Federal mileage rates for 2021.

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The IRS has published the reference amounts for mileage rates for 2021. The rates:

Beginning on January 1, 2021, the standard mileage rates for the use of a vehicle will be:

  • 56.0 cents per mile driven for business use, down 1.5 cents from the rate for 2020,
  • 16 cents per mile driven for medical or moving purposes, down 1 cent from the rate for 2020, and
  • 14 cents per mile driven in service of charitable organizations.

The business mileage rate decreased one and a half cents for business travel driven and one cent for medical and certain moving expense from the rates for 2020. The charitable rate is set by statute and remains unchanged.

The business rate is down from 57.5 cents in 2020 and 58.0 cents in 2019, which in turn was up from 54.5 in 2018.

The standard rate for business is based on their analysis of the fixed and variable costs of operating a vehicle.  The medical & moving rate is based on variable costs of operation.

Rates were published in Notice 2021-02:  2021 Standard Mileage Rates.

A few highlights from CalCPA’s Not-for-profit Conference.

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Listened to CalCPA’s virtual Not-for-profit conference today.

Lots of great stuff during the sessions. Three items were worth sharing on Twitter during the day. Thought I’d share them here as well:

How to account for PPP forgiveness.

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Forgiveness of PPP loans.

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There are lots of details and nuances to the federal Paycheck Protection Program. I’m not up to speed on PPP so I won’t be commenting on the program, especially the forgiveness rules.

There is a growing volume of information on the ‘net describing the program. Here are some resources you can check out to learn more.

SBA forgiveness application

5/15/20 – Small Business Administration – Paycheck Protection Program Loan Forgiveness Application,” Small Business Administration, – The SBA published the text of the forgiveness application.

Commentary on forgiveness application

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Guidance from SBA for faith-based charities applying for PPP loans.

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If you are in leadership or on the finance team of a faith-based not-for-profit organization, you really, really need to read the Faith-Based Organizations FAQ From The Small Business Administration:

The document is dated 4/3/20.

Read this document if you have applied or are thinking about applying for a loan under the Paycheck Protection Program.

An issue in the back of many people’s mind is whether any federal assistance under this program will infringe on religious freedom. I think you will be quite pleasantly surprised by reading the FAQ.

Please read the article. You might want to make a copy for your file.

Legal issues arising from the pandemic. It’s gonna’ get messy…

Time to read that insurance policy. Image courtesy of Adobe Stock.

ECFA presented a webcast Navigating Critical Legal Issues in the COVID-19 Crisis on 4/7/20. If this condensed summary of issues is at all interest to you, check out their website,www.ECFA.org. Webcast is now available at no charge if you are a registered member or if you are an ECFA member. Registered status is free.

I won’t be giving any legal advice here. Instead I will merely identify issues for you to consider. Consult with your attorney if you need to go in depth.

A long yet partial list of legal issues to consider

Intentionally assess whether you perceive taking a PPP loan under the SBA rules will have any effect on your ability to exercise your religious freedom. Webcast provides good guidance.

OSHA – there are general rules under federal OSHA and state equivalent regulations affecting the workplace. These may be more significant in a coronavirus environment.

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Update on the charity that settled in January 2019 with the California Attorney General

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Went browsing around the web last night and found the settlement agreement for the AG’s case against the Giving Children Hope charity. Yesterday’s post discussed that case at length.

The National Association of State Charity Officials has a reprint of the California AG’s press release.

Included in the article is a link to the signed Assurance of Voluntary Compliance., which was approved by a judge on January 22, 2019.

Following are a few of the highlights from the signed agreement. In particular, the agreement fills in some of the details I was wondering about.

Remember my previous comment that I could see no reason one particular board member was included in the case?  He was chair of the board from 2014 through 2016, according to paragraph 2. On the settlement agreement, he signed as chairman on behalf of the charity which agreed to dissolve itself.

The CPA cited in the case provided accounting services to GCH from January 2014 through June 2017 (para 2).

In paragraph 10a the AG asserts GCH had at least 25 transactions in which it had one of two controlled subsidiaries purchase medicine from a named wholesaler in the Netherlands for a “very minimal price” and then had the controlled charities donate the meds back to GCH.

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Standard mileage rates for 2019

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The IRS has published the 2019 standard mileage rates. New rate for transportation and reimbursements is 58 cents, which is up from 54.5 cents in 2018. That is an increase of 3.5 cents.

New rates from the IRS, along with some comments on the impact of TCJA legislation are found in Notice 2019-02: (more…)

Some additional news reports on the California AG’s enforcement actions

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There are a few recent articles discussing enforcement action by the California Attorney General regarding the accounting for donated medicine used by three national charities. Looks like the issue is beginning to get a bit wider attention than this teeny tiny little ol’ blog.

