If you’re like me, you love watching team sports be it baseball in the summer, basketball through the winter, or curling and volleyball during the Olympics! For a shot at winning, each of the team members must expertly perform their position. While not as exhilarating to watch, nonprofit boards are similar to team sports; the board of directors (the team) can only be successful if each of the individual members (just like individual athletes) play their positions well. That means individual board members must hold one another accountable for the overall outcomes of the nonprofit organization. In this way, there is shared responsibility of the individual board members for their actions, for the good of the board as a collective entity.
While each nonprofit can vary in structural organization, let’s review what a typical board of directors is collectively responsible for. (Note: directors can be known by other names, such as trustees, regents, directors, or a council.)
Governing with Compliance Top of Mind
The board has a responsibility of compliance.
First off, it’s important to remember that the nonprofit board is the ultimate governing authority of the tax-exempt organization. The board is therefore responsible (and can be held legally liable) for what happens within and to the nonprofit. Compliance is the word to keep in mind. A board makes certain the organization is compliant with local, state, and federal laws, as well as its own policies and procedures. Nonprofit policies are invaluable documents that provide structure and guidance in operations and decision-making. They supersede the individual team members’ opinions for the good of the nonprofit as a whole. Without updated and relevant adopted policies, nonprofit boards have a significantly difficult time achieving a solid standard of compliance.
Speaking of important policies, nonprofit boards have a responsibility to approve some compensation decisions. Boards are involved with compensation decisions to various extents, from approval of just the top executive’s salary, to all staffers’ compensations—it just depends on organizational structure. However, at the very least, board members should be involved with compensation points asked about on Form 990. (Again, a great reason to snag the 10 for 990 deal!)
Keep a Quorum
The board has the responsibility to maintain a quorum for meetings. Your nonprofit’s bylaws (a foundational document a part of formation) should define a quorum—the minimum number of voting members present—needed to hold a meeting. How do you decide on a quorum? It’s the minimum number of board member who should be reasonably able to attend a meeting. Maintaining a quorum means a majority of voting members are making decisions on behalf of the organization. If a quorum is left to be too flexible, the organization runs the risk of a few members (not the majority) making executive decisions.
Three Ds
The board’s responsibilities can be summed up in the easy to remember “three Ds”: duty of care, duty of loyalty, and duty of obedience. This isn’t just a useful pneumonic device, these are the legal standards (as defined by case law) to which a board’s actions are collectively held.
Duty of care: This means that board members are expected to actively participate in making decisions, resolving issues, and participate in planning.
Duty of loyalty: Board members must put the interests of the nonprofit ahead of their own personal and professional interests. This means that even merely potential conflicts of interest must be studiously avoided. (Your nonprofit MUST have a conflict of interest policy dispersed, reviewed, and signed by each board member.)
Duty of obedience: Compliance with all local, state, and federal regulations and laws applicable to the nonprofit, is an essential responsibility for board members.
Ultimately the board has the responsibility to keep the organization committed and focused on its stated mission. This is encompassed within the three Ds. In working to uphold the tax-exempt purpose of the nonprofit it’s important all board members recognize their individual responsibilities, and those of the board as a whole, overlap. If the board fails to uphold its duties, in some situations, an individual on the board could be found legally liable (and typically served with fines and/or other restrictions).
Questions about collective responsibilities and how they apply to a nonprofit board you’re involved with? Want to schedule a board training or orientation to brief board members on their legal and financial duties? Need to get those important policies asked about on Form 990 in place? Don’t hesitate to reach out viaemail or by phone (515-371-6077).
You’ve probably heard you need to have a financial power of attorney in place, but the whole thing seems a little ambiguous…what does this important document (which is an important part of a complete estate plan) actually mean? Let’s cover the basics.
What is a financial power of attorney?
A financial power of attorney (“POA”) is a legal document that designates someone to handle your financial decisions on your behalf, if you are unable to do so while living, due to incapacitation. (Note that upon death, your financial power of attorney terminates and your will and/or trust kick in to guide decision making in your absence.)
There are two main types of financial power of attorney I offer my clients.
Immediate power—effective from the moment you sign it, without any medical certification; while immediate, you do not lose control of your affairs. (This is typically what I recommend.)
