Some Non-Profit Accounting Guidelines

I recently spoke to the director of a non-profit agency which was involved in some lobbying activities.  It caused me to wonder how many non-profits know what the guidelines are on that issue.  It is important to know the rules for non-profit accounting.  Albuquerque has many non-profits that I believe could benefit from the following synopsis.

The tax code makes a differentiation between political and legislative activities.  Political activities involve such actions as endorsing candidates.  501(c)(3) organizations are strictly prohibited from participating in political activities if they wish to maintain their tax-exempt status.  Legislative activities, however, are permitted with certain limitations.  These include activities such as lobbying and asking the public to support or oppose certain legislative measures.  An organization can participate in educational activities without falling subject to the legislative limits, as long as no particular legislation is being discussed.  Other types of 501 organizations, which are not 501(c )(3) organizations, do not have limits on legislative activities as long as the activities are congruent to the purposes of the organization.

If the legislative activity limits are exceeded, an organization may be liable for an excise tax of 5% of the lobbying expenditures, and, if the limits are exceeded by 150% or more, may have their tax-exempt status revoked.  Most 501 (c )(3)s, barring churches and private foundations, have the option of using an expense-based limitation.  The limitation varies depending on the total amount of expenditures.  The limits are 20% up to the first $500,000 of expenditures, then 15% up to the next $500,000, after that, 10% up to the next $500,000, and 5% on any amount above that.

This is, of course, a brief synopsis of the issue.  For more help on making sure your organization is in compliance with IRS rules in any area of accounting, Albuquerque firm Hinkle + Landers is a great resource.

Hinkle + Landers, PC, one of the leading Albuquerque CPAs and accounting firms, stays up to date on news that has an impact the accounting industry and our community.  The previous is a blog by Sara Heppler a Staff Accountant of Hinkle + Landers, PC related to the political and legislative activities of non-profits.

Firm Profile:  Hinkle + Landers, CPAs is one of Albuquerque New Mexico’s leading accounting firms.  Hinkle + Landers, CPAs has been operating for over 40 years in Albuquerque as well as all parts of New Mexico.  Hinkle + Landers, CPAs also provides audit, fraud and forensic accounting services as well as tax preparation