We’ve been keeping close track of the Massachusetts Privacy Law, with some recent comments specifically about the compliance work nonprofits will need to perform.  Halfway to the deadline, now, and we encourage organizations of all types to do a quick check of where they stand, as the penalties for noncompliance will be steep.

To get more information, you can also check out this archived MFA webinar.

Nonprofits should be ready to adjust this year to new guidelines around FIN 48, a regulation that calls for improved disclosure of uncertain tax positions.  Discussion has been going on for years about how to best implement the changes; the original FIN 48 was proposed for 2006, and after several years of deferments it is now upon us for fiscal years beginning after December 15, 2008.

FIN 48 got plenty of attention in the for-profit world, but nonprofits are impacted as well.  As Accounting Today wrote earlier this year, “Many large public companies have adopted it, but smaller organizations, including pass-through entities such as S corporations and partnerships, as well as nonprofits, were concerned about how to apply the stringent requirements.”

FIN 48 is a complex piece of work, which explains the years of delay in its implementation.  The standard requires new disclosures in all GAAP financial statements, and even more burdensome, it calls for nonprofits to determine unrecognized tax benefits resulting from an overall evaluation of their tax positions.  These positions may include items such as:

- Tax return filing requirements in other jurisdictions, including states, cities and foreign countries

- Tax positions taken in determining how much revenue qualifies as Unrelated Business Taxable Income (UBTI) and is therefore taxable

- Tax positions taken to allocate expenses to offset revenue that is identified as UBTI

As outlined in this MFA tax alert from 2008, nonprofits should take a few steps this year to comply with FIN 48 (Note: the linked tax alert states that FIN 48 is effective for tax year 2008, but as noted above that has since been deferred to tax year 2009).  They should perform an overall evaluation of tax positions taken or not taken, speak with their audit team to ensure expectations are understood, and consult their tax advisors to ensure all uncertain tax positions have been identified and steps drafted.

The IRS gave it’s official blessing to the new form 990 that is required filing for nonprofits. The move reflects the government’s effort to clamp down on misinformation and fraud coming out of the sector, and while we applaud the call for transparency we also recognize that this new version of 990 places onerous demands on the time of accounting professionals at these entities.

As outlined in an article in Accounting Today, the form is 11 pages and includes some new requests. A new section asks questions about the organization’s governance structure, policies and practices. Other important changes include new definitions of officers and key employees. Organizations must also now report on the compensation paid to their top five highest compensated employees and top five independent contractors.

For nonprofits, these changes mean that if an organization does not currently have all of its governance policies in place and in writing, they’ll have some work to do. Most if not all of these policies will need to be reviewed and approved by the governing board; for smaller organizations that are less formal this could be a time consuming project that will need special attention.