Springing power—becomes effective only upon medical certification that you are unable to carry on your legal and financial affairs.
What happens if I don’t have a financial POA?
If you don’t have a financial POA, and you were to become incapacitated, any financial decisions would need to be made by a court-appointed conservator. Under a court’s direction, the conservator would handle your financial matters. It’s a quite expensive and time consuming process, especially compared with the relative simplicity of executing a financial POA. Also, needless to say, most people would elect to trust their important financial decisions to a person they love and trust, over someone the court appoints.
After I die, can my agent continue to operate under my financial POA?
A common misperception is that your agent will be able to use this power after your death. Instead, at your death, any of the agent’s powers will be automatically revoked. The representative appointed through the probate process will carry out your estate plan.
Who should I choose to serve as my “attorney-in-fact?”
The agent (or attorney-in-fact) you choose will be managing your finances, so it is critically important to choose someone trustworthy; someone who will not abuse or exploit this power; someone who will listen to your wishes, goals, and objectives, as included in the document or otherwise communicated; and someone who will look out for your best interests.
You also have the option of designating a successor agent who can take over if the original agent is unable or unwilling to serve. This is highly recommended.
Who should receive a copy of my financial POA?
The person named as agent and any person named as a successor agent should receive a copy. It may also be wise to share a copy with your financial institution(s), such as your bank/credit union, as well as with your financial advisor and/or accountant.
Can I revoke my financial POA?
Yes, you may revoke the financial POA at any time. You can also amend the financial POA (change it, revise it, etc.) at any time.
Are there other estate planning documents I need?
Yes, definitely! There are six “must have” estate planning documents. The financial power of attorney is one of these documents that create a comprehensive estate plan.
Who needs a financial power of attorney?
I’m a staunch believer that every adult Iowan needs an estate plan—including young professionals, newlyweds, the non-wealthy, and especially people with minor children—and, therefore a financial power of attorney. A financial power of attorney can even be incredibly important (but often overlooked) for college students.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2017/02/neonbrand-395170-e1517309518253.jpg23964728Gordon Fischerhttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngGordon Fischer2018-01-30 04:25:092020-05-18 11:28:567 Things Every Iowan Should Know About Financial Power of Attorney
But, in conquering your charitable giving goals, it’s just as important to know which nonprofit organizations are NOT qualified beneficiaries for tax-reducing gifts. Additionally, not all gifts to qualified charities are eligible. Contributions to certain entities may appear to be tax-deductible, but in actuality are not. This is not to say that these contributions are not valuable and helpful to the respective donees, it’s just that the U.S. government isn’t going to give you a tax break.
Knowing what you can and can’t claim helps you maximize the potential tax savings that the charitable tax deduction offers.
Contributions made to the following are NOT considered viable for the charitable deduction:
Promises and Pledges
Let’s say you made a charitable pledge to a local 501(c)(3) for $150, but only paid $50 in donation during the tax year of the respective tax return. You can only deduct the $50 actually donated. Once you make the transfer of the rest of the pledge ($100) then you could deduct that from the appropriate tax year.
Political parties, campaigns, and action committees
It’s important to get involved in the process fo democracy, but joining politic through monetary support does not translate into a charitable donation. Funds given to political candidates, parties, and PACs cannot be claimed. This also includes money spent to host or attend fundraising events or advertising.
Fundraising tickets
I’m sure you cannot count all the times you’ve been asked to purchase raffle tickets, bingo cards, lottery-based drawings and the like. It’s a common fundraising tactic, but such costs are not deductible.
Personal benefit gifts
The IRS considers a charitable contribution to be one-sided. This means if you receive something in reciprocity for a donation—anything from a tote bag, to a plant, to a three-course dinner—only the amount in excess of the fair market value of the item/service received is deductible. Let’s say your little neighbor is selling popcorn to raise money for their scouting troop. You buy some popcorn from the kid for $10 and the retail value of such a popcorn tin is $6. This donation would translate into a $6 charitable deduction. Likewise, you purchase a $75 ticket to an annual event hosted by a qualified charity. The event includes a meal that would have cost you $30 at a restaurant; overall your charitable deduction would be $45. (Read more about quid pro quo donations here.)