Inflated Expectations / What’s going on with foreign affairs nonprofit Food for the Poor? from Slate on May 10, 2018, provides a non-technical description of the issues raised by the California AG.

Good explanation of medicine valuation, near-term expiry, joint cost allocation, principal market, access, and materiality issues without ever using those words. Even hints at daisy chain and SFAS 136 agency transactions.

Let me suggest a couple of exercises for accountants in the audience.

First, read through the article another time identifying all the accounting issues touched upon. Think about that as an illustration of how to describe technical accounting issues without being technical. (Yeah, I know, what a crazy idea – explaining stuff so people will understand.)

Second exercise is to read through the article thinking about how non-accountants would respond to each of those ideas if it was the first time they had heard about it.

How many of those GAAP accounting treatments would actually make sense?

How many would seem flat-out silly to people who haven’t spent years working with accounting rules?

Description of one shipment

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Regulators have serious problems with how the nonprofit community is accounting for donated medicine.

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There is a serious problem in the nonprofit community in terms of accounting for donated medicine. Three major enforcement actions by various regulators tell us that the regulators have serious reservations about how charities are dealing with gifts-in-kind.

Those of us working in the charity world need to ponder what could be making so many regulators so concerned.

50 Attorneys General

The rumors in the wind mentioned in my next post were discussed in 2012.  That turned into a major enforcement action by the Federal Trade Commission and all 50 state Attorneys General against 4 cancer charities. (See my posts under the tag FTC.) That was in 2015.

I’m not aware of any followup by that group and I’ll guess the reason is the complexity of coordinating a 50+ member committee.

For the FTC and all 50 Attorneys General to all be on the same page on an issue should serve as a warning they believe there is a serious problem.

IRS

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California A.G. files cease & desist order against 3 large charities alleging donated medicine was overvalued

The Evolution of Law; Bas Relief, Los Angeles Superior Court” by JoeInSouthernCA is licensed under CC BY-ND 2.0

As mentioned previously, the conflict over donated pharmaceuticals has heated up again. It seemed to have faded away over the last couple of years but has now gained renewed visibility.

The California Attorney General has filed cease and desist orders against three large, high-profile charities who received between 70% and 98% of their revenue from medical GIK.

A complaint was filed against another charity for overvaluation of GIK. That charity essentially conceded the accusations in a stipulated settlement, agreeing to terminate the charity’s existence. That action is discussed here.

The three large charities are Food for the Poor, Inc., MAP International, and Catholic Medical Mission Board, Inc.

The cease and desist orders can be found at the AG’s web site:

This is a long post, approaching 2,200 words. Might be worthwhile to get a fresh cup of coffee before diving in.

 

Background

This post will walk through a number of key comments in the cease and desist orders, which I’ll referred to as C&DO. Because the C&DO are roughly parallel to each other, I’ll walk through the MAP order and add comments on the CMMB and FftP order where it is helpful. The CMMB C&DO does not have the comments regarding state charitable filing requirements.

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Reduced staffing and funding for the Exempt Organization division of the IRS

Internal Revenue Service” by saturnism is licensed under CC BY-SA 2.0

Staffing and funding for the IRS division that oversees tax exempt organizations has fallen dramatically in the last six years or so.

According to a behind-the-paywall article at the Washington Post, the budget for the Exempt Organization division has dropped from $102M to $82M between 2011 and FY 2017. That is a $20M decline, or 19.6%.

For the same years, staffing has declined from 889 to 642, according to the article. That is a decline of 247 positions, or 27.8%.

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Helpful comments from 2017 CalCPA Not-for-profit conference, part 1

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Here are a few of the comments from the May 24, 2017 Not-for-profit conference presented by California Society of CPAs that I thought would be of interest to others in the nonprofit community. Since all comments are the opinion of the speaker, neither their names nor organizations will be mentioned. The ideas mentioned can stand or fall on their own.

This is the first of two posts. The next discussion will address changes in financial statement presentation outlined in ASU 2016-14. In this post: tax, revenue recognition, and single audit.

Tax update:

  • It might just be possible that filing a form 1023 or 1023-EZ is so easy that people can get exempt status for an organization without knowing the requirements to properly operate a charity and maintain exempt status. In examinations to follow-up after exempt status is approved, the IRS is finding a lot of charities are out of compliance.
  • One of several focuses of the IRS is filing of FBARs, those forms used to report overseas bank accounts. One ripple effect of chasing money laundering is the impact on charities who have overseas accounts. Even though there is minimal risk of those accounts being used for tax evasion the FBAR filing requirement still apply. As a reminder, the deadline for filing FBARs is now April 15 with a six-month extension available.

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