofit Financial Stability.”  The white paper is a product of the not-for-profit committee of the Greater Washington Society of CPA’s.   

The recent collapse in the equity markets worldwide has had a severe negative impact on association’s endowments, investments and reserves. I recommend that you review your organization’s reserve policies and determine if changes need to be implemented. 

The IRS announced the 2009 optional standard mileage rates beginning Jan. 1, 2009:

- 55 cents per mile for business miles driven

- 24 cents per mile driven for medical of moving purposes

- 14 cents per mile driven in services of charitable organizations.

These rates reflect gas prices, and other fixed and variable costs, such as depreciation. The rate for charitable purposes has been a law since 2008.  These rates are slightly lower than the rates set in the second half of the year to combat the abnormal rise in gas prices.  The business mileage rate was 50.5 cents in the first half of the year and 58.5 cents in the second half.  The medical and moving rate was 19 cents in the first half of the year and 27 cents in the second half. 

A vehicle may not use the business standard mileage rate if the business has used any depreciation method under MACRS or after claiming a Section 179 deduction.  The business standard rate may also not be used for hire or for more than four vehicles used at the same time.

We invite you to join us for lunch to learn from Nonprofit Executives who have gotten control of their costs.

Our expert panel will discuss some of the most significant topics impacting the region’s real estate and nonprofit industry.  The panel discussion will take place Wednesday, October 29th from 11:30 a.m. – 1:30 p.m. at the Human Right Campaign, 1640 Rhode Island Avenue, NW, Washington, DC 20036.  Click here to learn about the panelists and discussion topics.

On Wednesday, October 1, 2008, McQuadeBrennan held a panel discussion on the redesigned Form 990. The IRS has redesigned the Form 990 for the 2008 tax year, which represents the most significant changes in filing requirements since 1979.  

Our panel of experts included me, Ron Schultz, Senior Technical Advisor of IRS’s Tax Exempt and Government Entities Division, Dan Moore, Vice President, Public Affairs at GuideStar, and Cher Wynkoop, Partner, Tax, Benefits & Wealth Planning Group at Reed Smith LLP.  The panelists did a great job. 

We discussed the new disclosure requirements, what they reveal to the public about an organization, things to consider before your 2008 tax year ends, and how to plan for the approaching filing season.  We presented the information to the audience through a PowerPoint presentation of an overview of the changes being made to the form, followed by a case study to put the changes into perspective for an organization.  

I wanted to make sure the audience could easily get a copy of the new Form 990 that was projected onto a screen during the seminar.  Below you will find links to the new 2008 Form 990 Core Form and Schedules.  I hope this is beneficial to everyone’s understanding of the redesigned form.   

2008 Form 990 Core Form

Schedule A

Schedule B

Schedule C

Schedule D

Schedule E

Schedule F

Schedule G

Schedule H

Schedule I

Schedule J

Schedule K

Schedule L

Schedule M

Schedule N

Schedule O

Schedule R

Yesterday, the IRS released Announcement 2008-63, revealing  an increase in the optional standard mileage rates used to compute the deductible cost of operating an automobile for business, charitable, medical or moving expense purposes for the final six months of 2008.  This rate is used as a benchmark by the federal government and businesses to reimburse employees for mileage. 

The IRS has increased the optional standard mileage rates for business purposes to 58.5 cents a mile for miles driven from July 1, 2008, through December 31, 2008.  This is an increase of 8 percent from the first six months of 2008. The mileage rate for medical or moving expenses will increase to 27 cents a mile, up from 19 cents.  The mileage rate for providing services for charitable organizations will not change from 14 cents a mile, as it is set by statute, not the IRS.

The price of gas is a major factor in the increase of the standard mileage rates. The IRS understands that with rising gas prices, adjustments must be made to “better reflect the real cost of operating an automobile”.  Other factors affecting this decision include depreciation, insurance, and other fixed and variable costs.

The IRS wants the reimbursement rate to be fair to taxpayers, which explains the urgency of adjusting the mileage rates before the scheduled update in the fall.