How the Taxpayer First Act Will Impact Nonprofits

By: Jeffrey A. Kowalczyk CPA CFE CGAP, Partner

Barbacane, Thornton & Company

The Taxpayer First Act (the Act) of 2019 was signed into law on July 1, 2019. The bill, having gone through a few changes on its way to the president’s desk, passed with bipartisan support – a rare thing in Washington these days. The law aims to reform the Internal Revenue Service (IRS) by making it more taxpayer-friendly and has been praised by the American Institute of Certified Public Accountants (AICPA). The summary of the bill, its titles and subtitles signal a much-needed pivot to the way the IRS fits into the 21st-century economic narrative. Among the areas of impact, the main themes include customer service, enforcement procedures, cybersecurity and identity protection, management of information technology, and use of electronic systems.

While this law offers many provisions for individual taxpayers, it also affects nonprofits. The law modernizes filing requirements that if ignored, will result in significant consequences. Any nonprofit organization that fails to uphold these new requirements for three consecutive years will automatically lose its tax-exempt status.

Starting in 2021, almost all tax-exempt organizations will file Forms 990, 990-PF, 990-EZ, and 990-T electronically, regardless of their asset status or their number of returns. The Act also requires the IRS to make Form 990 available to the public as soon as practicable in a machine-readable format. The implication here is that this information will be readily available to agencies, so nonprofits should take care to position the form for public consumption.

Nonprofits need to take a few additional details into account.

First, the Act requires the IRS to notify organizations that have not filed a return for two consecutive years. Chances are, your filing procedures are up to snuff. If they aren’t, don’t allow a lapse in communication stymie an opportunity for a second chance. Ensure the IRS has accurate contact information.

Second, the Act mandates that new e-file procedures go into effect for filers at different rates. For instance, nonprofit filers whose fiscal year begins on July 1, 2019, will receive a transitional reprieve.  The new e-file procedures are effective for years beginning AFTER July 1, 2019. See table below:

Nonprofits whose gross receipts amount to less than $200k and total assets less than $500k, and organizations that file a 990-T can expect transitional relief. The new law will allow the IRS to delay the mandatory filing for up to two years.

For most, the Taxpayer First Act is a welcome change. The Act helps protect business owners from IRS seizures and allows them to avoid the expenses and time-consuming process of having to go through the courts to reclaim their assets. One of the most critical components of the new law is the attention to cybersecurity and customer service. For nonprofits, the changes are aimed at increasing accountability and transparency.

If you have any questions about the law in its entirety or want to know how your organization should prepare for the changes, give the professionals in our office a call today.

Operational Transparency Is the Key to Effective Crowdfunding

By: Steven Kutsuflakis, CPA, Partner

Barbacane, Thornton & Company

In recent years, crowdfunding has grown in popularity as means of fundraising. Crowdfunding is a powerful tool to raise money for various charitable enterprises. But did you know that it can build your donors’ trust as well? According to a study from Indiana University’s Kelley School of Business, crowdfunding campaigns use two transparency tools to attract donors. One method is more effective than the other.

The study of over 100,000 campaigns benefiting victims of emergencies revealed both operational updates and traditional certification positively impacted campaigns. However, researchers found that each additional work‐related word in an update (operational transparency) increases donations on average by $65 per month.  Certification (conventional transparency), on the other hand, raises funds on average by $22 per month.

By offering work-related updates on the site, organizers are giving donors unique and in-depth insight into the cause, thus increasing their trust in their efforts. Updates vary by campaign but generally include reports, photos, videos, testimonials, and media coverage.

The findings of this study are especially encouraging to those looking to set up a campaign to address an acute need. Online crowdfunding platforms pave a simple way to fleet-foot response and frequent updates boost the campaign effectiveness.

If you are new to crowdfunding and are not sure where to start, we’ve outlined a couple basic steps below.

Crowdfunding Basics

1. Determine your goal, then add at least 30%. This cushion will protect your cause from being underfunded and provide a buffer for third-party processing fees. You can also consider assigning giving levels based on your audience. If you have 1,000 active donors and want to raise $10,000, you could set your levels to cover casual ($50), strong ($100), and generous ($500) donors.
2. Choose a platform site. Indiegogo, GoFundMe, KickStarter are the mainstream options; Causes, Fundly, Donately, and DonateKindly are the most popular choices among nonprofits. Work with providers to determine which one will be the most cost-effective and fit your nonprofit’s unique needs.
3. Designate an owner or team to manage the campaign from start to finish. The marketing person should
   1. Design the fundraising page according to your brand. Craft a sincere but catchy mission statement; frequently post updates, including images, videos, and graphics about your cause and its recipients; and create a hashtag to point people to your campaign page.
   2. Determine a marketing strategy and promotion schedule.
   3. Use social media and email to advertise your campaign.

Remember, operational transparency via frequent updates is the key to an effective crowdfunding campaign! Preplanning your communications and dynamically interacting with your donors will give your campaign the edge it needs to connect with donors and build trust.

