Winter 2005
Sarbanes-Oxley Act Applies to Non Profits
During 2002, in the wake of the Enron bankruptcy and other corporate scandals, Congress adopted the Sarbanes-Oxley (S-Ox) Act, a far-reaching law intended to help rebuild public confidence in corporate America. Among other matters, S-Ox imposes tough governance standards on publicly traded companies and holds board members accountable for overseeing most corporate financial transactions and auditing procedures.
Among the new requirements, chief executive officers must annually "certify" the accuracy of company financial statements. Prior to S-Ox, too many CEOs attempted to distance themselves from the particulars of their own corporate balance sheets or profit and loss statements. For example, when testifying before Congress about Enron's history of phony numbers and subsequent collapse, former chief executive Jeffrey Skilling had the audacity to repeatedly proclaim, "I am not an accountant." According to press reports, Mr. Skilling's performance so infuriated Congress that it included the certification provision in the new law so that CEOs can not effectively point their fingers elsewhere if, so to speak, the books are cooked.
Although most of S-Ox concerns publicly traded companies, two specific provisions apply to nonproifts. Number one, no corporate entity can legally retaliate against a whistle blower. Number two, all corporate entities must preserve relevant business records.
With respect to whistle blowers, nonprofits should establish policies for handling internal complaints. The policies should safeguard employee confidentiality and prohibit, in clear terms, any form of retaliation.
As for document retention, it is a crime to alter or destroy any document that could be used in an "official proceeding," such as a federal investigation or bankruptcy proceeding. Nonprofits should adopt tough retention policies so that relevant records are not automatically destroyed. The policies should include the handling of e-mail and voicemail.
S-Ox is changing corporate governance and its "best practices" are beginning to affect many nonprofit corporations. Please contact us if you have questions. We'll keep you posted as important events unfold.
New Rules for Vehicle Donations
In recent years, taxpayers have been donating vehicles to charities and taking charitable donation deductions. New I.R.S. rules for 2005, however, have changed the requirements for taxpayers who want to take these deductions.
If a donor’s vehicle is worth more than $500, then you need to consider how you, the nonprofit, intend to use the vehicle. If you intend to resell the vehicle, the donor may only deduct the amount that you actually receive for the vehicle. If, however, you plan to use the vehicle for “significant” tax-approved charitable work, the donor can claim its fair market value.
Fair market value, as you know, is the price a willing buyer with a reasonable knowledge of the relevant facts would pay; thus, fair market value must take into account the mileage and condition of the vehicle. There are many sources on-line for determining the fair market value of a used vehicle.
If the total deduction the donor will be claiming is more than $250, be sure to issue a written receipt. If the deduction would be more than $5000, the donor must have a written appraisal of the vehicle from a qualified appraiser. The cost of the appraisal, if paid for by the donor, is also deductible.
Update on Employment Law
The Veterans Benefits Improvement Act of 2004 has amended the Uniformed Services Employment and Reemployment Act of 1994 by expanding the period of continuation of coverage under a health plan for members of the uniformed services.
Any person who is absent from a position of employment by reason of service in the uniformed services may elect to continue their health coverage at a cost of no more than 102% of the full premium under the plan. However, if the person performs services for the uniformed services for less than 31 days, then the person is only required to pay the normal employee contribution.
The maximum period of coverage of a person and the person’s dependents has been expanded from the lesser of 18 months or when the employee fails to return to employment as determined under Section 4312 to the lesser of 24 months or when the employee fails to return to employment as determined under Section 4312.
The Act also now requires employers to provide notice of rights and duties under USERRA by posting a notice where the employer customarily places notices for employees. The DOL has not yet published the poster.
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