Today at the AICPA Not-for-Profit conference in D.C., I had the opportunity to attend the session on “The Top 10 Tax Issues Your CFO and Board Need to Know.” This was co-presented by Doug Boedecker (Tate & Tyron) and Craig Neyman (The David and Lucile Packard Foundation). The key takeaway I want to share relates to the importance of the Schedule A public support test. Mr. Boedecker joked that when a CPA firm is presenting the Form 990 to an audit committee or the board, this schedule is commonly not touched on for fear of losing the audience in the complexity of it. This resonated with me because the schedule does have a complex set of calculations and limitations and is often not understood. However, I am in agreement that it is important for committee members and board members to understand the importance of the schedule and how to monitor whether or not there should be concern for maintaining the public charity status.
The purpose of the public support test is to show the IRS that you receive funds from the broad public and should not be categorized as a private foundation. The IRS doesn’t necessarily care what type of public charity you are, as long as you can pass the public support test. For example, if you are in a situation where you are unable to pass the public support test as a 509(a)(2), but could pass by completing the test as a 509(a)(1) public charity, the IRS says that is OK.
Next time your committee members and board members are reviewing the Form 990, take a minute to look at Schedule A and consider any risks related to maintaining your public charity status via computation of the public support test.
The other top tax issues mentioned in this session related to governance, intermediate sanctions, lobbying and political activities, UBI traps, foreign filing requirements, employees vs. independent contractors, and state considerations.