Not-For-Profit Newsletter—Useful Information for Your Organizational Success Fall 2010
Can Your Executive Compensation Inside this Issue...
Plan Withstand IRS Scrutiny? Boost Your Nonprofit’s Income With
By Gilbert J. Weiner, Cherry, Bekaert & Holland, L.L.P. (CB&H) Ideas That Work .................................. 3
Health Care Reform Timeline .............. 4
Stories of compensation abuse at national and key employees Pending Lease Accounting Changes
organizations continue to command headline from both the report- Could Impact Your Balance Sheet ....... 5
news, contributing to increased public scrutiny ing organization and
of the not-for-profit sector. Even the mere any related organiza-
Gil is the Managing Unclaimed Property: The
perception of executive over-compensation is tions. The definition Director of CB&H’s Road to Compliance ............................ 6
rich fodder for news organizations, especially of a “key employee” Compensation and
in a recessionary economy, and nonprofits now includes anyone Benefits Solutions salary that exceeds $150,000, or is a former
clearly want to avoid that kind of front page with an annual salary Practice. officer or key employee. Schedule J looks at
coverage. of more than $150,000 compensation beyond salary, and includes
who maintains responsibility for 10 percent or questions about fringe benefits (e.g., first-class
Scrutiny from the government has also in- more of the organization. And all tax-exempt travel, spousal travel, and housing), severance
creased significantly. Congress has made plain organizations, not just 501(c)(3)s, must also pay, non-qualified deferred compensation, and
that it does not trust the tax-exempt sector now disclose their Top five employees with incentive compensation. This detailed breakout
to govern itself. The new Form 990 requires compensation in excess of $100,000. is then compared to the same information for
more disclosures, more detail, and more intri- prior years.
cate procedures. Compensation and benefits The policy section of the Form now includes a
reporting is one area targeted by these new question regarding whether or not the organi- Intermediate Sanctions and Excess
requirements. zation has a policy that allows for the review Benefits
and approval of officers and key employees IRC Section 4958, enacted in 1996 and fi-
The IRS has expanded the range and number by independent persons. Such a review would nalized in 2002, seeks to penalize insiders
of reported salaries, added intermediate sanc- include comparability data and contempora- (“disqualified persons”) who attempt to receive
tions, and increased the likelihood and severity neous substantiation. All nonprofits, not just excess benefits from nonprofits through certain
of an audit. Tax-exempt organizations will have 501(c)(3) and 501(c)(4) organizations, must transactions. The purpose here is to penalize
to increase their reporting output, and many will describe this process. It is likely the IRS intends the offending individual instead of jeopardizing
be doing so for the first time. all organizations to use these procedures as a the organization’s tax-exempt status. 4958 ap-
best practice. plies to compensation, loans, and sales, among
The Core 990 Form other transactions.
The core of the new Form 990 requires dis- Schedule J
closure of all W-2, 1099 and other compensa- Organizations must also complete a Schedule J Under Section 4958, a “disqualified person”
tion for current and former officers, directors, if any person listed on the Form has an annual can include any person in a position to exercise
substantial influence over an organization at
any time in the prior five years. This can include
officers, directors, key employees, their rela-
tives, and any entities they control. Although
Section 4958 only applies to 501(c)(3) and
501(c)(4) organizations, the recent changes to
Form 990 make it clear that the federal govern-
ment would like to apply these same rules to
Rebuttable Presumption of
In determining what is “reasonable” under
excess benefit rules, a fact and circumstances
test generally places the burden of proof on the
organization. However, Section 4958 establish-
es a Rebuttable Presumption of Reasonable-
IRS is continued on page 2
Cherry, Bekaert & Holland, L.L.P. 1 www.cbh.com/nfp
IRS is continued from page 1 Comparability Data. The data analyzed that is higher or lower than the comparability
must be sufficient to determine that the entire data.