You’ve probably given more than you can write off from small cash donations to your church’s collection plate, the Salvation Army holiday bell ringer, and charity bake sales. Why cannot you just guesstimate, add this all up, and deduct the amount off of your taxes? Receipts. The IRS requires proof of all cash donations big and small; a canceled check, statement or receipt from the recipient organization can suffice for cash donations up to a $250 (in total), and then more substantiation is demanded.
Person-to-Person
I’ve seen many successful crowdfunding campaigns for individuals raising money for a multitude of things. Let’s say your cousin is raising money for an expensive medical procedure through an online site and you donate to help them reach their goal. Or, maybe your nephew is raising money to take a mission trip this summer. Unfortunately and contributions earmarked for a certain individual (despite the economic/medical/educational need) are not deductible, according to IRS Publication 526. However, if you were to make a contribution to a qualified organization that in turn helped your cousin or nephew out with a grant or scholarship, for example, the contribution would be deductible. Make note though, even if you were to give a contribution to a charity in order to help a specific individual, you cannot designate the money to one specific individual for the gift to. Basically, the contribution cannot be given directly or indirectly to a specific individual and still be tax deductible.
The list could go on for contributions that are not deductible, but some other notable inclusions to be aware of include:
For-profit schools (nonprofit schools are good to go so long as donations are not made to benefit a specific individual)
For-profit hospitals (nonprofit hospitals are A-OK)
Value of blood donations (you just need to do that one out of the goodness of your heart…literally)
Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or similar groups
College tuition (Even if the school is a nonprofit, tuition to attend the school is NOT tax deductible as a charitable contribution)
Professional groups/associations (such as civil leagues)
This may make it seem like there are many exceptions to the charitable deduction rule, however there are still an innumerable number of qualified nonprofit organizations that are a good way of reducing taxes (remember, you have to itemize) while also helping others. If you have questions about the charitable contribution tax deduction it’s a good idea to consult with your professional advisors. It’s also a good idea to heed these tips prior to making a charitable donation and double-check the organization’s status on the IRS’ Exempt Organizations Select Check tool, which allows users to search a list of organizations eligible to receive tax-deductible charitable contributions.
I would be happy to have a conversation regarding the tax code, the best time and way to maximize a charitable donation, and help ensure you’re in compliance in compliance with all state and federal laws. Contact me at via email or by cell phone (515-371-6077).
Collective Responsibilities of Nonprofit Boards
NonprofitsIf you’re like me, you love watching team sports be it baseball in the summer, basketball through the winter, or curling and volleyball during the Olympics! For a shot at winning, each of the team members must expertly perform their position. While not as exhilarating to watch, nonprofit boards are similar to team sports; the board of directors (the team) can only be successful if each of the individual members (just like individual athletes) play their positions well. That means individual board members must hold one another accountable for the overall outcomes of the nonprofit organization. In this way, there is shared responsibility of the individual board members for their actions, for the good of the board as a collective entity.
While each nonprofit can vary in structural organization, let’s review what a typical board of directors is collectively responsible for. (Note: directors can be known by other names, such as trustees, regents, directors, or a council.)
Governing with Compliance Top of Mind
The board has a responsibility of compliance.
First off, it’s important to remember that the nonprofit board is the ultimate governing authority of the tax-exempt organization. The board is therefore responsible (and can be held legally liable) for what happens within and to the nonprofit. Compliance is the word to keep in mind. A board makes certain the organization is compliant with local, state, and federal laws, as well as its own policies and procedures. Nonprofit policies are invaluable documents that provide structure and guidance in operations and decision-making. They supersede the individual team members’ opinions for the good of the nonprofit as a whole. Without updated and relevant adopted policies, nonprofit boards have a significantly difficult time achieving a solid standard of compliance.
Download my free guide for nonprofit leaders on policies and procedures your organization needs. Then, check out my special deal on nonprofit policies related to Form 990 (annual information return) such as gift acceptance, investment, conflict of interest, and whistleblower policies.
Money on the Mind
Speaking of important policies, nonprofit boards have a responsibility to approve some compensation decisions. Boards are involved with compensation decisions to various extents, from approval of just the top executive’s salary, to all staffers’ compensations—it just depends on organizational structure. However, at the very least, board members should be involved with compensation points asked about on Form 990. (Again, a great reason to snag the 10 for 990 deal!)