4. Consider using products to incentive donors. Some nonprofits find grand success when they offer fundraising products in conjunction with their campaign. Choose meaningful items that showcase your brand and your cause.
5. Be future-minded. Don’t forget to capture donor data. Some crowdfunding platforms offer CRM integration, making this process as seamless as possible. If you don’t have a way to automate this step or a CRM system, turn to manual entry. Capturing donor information is critical to growing your donor base. Your overall mission is best served by cultivating a relationship with your donors. Recording the data you receive from donor platforms is a great way to gain insight.
6. Follow through on the basics. As with all your fundraising efforts, you must establish a follow-up strategy. Don’t forget to send donation receipts and thank you notes on time, within 24 hours and three days, respectively. Donors also like to receive updates, especially when you reach your fundraising goal! Each touchpoint is an opportunity to keep your organization and cause top of mind. Try your best to personalize your follow-up communications, taking into consideration their names, credentials, and donor levels. For instance, addressing a donor by the wrong name is a faux pas, but failing to thank a major donor personally is a mortal sin.

The research report, Operational Transparency on Crowdfunding Platforms: Effect on Donations for Emergency Response, was published in the online journal Production and Operations Management.

4 Ideas for Nonprofit Workspace Giving Programs

By: Edmund Fosu-Laryea CPA

Barbacane Thornton & Company

An increasingly common thread among workers in nonprofit and for-profit companies is their desire to participate in community service. In general, staffers of the 21^st century are inclined to give. According to Classy, an online fundraising software creator,

• 63% of young GenXers and Millennials prefer to work for companies that support social causes, and
• 54% of employees who take pride in their organization’s contribution to society feel engaged in their position.

The warm glow of giving shines exceptionally bright amongst millennials. According to a Deloitte study, 70% of millennials strongly favor companies committed to the community. The same study reported that 55% of millennial workers felt proud to work for companies that frequently volunteer. With millennials making up the largest segment in the workforce, these statistics should influence your decision to implement a workplace giving program, especially in the nonprofit sector.

It is tempting to see nonprofit work as inherently charitable. However, the truth is, nonprofit organizations are the most qualified to model effective workplace giving programs. And their workers? They are naturally eager as beavers in most cases.

Workplace giving firm, YourCause recently released its annual report, Industry Review: Employee Engagement and Corporate Social Responsibility. The findings highlight a few robust strategies to help organizations reach high levels of employee participation while offering professional development benefits. The following four trends are quickly becoming best practices because of their proven effectiveness.

1. Mix and Match Opportunities

Offering a combination of giving opportunities yields a higher rate of participation. Consider creating a menu of options from the ideas below:

• Volunteer Time Off (VTO)
• Pro Bono Service / In-kind donations
• Automatic Payroll Deductions (offer a variety of options)
• Matching Gift Programs
• Peer-to-Peer Fundraising Challenges
• Events (charity sporting events/fundraisers/networking events)
• Seasonal or Holiday Campaigns (Giving Tuesday/Martin Luther King Day)
• Disaster Relief Partnerships

2. Year-Long Campaigns

According to YourCause, calendar-year giving programs result in more dollars donated per employee. Perhaps it is because people appreciate having control over their decisions to give. By running a year-long campaign, you can tap givers that need to align giving with their budgets. You may also appeal to those who value their free agency.  As you plan your year-long campaign, take a cue from short-term campaign strategies to boost engagement. Keep the campaign front and center by increasing communications, providing regular updates throughout the year, and hosting semi-annual or quarterly events.

3. Make it Easy, Make it Plastic

Cash is king, but plastic is elastic. When organizations offer employees the flexibility of giving via credit card, they often see higher levels of giving. Organizations that go a step further to cover credit card processing fees see even higher levels of engagement. The pièce de résistance in plastic giving, however, are “cause cards,” a unique offering from CSR platforms like YourCause. Card programs vary; however, they are always a type of giving grant. In other words, the organization provides funds on the cards for its employee to designate to the charity of their choice. The company can allocate cards for employee rewards or campaign participation. Ultimately, “cause cards” incentivize volunteer participation and provide a unique tax credit for the organization.

 Don’t Forget Your Retirees

According to the YourCause report, retirees contributed almost 4.5 times more dollars and logged nearly eight times as many volunteer hours than full-time employees. Don’t neglect to reach out to your retirees when running a campaign. This untapped segment is a secret weapon for a few reasons. First, retirees generally have the bandwidth to show up. Second, giving is usually written into their retirement plan. Third, our mature counterparts see the value of service in a way we can’t, partially due to their broader perspective. When they return to support a campaign, their participation is nothing short of inspirational.

Nonprofit organizations are missing a huge opportunity when it comes to leveraging the benefits of workplace giving programs. It is time to start looking at the ways workplace giving and volunteer programs can enhance employee engagement and satisfaction, and boost your nonprofit’s brand and effectiveness. If you’d like to read the YourCause report, visit https://solutions.yourcause.com.