ness that, if followed, places the burden of proof compensation package is reasonable. This
for reasonable compensation back on the IRS. includes: Deferral of Compensation
This can offer nonprofits a powerful advantage The Internal Revenue Code provides nonprofit
in an examination, and organizations should • levels paid by similar organizations, both employees a number of opportunities for tax
move to adopt these procedures. taxable and tax-exempt, for functionally deferral on income or salary. These opportuni-
comparable positions; ties vary by IRC section. Generally, 401(a) and
To establish a rebuttable presumption of • the availability of similar services in the 401(k) plans are qualified. 403(b) sections may
reasonableness, compensation terms are geographic area; or may not be qualified. Individual accounts
approved in advance by an authorized body • current data compiled by independent (219 or 408) along with key employee 457(a)
composed of individuals who are totally inde- firms; and or 457(f) sections must exercise caution in com-
pendent from the organization. The authorized • actual written offers from similar institu- pensation deferral. While deferred compensa-
body must rely upon appropriate comparability tions. tion can be useful to an organization, the details
data prior to making a final decision, and must of these plans vary widely from organization
also adequately and concurrently document the Small organizations are exempt from this re- to organization, and will be scrutinized in the
basis for compensation determination. quirement if their gross revenue is less than event of an audit.
$1 million and they collected compensation
Anyone not on the authorized body must information from three comparable organiza- The IRS is attempting to view compensation in
recuse themselves from any compensation tions either in that community or in similar holistic terms, not just in terms of salary. This
discussions except to answer direct questions. communities. initiative will continue to be a hot topic and,
Those persons must specifically not be no doubt, more disclosures are on the way.
present for any debate or voting regarding Documentation. Proper documentation begins The IRS clearly sees excess benefit rules as
compensation. Some conflicts of interest that with an approved and dated terms of arrange- good guidance for reasonable compensation,
would preclude an individual from participating ment. Members of the authorized body must considering it a best practice.
as a part of the authorized body include: be present during all debates and voting. All
documentation regarding comparability data Tax-exempt organizations of every kind put
• benefiting from a compensation agree- (i.e., how it was obtained and relied upon) is themselves in the best position for success
ment; required. by familiarizing themselves with Section 4958
• receiving compensation from a person regulations. We strongly recommend establish-
who is subject to the agreement; and Should a person have recused themselves ing a rebuttable presumption of reasonableness
• any family or business relations of the from the body due to a conflict, the body when setting executive compensation and
subject of the agreement. must present documentation regarding such taking advantage of all appropriate deferral
circumstances. Finally, the body must provide a arrangements. Through preparedness and
rationale for any approved compensation keen strategy, nonprofits can thrive, even under
We’re on the case.
Here are this month’s most popular NFP Blog posts:
• New Law Brings Cell Phone Relief • IRS Outlines Hot Topics for
to Nonprofits Tax-Exempt Organizations to
• Beginning in 2011, FSA Watch in 2010
Reimbursement Will Require • IRS Considering Simplifying the
Prescriptions for OTC Meds Substantiation Requirements for
• IRS Suspends Updates to Cell Cell Phones
Phone Tax Rules • Increased IRS Scrutiny Reaches
• IRS Extends Filing Deadline for to Small Nonprofits
990-N and 990-EZ Filers • DOL Issues FAQ Guidance for
• R.I.P. – The Pooling of Interests Form 5500 Electronic Filing
Method of Accounting • IRS Postpones Requirement
• Form 990, Schedule K – Don’t to Disclose Health Care Costs
Procrastinate About Tax-Exempt on W-2
Stay on top of the issues affecting your organization:
Cherry, Bekaert & Holland, L.L.P. 2 www.cbh.com/nfp
Boost Your Nonprofit’s Income With Remember to think green
Ideas That Work Some of the same actions that help
the environment may also help your
Donor contributions continue to decline for but they may be more likely to publicize the organization save money. Consider these
many nonprofits, and this means that it may organizations to which they belong. cost-saving and environmentally friendly
be time to seriously review some supplemental measures:
revenue options. There are a number of time- Collaborate
tested ways nonprofits can generate revenue Working together with other organizations • Purchase newer, Energy Star-rated
and keep your nonprofit economically viable. can help you earn – and save – money. For machinery. Donated equipment is great,
However, many alternative revenue streams instance, you can rent or share office space but energy-efficient equipment can
often involve unrelated business income, so with a nonprofit that has a similar or related greatly reduce your electric bill.
be sure to discuss any potential new income mission. It also can be beneficial to exchange or • Weatherproof your office space. You’ll
strategies with your accountant. share staff or service providers – or to organize likely recoup the initial cost with lower
a joint event, which will bring new patrons to energy bills.