Keep a Quorum
The board has the responsibility to maintain a quorum for meetings. Your nonprofit’s bylaws (a foundational document a part of formation) should define a quorum—the minimum number of voting members present—needed to hold a meeting. How do you decide on a quorum? It’s the minimum number of board member who should be reasonably able to attend a meeting. Maintaining a quorum means a majority of voting members are making decisions on behalf of the organization. If a quorum is left to be too flexible, the organization runs the risk of a few members (not the majority) making executive decisions.
Three Ds
The board’s responsibilities can be summed up in the easy to remember “three Ds”: duty of care, duty of loyalty, and duty of obedience. This isn’t just a useful pneumonic device, these are the legal standards (as defined by case law) to which a board’s actions are collectively held.
Mission Ready
Ultimately the board has the responsibility to keep the organization committed and focused on its stated mission. This is encompassed within the three Ds. In working to uphold the tax-exempt purpose of the nonprofit it’s important all board members recognize their individual responsibilities, and those of the board as a whole, overlap. If the board fails to uphold its duties, in some situations, an individual on the board could be found legally liable (and typically served with fines and/or other restrictions).
Questions about collective responsibilities and how they apply to a nonprofit board you’re involved with? Want to schedule a board training or orientation to brief board members on their legal and financial duties? Need to get those important policies asked about on Form 990 in place? Don’t hesitate to reach out via email or by phone (515-371-6077).
7 Things Every Iowan Should Know About Financial Power of Attorney
Estates & Estate Planning, Powers of Attorney, Wills, Trusts & EstatesYou’ve probably heard you need to have a financial power of attorney in place, but the whole thing seems a little ambiguous…what does this important document (which is an important part of a complete estate plan) actually mean? Let’s cover the basics.
What is a financial power of attorney?
A financial power of attorney (“POA”) is a legal document that designates someone to handle your financial decisions on your behalf, if you are unable to do so while living, due to incapacitation. (Note that upon death, your financial power of attorney terminates and your will and/or trust kick in to guide decision making in your absence.)
There are two main types of financial power of attorney I offer my clients.
What happens if I don’t have a financial POA?
If you don’t have a financial POA, and you were to become incapacitated, any financial decisions would need to be made by a court-appointed conservator. Under a court’s direction, the conservator would handle your financial matters. It’s a quite expensive and time consuming process, especially compared with the relative simplicity of executing a financial POA. Also, needless to say, most people would elect to trust their important financial decisions to a person they love and trust, over someone the court appoints.
After I die, can my agent continue to operate under my financial POA?
A common misperception is that your agent will be able to use this power after your death. Instead, at your death, any of the agent’s powers will be automatically revoked. The representative appointed through the probate process will carry out your estate plan.
Who should I choose to serve as my “attorney-in-fact?”
The agent (or attorney-in-fact) you choose will be managing your finances, so it is critically important to choose someone trustworthy; someone who will not abuse or exploit this power; someone who will listen to your wishes, goals, and objectives, as included in the document or otherwise communicated; and someone who will look out for your best interests.
You also have the option of designating a successor agent who can take over if the original agent is unable or unwilling to serve. This is highly recommended.
Who should receive a copy of my financial POA?
The person named as agent and any person named as a successor agent should receive a copy. It may also be wise to share a copy with your financial institution(s), such as your bank/credit union, as well as with your financial advisor and/or accountant.
Can I revoke my financial POA?
Yes, you may revoke the financial POA at any time. You can also amend the financial POA (change it, revise it, etc.) at any time.
Are there other estate planning documents I need?
Yes, definitely! There are six “must have” estate planning documents. The financial power of attorney is one of these documents that create a comprehensive estate plan.
Who needs a financial power of attorney?
I’m a staunch believer that every adult Iowan needs an estate plan—including young professionals, newlyweds, the non-wealthy, and especially people with minor children—and, therefore a financial power of attorney. A financial power of attorney can even be incredibly important (but often overlooked) for college students.
Do you have a financial POA? How about a full estate plan in place? Why or why not? I’d love to hear from you. Email me at gordon@gordonfischerlawfirm.com or call (515-371-6077).
