The long-awaited $1 trillion Infrastructure Investment and Jobs Act (IIJA) received the U.S. House of Representatives’ approval Friday, November 5, 2021, to provide funding for improvements to highways, bridges, and other road safety measures. The bill also offers plans to reconnect communities previously divided by highway building and expand national broadband networks.

According to White House projections, investments outlined in the infrastructure act will add approximately 2 million jobs per year over the next decade.

A portion of the original bill was held back, and there were not as many tax provisions as originally expected, which could mean additional changes may be coming in a fiscal year 2022 budget reconciliation.

What’s in the $1T Infrastructure Act?

There are several key tax provisions found in the IIJA.

• Employee Retention Credit: The infrastructure act ends the employee retention credit (ERC) early, repealing the fourth-quarter extension. Wages paid after September 30, 2021, are ineligible for the credit unless paid by an eligible recovery startup business.
• Crypto asset Reporting: The IIJA clearly defines the terms broker and digital assets to clarify capital gains or losses from cryptocurrency. It also provides new reporting requirements for crypt currency exchanges. The following information must be reported to the IRS and customers effective January 1, 2023:
  • Name, address, and phone number of each customer,
  • Gross proceeds from any sale of digital assets, and
  • Capital gains or losses (short-term or long-term)
• Disaster relief: The IIJA modifies the automatic extension of specific deadlines for taxpayers impacted by federally declared disasters. It amends the definition of a disaster area as “an area in which a major disaster for which the President provides financial assistance under section 408 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5174) occurs.”
• Other Tax Provisions
  • Extension of highway-related taxes
  • Extension and modification of superfund excise taxes
  • Allowance of private activity bonds for qualified broadband projects and carbon dioxide capture facilities

What Else is Included?

Here’s a breakdown of what’s included:

• Roads and bridges: $110 billion to repair the nation’s highways, bridges, and roads and invest in other transportation programs.
• Public transit: $39 billion to expand and modernize transportation systems, improve access for people with disabilities, provide dollars to state and local governments to purchase zero-emission buses, and repair buses, rail cars, and train tracks.
• Passenger and freight rail: $66 billion to reduce Amtrak’s maintenance backlog and improve rail service routes, including the Northeast Corridor.
• Electric vehicles: $7.5 billion for electric vehicle charging stations, $5 billion to purchase electric buses, and $2.5 billion for ferries.
• Modernizing the electric grid: $65 billion to protect against power outages.
• Airports: $25 billion to improve runways, gates, taxiways, terminals, and air traffic control towers.
• Water and wastewater: $55 billion to spend on water and wastewater infrastructure, including replacing lead pipes and addressing water contamination.
• Broadband internet: $65 billion to bolster the country’s broadband infrastructure, including ensuring every American has access to high-speed internet. Additionally, one in four households is expected to become eligible for a $30 per month subsidy to pay for internet access.
• Great Lakes Restoration Initiative: $1 billion for the cleanup of rivers and lakes, including a special target of areas with heavy industrial pollution.
• Road safety: $11 billion for transportation safety programs.

Where does the Build Back Better plan stand?

The BBB is set to be the largest social policy bill brought to a vote in recent years, bringing funding to address issues such as climate change, health, education, and paid family and medical leave.

House leaders hope to pass the Build Back Better plan later when they return November 15 after a weeklong recess.

The Build Back Better plan and IIJA have many intricate details. We’ll continue to provide more information as it becomes available.

Funding from this bill is anticipated to impact small governments and many nonprofit organizations. It is projected that the number of Federal audits under the Uniform Guidance will increase dramatically. If you find that your organization will be receiving this funding be sure to reach out to our team of professionals who can assist you with implementing the Federal compliance requirements regarding appropriate tracking of these funds.

Nonprofits remain one of the most important aspects in the front lines of helping communities in need. During times of crisis, such as the COVID-19 pandemic, many may find themselves with an influx in donations and in-kind gifts. Remember to use the new reporting requirements outlined by the Financial Accounting Standards Board (FASB) in accounting standards update No. 2020-07 released in September 2020.

Check out what reporting changes must be made by nonprofits and when they should go into effect.

What is considered an in-kind gift?

When nonprofits receive non-financial gifts from donors, they are more than likely considered a in-kind gifts. The FASB Master Glossary defines these as gifts of nonfinancial assets or fixed assets (e.g.. buildings, land, equipment), the use of fixed assets or utilities, materials and supplies, unconditional promises of assets, and intangible assets and services.

In-kind gifts allow nonprofits to focus more on their mission and the communities they serve while building relationships with businesses and individuals who may choose to or need to contribute in a non-financial manner.

When will the reporting requirements go into effect?

According to the accounting standards update No. 2020-07 by the FASB, nonprofits must include the new reporting requirements on annual financial reports for fiscal years beginning after June 15, 2021. If your organization follows a nontraditional fiscal year, you may already be tracking in-kind gifts in more detail. If you follow the calendar year, your organization will need to implement new procedures for recording in-kind gifts in the new year.

What are the new reporting requirements?

Nonprofits are now, or will soon be, depending on their fiscal year, required to report in-kind gifts as a separate line item on the statement of activities. This should be separate from cash or other financial assets.

When recording in-kind gifts throughout the year, keep the following reporting needs in mind. If you’re tracking these correctly along the way, creating the updated financial reports should be less daunting.

Statement of Activities reporting requirements:

• In-kind gifts as a separate line item and further broken down by category to show the type of non-financial assets.

Disclosures for in-kind gifts:

• Nonprofits must disclose the following for each category type:
  • If the gifts were monetized or used during the reporting period and how they or the money was used.
  • The policies in place for monetizing in-kind gifts.
  • A description of any donor-imposed restrictions, if applicable.
  • How the nonprofit arrived at the valuation for the in-kind gifts received.
  • Principal (or most advantageous) market used to calculate the fair market valuations.

Other reminders for reporting in-kind gifts

In addition to the new requirements, nonprofit organizations should be mindful of generally accepted accounting practices for in-kind gifts. When receiving in-kind gifts, recognize them as income in the period they were pledged or committed to your organization, using fair market value at the time of the gift. This does not apply if there are certain stipulations that dictate how the contribution should be used or if it is part of a conditional transaction.

Nonprofits can also act as an agent if the donor specifies the in-kind gift has another beneficiary. This is because the donor hasn’t given up their “variance power.” If contributed services are donated, they only need to be recorded in financial statements if the service “creates or enhances non-financial assets” or the service “requires specialized skills provided by individuals with those skills that would typically need to be purchased if they were not previously donated.” Examples of these types of services include accounting, medical care, legal services, and construction work.

For clarification on in-kind gifts or assistance establishing a method for tracking and reporting these contributions, reach out to our team of knowledgeable professionals today.