What’s Your Mission? both organizations. • Install a programmable thermostat to
A tried-and-true way to generate income is minimize energy use during nights and
to offer services and programs for a nominal Partnering with another nonprofit brings ad- weekends. Also, set the thermostat a
fee. For example, you might host speakers, ditional skills and experiences to the table that degree or two cooler in the winter and
classes or exhibits that are related to your may help each organization generate new warmer in the summer.
organization’s tax-exempt purpose. You can ideas and resolve issues. • Buy compact fluorescent light bulbs
raise additional funds by having a program that use less energy. They cost more
guide with advertising or by selling souvenirs, Special Events initially, but last longer than standard
or perhaps items exhibited at the events. Or, if Even in an economic downturn, a creative and incandescent bulbs.
you’re an expert in your field, you may be able well-organized special event can be successful, • Install motion detectors in break and
to sell your expertise as a consultant to other particularly from a fundraising point of view, conference rooms, so that lights
similar organizations. because it can draw your faithful donors as automatically switch off when the room
well as prospects. isn’t in use. Post signs by light switches
Sometimes selling products related to your and electrical appliances that remind
mission becomes a lucrative sideline activity. Plus, special events, such as walks, tourna- employees to turn them off.
For example, Minnesota Public Radio grew a ments, dinners, auctions and cook-offs, can
business selling T-shirts for Garrison Keillor’s be memorable and help potential donors and
“Prairie Home Companion” radio show, and the media learn about your organization’s in mind that all investments have some risk
many metro area museums have created large “softer” side. involved. It is essential to monitor your risk and
direct merchandising and product licensing en- diversification along with any tax consequences
terprises based on items in their collections. Investment Income from earnings.
Even in today’s economy, there are many
Also, evaluate those revenue-generating pro- options when it comes to investing your non- Seeing It Through
grams you currently offer. Are they as success- profit’s money. But you’ll want to keep an eye Once you decide on what it is you want to do
ful as they could be? Could they be modified on factors such as requirements for risk toler- to bring in more money, how you go about
to attract more people? Are you publicizing ance, liquidity and possible conflicts of interest. it becomes crucial. From planning a budget
them well? And be mindful of existing investment policy for any new program or service to effectively
restrictions. promoting the event within your community,
Memberships your team’s organizational abilities and market-
Some organizations may charge membership For short-term investments, a money market ing know-how will come into play. Give your
fees. Memberships typically work well for non- or short-term bond mutual fund can offer staff the creative room to pursue new ideas
profits that provide a service. In return for the higher returns than a savings account while as you keep an eye on the risks of any new
fee, members get privileges they wouldn’t have still providing a fair amount of liquidity. Keep endeavors.
received if they were simply donors, such as:
• Discounts on programs, services or
• Invitations to special events, and
• Special opportunities, such as members-
only Web site access, facility access or
In addition to providing income, memberships
can benefit your nonprofit in other important
ways. For example, people don’t always
discuss the organizations to which they donate,
www.cbh.com/nfp 3 Cherry, Bekaert & Holland, L.L.P.
Health Care Reform Timeline
The recent enactment of the Patient Protection you informed and up-to-date regarding how The Act also encourages employers to provide
and Affordable Care Act of 2010, in combina- the Health Care Act will affect you and your qualifying coverage by both penalizing large
tion with the Health Care and Education Tax organization. employers that lack qualifying coverage and
Credits Reconciliation Act of 2010 (collectively promoting contributions from small employers
known as the “Health Care Act” or the “Act”), The Health Care Act requires all individuals to employee premiums. Employers that cur-
significantly changes the nation’s health care not covered by Medicaid or Medicare to obtain rently offer qualified coverage can continue to
landscape, and many of these changes will be minimum essential coverage or pay a penalty offer that same coverage under a grandfather
carried out through substantial additions and (unless they are exempt from the individual re- provision.
alterations to the U.S. tax code. sponsibility mandate). Low-income individuals
and some middle-income families are eligible For more information about how health care
Given the scope of this landmark legislation, we for credits or vouchers to aid in the cost of reform legislation affects your business, visit
have prepared a short summary of the new law. obtaining coverage.
www.cbh.com/health or contact your local CB&H
As your tax professionals at CB&H continue to
study the legislation, we will continue to keep tax professional.
