Pennsylvania Raises audit and review thresholds and makes otehr changes to the Charitable Purposes Act

 Important changes to the PA Solicitation of Funds for Charitable Purposes Act.

Governor Wolf signed two bills into law on December 22,2017. Both Acts amend the Solicitation of Funds for Charitable Purposes Act (Charities Act) to affect several important Bureau processes. Both Acts become effective in 60 daysfrom the date they are signed by the Governor, which is February 20, 2018.

Act 71(HB 1420) amends the Charities Act to raise the thresholds for an audit, review or compilation of the financial reports required to be submitted by charitable organizations that are registered under the Charities Act.

An audit of the financial records of a registered charitable organization by an independent certified public accountant or public accountant is not required until the gross annual contributions meet or exceed $750,000 (audit threshold was previously $300,000). Charitable organizations which receive annual contributions of at least $250,000, but less than $750,000, will be required to have a review or audit of their financial statements performed by an independent certified public accountant or public accountant. Lastly, charitable organizations which receive annual contributions of at least $100,000, but less than $250,000, are required to have a compilation, review or audit of their financial statements performed by an independent certified public accountant or public accountant. A compilation, audit or review is optional for any charitable organization which receives annual contributions of less than $100,000

Act 71 thresholds for audit, review or compilation of financial reports will be applied to all charitable registration renewals due February 15, 2018 (3/31/2017 FYE) and all subsequent renewals and to all new charitable organization registrations for all other fiscal year ends filed on or after February 20, 2018.

Act 72(HB 1421) clarifies that annual registration statements for charitable organizations must be refiled annually based on the postmark date instead of the date received at the Bureau. This change will put the Bureau in line with the Internal Revenue Service (IRS), which goes by postmark date for timeliness in filing taxes. For example, if a registration statement is due to be refiled on May 15, 2018, it must be postmarked by May 15, 2018. Act 72 due dates will be applied to all charitable organization registration renewals due February 15, 2018 (3/31/2017 FYE) and all subsequent renewals and to all new charitable organization registrations for all other fiscal year ends filed on or after February 20, 2018. This change should help charitable organizations to comply with registration deadlines and eliminate late filing fees. Act 72 also increases the deemed approved time for charitable organization, solicitor and fundraising counsel registration filings from 10 to 15 days, giving the Bureau more time to review and process registration filings.

Finally, as part of improving its processes and procedures, the Bureau of Corporations and Charitable Organizations revised the Charitable Organization Registration Statement (BCO-10) in August 2017 to be shorter and more user-friendly. If you have older versions of Bureau forms saved, please use the newer forms available on our website, that can be found on the Registration Forms page.

Clergy Housing Allowance ok for now...

Although the recently passed tax legislation (“Tax Cuts and Jobs Act”) did not make changes to the clergy housing allowance (i.e. the parsonage allowance), there has been some action in the courts.

In October 2017, a federal judge in the Western District of Wisconsin (Gaylor v. Mnuchin) held the parsonage allowance and exclusion from income to be unconstitutional.

But... December 2017, she stayed her decision until 180 days after the appeal process is complete.  The appeal process could take years, so the current law stands for now. 

For more information see the below article:

Chicago Tribune: Chicago-area clergy defend housing allowance as it faces legal challenge

Forbes: Tax Free Housing Benefits For Clergy Will Be Safe For The Present

Push to have IRS eliminate the Form 990 Schedule B....

Not any real momentum here yet, but a group has addressed a letter to congress seeking to eliminate Form 990 Schedule B.  The letter states...

"As acknowledged by the IRS itself, Schedule B information is inapplicable to the legally permissible handling of 501(c) organization tax filings. Eliminating Schedule B will not only make tax compliance easier, but also help limit the ability of the IRS and others, including state officials with access to the information, to chill free speech and civic participation among the public"

See the letter here.

Form 1023: IRS to post approved tax-exempt status application forms online

The IRS has announced plans to post online approved copies of Form 1023, Application for Recognition of Exemption Under Section 501(c)(3), and Form 1024, Application for Recognition of Exemption Under Section 501(a), according to a report from Tax Analysts (2017 TNT 239-5).

Section 6104 already required organizations to make Forms 1023 (or 1024 if applicable) available for public inspection.   Form 1023 has already been made publicly available for charitable organizations registered in NY via  CharitiesNYS.com