Not Every Charitable Donation is Tax Deductible
Charitable Giving, Taxes & FinanceIt’s the end of January and that means Tax Day is creeping closer. You tend to hear a lot about what sort activities are tax deductible. You may deduct charitable contributions of money or property made to qualified organizations if you itemize your deductions. And, you’ll certainly want to be aware for substantiation purposes what contributions are indeed deductible.
But, in conquering your charitable giving goals, it’s just as important to know which nonprofit organizations are NOT qualified beneficiaries for tax-reducing gifts. Additionally, not all gifts to qualified charities are eligible. Contributions to certain entities may appear to be tax-deductible, but in actuality are not. This is not to say that these contributions are not valuable and helpful to the respective donees, it’s just that the U.S. government isn’t going to give you a tax break.
Knowing what you can and can’t claim helps you maximize the potential tax savings that the charitable tax deduction offers.
Contributions made to the following are NOT considered viable for the charitable deduction:
Promises and Pledges
Let’s say you made a charitable pledge to a local 501(c)(3) for $150, but only paid $50 in donation during the tax year of the respective tax return. You can only deduct the $50 actually donated. Once you make the transfer of the rest of the pledge ($100) then you could deduct that from the appropriate tax year.
Political parties, campaigns, and action committees
It’s important to get involved in the process fo democracy, but joining politic through monetary support does not translate into a charitable donation. Funds given to political candidates, parties, and PACs cannot be claimed. This also includes money spent to host or attend fundraising events or advertising.
Fundraising tickets
I’m sure you cannot count all the times you’ve been asked to purchase raffle tickets, bingo cards, lottery-based drawings and the like. It’s a common fundraising tactic, but such costs are not deductible.
Personal benefit gifts
The IRS considers a charitable contribution to be one-sided. This means if you receive something in reciprocity for a donation—anything from a tote bag, to a plant, to a three-course dinner—only the amount in excess of the fair market value of the item/service received is deductible. Let’s say your little neighbor is selling popcorn to raise money for their scouting troop. You buy some popcorn from the kid for $10 and the retail value of such a popcorn tin is $6. This donation would translate into a $6 charitable deduction. Likewise, you purchase a $75 ticket to an annual event hosted by a qualified charity. The event includes a meal that would have cost you $30 at a restaurant; overall your charitable deduction would be $45. (Read more about quid pro quo donations here.)
Receipt-less donations
You’ve probably given more than you can write off from small cash donations to your church’s collection plate, the Salvation Army holiday bell ringer, and charity bake sales. Why cannot you just guesstimate, add this all up, and deduct the amount off of your taxes? Receipts. The IRS requires proof of all cash donations big and small; a canceled check, statement or receipt from the recipient organization can suffice for cash donations up to a $250 (in total), and then more substantiation is demanded.
Person-to-Person
I’ve seen many successful crowdfunding campaigns for individuals raising money for a multitude of things. Let’s say your cousin is raising money for an expensive medical procedure through an online site and you donate to help them reach their goal. Or, maybe your nephew is raising money to take a mission trip this summer. Unfortunately and contributions earmarked for a certain individual (despite the economic/medical/educational need) are not deductible, according to IRS Publication 526. However, if you were to make a contribution to a qualified organization that in turn helped your cousin or nephew out with a grant or scholarship, for example, the contribution would be deductible. Make note though, even if you were to give a contribution to a charity in order to help a specific individual, you cannot designate the money to one specific individual for the gift to. Basically, the contribution cannot be given directly or indirectly to a specific individual and still be tax deductible.
The list could go on for contributions that are not deductible, but some other notable inclusions to be aware of include:
This may make it seem like there are many exceptions to the charitable deduction rule, however there are still an innumerable number of qualified nonprofit organizations that are a good way of reducing taxes (remember, you have to itemize) while also helping others. If you have questions about the charitable contribution tax deduction it’s a good idea to consult with your professional advisors. It’s also a good idea to heed these tips prior to making a charitable donation and double-check the organization’s status on the IRS’ Exempt Organizations Select Check tool, which allows users to search a list of organizations eligible to receive tax-deductible charitable contributions.
I would be happy to have a conversation regarding the tax code, the best time and way to maximize a charitable donation, and help ensure you’re in compliance in compliance with all state and federal laws. Contact me at via email or by cell phone (515-371-6077).