Tax Credit for Investments in • A two-year temporary credit available for investments in new therapeutic discovery projects in
New Health Care Therapies 2009 and 2010
2010 Tax Credits for Offering Health
• Up to 25% of the employer contributions for qualifying nonprofits
Adoption Credit Extended • Credit for child adoption increased to $13,170 in 2010, indexed for inflation in 2011 (refundable in
2010 and 2011)
Medical Expense Definition • Definitions for qualified medical expenses altered as they relate to FSAs, HSAs, and Archer
Changes MSAs (certain medications exempt)
Nonqualified HSA & MSA • Penalty increases from 10% to 20% for HSAs
Distributions Penalty Increases • Penalty Increases from 15% to 20% for MSAs
Employers Must Report Health • Employers must disclose the aggregate cost of each employee’s health care benefits on his or
Care Plan Values on W-2 her W-2 form
Corporate Information Reporting • Organizations paying $600 or more annually for property and services must report payments to
Medicare Tax for High-Income • 0.9% increase in earned income tax
Individuals Increases • Applied to earned income over $200,000 for individuals, $250,000 for families
Medicare Contribution Surtax for • 3.8% contribution on unearned income
High-Income Individuals • Applies to MAGI over $200,000 for individuals, $250,000 for families (excludes retirement ac-
2013 FSA Contributions Limited • Caps at $2,500, indexed for CPI 2014 and later
Executive Compensation • Health Care Provider executives remuneration deduction caps at $500,000
Deduction for Medicare Part D • No subsidy expense deductions for qualified employers
Individuals Required to Obtain • Must have minimum essential health coverage or pay penalties based on percentage of yearly
Healthcare or Pay Penalty income (phased-in over 3 years)
Employer Penalty for Not • Employers with more than 50 employees could pay up to $2,000 per employee annually, after the
Providing Coverage first 30 employees
Annual Fee Imposition on Health • Health care providers pay non-deductible fee of $8b
Care Provider Industry • Apportioned by market share, certain groups exempt
Employers Must Report Health • Must file returns with the IRS including info about employer, waiting period, employees, coverage
Coverage Information plans, and premiums (penalties for non-compliance)
Health Insurer Excise Tax on • 40% non-deductible excise tax imposed for plans over $10,200 individual, $27,500 family (higher
High-Cost Plans limits for retirees)
Cherry, Bekaert & Holland, L.L.P. 4 www.cbh.com/nfp
Pending Lease Accounting Changes evaluated and recorded under the terms of this
proposed guidance. The proposed guidance
Could Impact Your Balance Sheet does provide for a simplified method for leases
with a maximum term of 12 months (including
By Jeffrey T. Sabetta, Cherry, Bekaert & Holland, L.L.P. (CB&H) all extension options) whereby a right-to-use
Email: email@example.com asset and liability are still recorded, but only
at the amount of the payments remaining on
On August, 17, 2010, as part of the continuing incremental borrowing the lease(s). Under this method, no interest
convergence process, the Financial Accounting rate at the date of expense would be recorded in the statement
Standards Board (FASB) and International lease inception. Jeff is a Senior Audit of changes in net assets.
Accounting Standards Board (IASB) (collectively Manager with CB&H
the “Boards”) released joint exposure drafts The asset cost will What Should I Do Now?
and a member of the
that would significantly change the accounting be amortized using While proposed changes are not expected to
treatment of leasing arrangements of both straight-line methods Firm’s Not-For-Profit effective until 2013 there are certain steps that
lessees and lessors. to amortization ex- Industry Group. can be taken now.
pense over the term of
These proposed changes would require the lease and interest expense will be recorded First, analyze the potential impact this new
organizations to record nearly all leases on as the related liability is paid down (similar to a guidance may have on you by determining the
their statement of net assets as a right to use mortgage). Note that under this new guidance, impact of capitalizing existing (and new leases)
asset with a corresponding lease liability. While amortization and interest expense would re- on your financial statements, loan covenants
the proposed guidance is still in exposure place rent expense in the statement of changes and financial ratios/EBITDA calculations.
draft form, the Boards expect to issue the final in net assets.
standards in 2011. An effective date has yet For potential covenant violations this may be a
to be determined, but could be as early as The lease term will be defined as the longest good time to begin discussions with your lend-
2013. possible term more likely than not to occur. All ers about modifying existing loan agreements.
relevant factors need to be considered, includ- Make sure this discussion includes not only
How Did We Get Here? ing renewal options. Once the lease terms have existing leases but anticipated future leases as
Current accounting guidance requires leasing been determined to be more likely than not to well. Then you can consider evaluating future
arrangements to be recorded as either an op- occur, the longest of those terms would be the lease versus buy considerations.
erating or capital lease. Operating leases are term used to account for the lease.
expensed over the term of the related lease Conclusion
with future payments under the terms of these Reassessment of the lease term or purchase Due to the potential significant impact of the
leasing agreements disclosed in the footnotes options is required at each reporting date, with proposed lease accounting change it is not
to the financial statements. This provides us- changes based upon the existence of any new too early to begin analyzing the impact on your
ers of the financial statements with information facts or circumstances reflected as adjustments organization not only from the perspective of
regarding how much an entity was committed to the carrying amount of the right-of-use as- financial compliance but internal resources
to pay in future years. sets. as well.
Conversely, if a lease met one of the four criteria The proposed guidance does not provide for The FASB will accept public comments on this
of a capital lease, a leased asset and related any grandfathering of existing leases, therefore proposed change through December 15, 2010
liability were recorded on the statement of net both existing and new leases will need to be at the following link: http://bit.ly/cbh-letter.
assets with the asset and liability depreciated/
amortized over the estimated economic useful
life of the lease.
The proposed guidance, in essence, does
away with operating leases. All leases (unless
immaterial) would be capitalized using the
present value of the minimum lease payments.
Therefore, entities that in the past had off-bal-
ance sheet lease obligations, would now record
these obligations on their balance sheet.
Where Are We Going?
The proposed guidance will result in nearly
all leasing arrangement being reported on
the statement of net assets. For all qualifying
leases, both existing and new, lessees will
be required to record a right to use asset and
corresponding liability as calculated using
an effective interest method over the term of
the lease, as determined using the lessee’s
www.cbh.com/nfp 5 Cherry, Bekaert & Holland, L.L.P.
Unclaimed Property: The Road to controls and attention to ensuring unclaimed
property compliance. Second, it will legitimately
Compliance minimize your organization’s unclaimed prop-
erty reporting obligations. And finally, it will earn
By Debbie L. Zumoff, The Keane Organization your organization goodwill.
CB&H offers expanded unclaimed property services through an alliance
with The Keane Organization. Best Practices
You can use the guidelines discussed in the last
In our last issue of NFP News, we discussed One major decision issue to establish a solid set of internal controls
many of the misperceptions associated with facing organizations is As Firm Director of and follow the best practices outlined below.
unclaimed property obligations and outlined whether to outsource State and Local Tax
many of the risks associated with the current the management of Define the Liabilities Impacting Your Com-
surge in compliance efforts happening at the risk or use dedicated pany. Begin by assessing and analyzing the
state level. As a follow-up to that initial discus- in-house resources. Stanton coordinates various property sources in your organization
sion, we’d like to now examine what options Making the right deci- unclaimed property contributing to unclaimed property. Take a big
you should consider when developing a best sion depends upon services through The picture, global view of your entire enterprise
practices approach to achieving compliance. the availability of time, Keane Organization to engage all possible contributors to potential
resources, and staff. for CB&H clients. She liability. Typically, 80 percent of your unclaimed
Implementing a best practices approach to For some, the demand can be reached at property exposure value lies in only 20 percent
managing unclaimed property risk can be a to embrace such a of the outstanding obligations. Identify and
challenge. If you are a first-time unclaimed program is driven by focus on resolving those to reduce your total
property reporting entity not under state audit, the volume of outstanding obligations, their liability.
and you find your organization in an initial complexity, and the overall cost to the orga-
compliance situation, you should initiate an nization. Try to understand why unclaimed property is
immediate outreach program. Make an effort being generated at your organization or why
to connect with property owners as soon as Consider your experience conducting and man- individuals or businesses have failed to take
you identify and quantify your past-due obli- aging outbound phone and/or mail campaigns. action with regard to the sums you owe them.
gations. Do you have the research tools and resources Customers often relocate, get acquired, or their
required to follow up on your undeliverable businesses simply fail. Recipients of health
Consider the timeframes necessary to do so population of individuals and businesses? Are benefit checks can easily become confused.
while working with the states to get your vol- you capable of adjusting your policies to keep Duplicate or alternate modes of payment can
untary disclosure and reporting arrangements up with evolving unclaimed property laws? go unidentified if not properly reconciled.
in order. Organizations should systematically
perform owner outreach to manage outstand- The value of an active best practices approach Do you have miscellaneous income entries
ing general ledger obligations spanning the to your organization’s unclaimed property liabil- without adequate explanation? Are accounting
duration of the dormancy periods. ity will serve several valuable purposes. First, policies and practices implemented consistently
it will allow you to demonstrate strong internal across your entire organization? Do you have
Want to learn more about
Download our Unclaimed Property webinar at
Cherry, Bekaert & Holland, L.L.P. 6 www.cbh.com/nfp
comprehensive and written unclaimed property eliminate duplicate payments and other costly
policies and procedures in place? Are they accounting errors. For instance, it is important 8 steps you can take to best
being followed consistently throughout your to reach out to vendors to reconcile apparent manage your company’s
organization? outstanding balances. It is common when
scrutinizing uncashed check files to find vendor unclaimed property risk
Preemptively Resolve Outstanding obligations that appear to be unpaid, which 1. Define the Liabilities Impacting Your
Liabilities. Obviously, the primary threat were in fact paid in full via an alternate account Company.
presented by past-due obligations is that of a or means (e.g., wire, EFT). Reducing these 2. Preemptively Resolve Outstanding
state (or multistate) audit. Often it’s the most accounting oversights creates instant savings Liabilities.
well-intentioned companies that unwittingly by preventing an unnecessary cash outlay. 3. Develop a Corporate Philosophy
overlook or misinterpret their obligations. Regarding Due Diligence.
The complex and dynamic laws of unclaimed Document an Annual Compliance Road- 4. Reconcile Accounts to Prevent
property reporting leave such organizations map. Formalize all compliance goals and Overpayment.
noncompliant, facing financial fines and expectations of all individuals who play a role 5. Document an Annual Compliance
penalties, as well as undeserved reputational in the system. In today’s environment it is Roadmap.
risk. critical to establish compliant behaviors and be 6. Eliminate Audit Red Flags.
committed to and encourage an atmosphere 7. Perform Sound Recordkeeping and
It is best to conduct a rigorous self audit or of openness. Accounting.
holder advocate evaluation to test the sound- 8. Encourage Continuous Learning and
ness of historical practices and reporting. If Create clear timelines of events and milestones Review.
holes in compliance are identified, you will to ensure that semi-annual report cycles run
need to take action as soon as possible. There smoothly. Critical to the plan is a methodology
are still opportunities in most states to take ad- to stay up-to-date on the latest changes to un- all unclaimed property liabilities on financial
vantage of amnesty and voluntary compliance claimed property laws. For large organizations, statements as required.
programs which provide leniency with respect a range of unclaimed property software sys-
to delinquent reporting. tems and outsourcing options exist to help with Encourage Continuous Learning and
planning and execution. If efforts are instead Review. Conduct regular training to discuss
Develop an Organizational Philosophy coordinated in-house, carefully document the legal changes and reinforce policies and pro-
Regarding Due Diligence. As heavyweight workflow, staff responsibilities, and information cedures. Training, at some level, should be
champion Jack Dempsey was fond of saying, needs at each step in the process. delivered to all relevant departments to ensure
“the best defense is a good offense.” In the organizational consistency. Regularly review
unclaimed property world, due diligence is Eliminate Audit Red Flags. While the “A-list” performance and modify reference materials to
the practice of mitigating unclaimed property for state audits consists of entities that have ensure valid “living documents” that staff can
liability at its source—by finding missing people never filed reports, the second tier is filled with use to manage the operation.
and helping them take action to reconcile their organizations that call attention to themselves
accounts. by the manner in which they report. Incomplete Debbie Zumoff is Chief Compliance Officer with
reports are certain to raise suspicion, as are The Keane Organization, the premier provider
By law in most states, due diligence is only reports which don’t match the typical profile for of comprehensive unclaimed property reporting
required once—typically within 120 days of other similar organizations. and compliance solutions. CB&H’s strategic al-
when the property must be remitted. At this liance with the Keane Organization enables the
point, the property has been unresolved for Other obvious signs include failure to report all Firm to provide a streamlined suite of escheat-
potentially many years and the likelihood of relevant property types and inconsistent report ment solutions to help CB&H clients of all sizes
locating the property owner at the original filings from year to year. In addition, organiza- address this area of growing concern.
address is minimal. The best approach is to tions that are undergoing or have undergone
conduct a due diligence effort within 90 days restructurings should consider themselves high
The information in this newsletter has been provided by Cherry,
of the original payment transaction. on the list for audit consideration since many Bekaert & Holland, L.L.P., and its affiliates (“CB&H”) for general
accounting details—such as old boxes of bank information purposes. It does not constitute legal, accounting, tax
or other professional advice or services and is presented without
Address the undeliverable mail population in records—can easily get set aside, forgotten or any representation or warranty as to the accuracy or completeness
your outreach strategy. Undeliverable mail can destroyed. of the information.
be a significant problem, stalling many efforts While CB&H has made every attempt to ensure that the informa-
Perform Sound Recordkeeping and Ac- tion contained herein has been obtained from reliable sources,
to reunify owners with their financial property. CB&H is not responsible for any errors or omissions, or for the
Ideally you should research new addresses counting. Maintain electronic and hard copy results obtained from the use of this information. In no event will
CB&H, or CB&H’s partners, agents or employees be liable to you
and re-mail, telephone or email those vendors, documentation of all previous unclaimed or anyone else for any decision made or action taken in reliance
employees or customers where appropriate. property reports for at least 10 years so that on the information contained herein or for any consequential,
special or similar damages, even if advised of the possibility of
But locating businesses can be daunting since you can quickly and easily demonstrate your such damages.
there are few available databases designed to compliance. This practice will help to facilitate
U.S. Treasury Department Circular 230 Disclosure: In accordance
locate commercial entities. And the IRS and internal audits, contribute to long-term compli- with applicable professional regulations, please understand that,
SSA won’t help you. ance efforts, and serve as a strong exhibit of unless specifically stated otherwise, any written advice contained in,
forwarded with, or attached to this communication is not a tax opin-
your controls in the event you are audited. Make ion and is not intended or written to be used, and cannot be used,
Reconcile Accounts to Prevent Overpayment. sure that internal departments or divisions are by any person for the purpose of (i) avoiding any penalties that may
be imposed under the Internal Revenue code or applicable state or
Part of the due diligence process should include communicating effectively to properly disclose local law provisions or (ii) promoting, marketing or recommending to
a reconciliation of all accounts to identify and another party any tax-related matters addressed herein.
www.cbh.com/nfp 7 Cherry, Bekaert & Holland, L.L.P.
1700 Bayberry Court – Suite 300
Richmond, Virginia 23226
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Fall 2010 Edition
Useful Information for Your Organizational Success
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