Possible “Clawbacks” from Bankrupt Donors?

As we move past Thanksgiving and “Giving Tuesday” and move into the Christmas and year-end giving
season, it might be an interesting time to consider your institution’s Gift Acceptance Policy and the
procedures surrounding the acceptance of donor gifts.
Many of you have been hearing about the sudden collapse and bankruptcy proceedings of FTX. This
seemingly robust cryptocurrency exchange sought to be very philanthropic – in their terms “altruistic.”
FTX gave heavily to many future-looking projects and to political parties – to the tune of billions of
dollars.


One question that arises with regard to the FTX collapse is whether the bankruptcy court might seek to
have some or all of the FTX contributions to charities and/or political parties returned. This process –
sometimes referred to as “clawbacks” – could be devastating to recipients. This would be especially
difficult for those who have spent the funds.
So, first question: Does your institution have a “Gift Acceptance Policy” in place? And, right behind that
question: If so, do you follow it?


If your institution does not have a policy of this nature, you should. Please contact us about more
information and policy templates that may assist you and your Team in the process.
Back to FTX and possible “clawbacks.” This post is for information purposes. We are not attorneys and
are not offering legal advice.


Clawbacks generally happen when debtors file claims/complaints with the bankruptcy court. These
complaints most often take the form of 1) preference demands or, 2) fraudulent conveyance claims.
With a preference demand, there would be a request for the return of payments made within 90 days
before the bankruptcy. If actual fraud is involved, there is the potential for a 2-year clawback period.
Back in 1998, Congress enacted the Religious Freedom and Charitable Donation Protection Act that is
designed to protect churches and other charities from having to turn over charitable contributions to a
bankruptcy trustee. A key to this legislation is the following provision, which is an amendment to section
548(a)(2) of the bankruptcy code:

A transfer of a charitable contribution to a qualified religious or charitable entity or organization
shall not be considered to be a transfer [subject to recovery by a bankruptcy trustee] in any case
in which—(A) the amount of that contribution does not exceed 15 percent of the gross annual
income of the debtor for the year in which the transfer of the contribution is made; or (B) the
contribution made by a debtor exceeded the percentage amount of gross annual income specified
in subparagraph (A), if the transfer was consistent with the practices of the debtor in making
charitable contributions.

Historically, clawbacks of donations to charities are pretty rare. However, in a 2014 church case
(McGough, 737 F.3d 1268 (10th Cir. 2014)), required a church to return donations from a bankrupt
couple that gave over 15% of their annual income to the church. The question arose with respect to the
amount of the contributions that the church was required to return to the bankruptcy court. On appeal, the

question arose as to whether the church would be required to return all of the “over 15%” contributions or
only the amount that exceeded 15% in a given year.

In McGough, a federal appeals court concluded that contributions in excess of 15 percent of annual
income are entirely recoverable by the bankruptcy trustee. This includes the first 15% of the
contributions made by the bankrupt donor.

TO REVIEW…

  • Does your school have a “Gift Acceptance Policy” in place that is followed by Management and the Board?
  •  Have you considered the potential ramifications of accepting “digital assets” – including cryptocurrency donations?
  •  Please consider the potential issues that may arise from accepting donations of “unstable” assets or from struggling donors/entities.
  •  Be sure you and your Team are knowledgeable about the “ins-and-outs” of non-cash or “alternative” asset donations.

Written by
David C. Moja, CPA www.mojacompany.com
The information provided herein presents general information and should not be relied on as accounting,
tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions
regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel
about the facts and laws that apply.

Thanksgiving Turkey “Coupons/Vouchers” for Employees

November 15, 2022
At this wonderful time of year, we are often asked about whether the value of a turkey, ham, or other item
of merchandise purchased by an employer and distributed generally to each of an institution’s employees
at Thanksgiving – or Christmas – might constitute wages subject to income tax withholding or income
subject to tax for income tax purposes. In most cases the answer is, No. But what about coupons,
vouchers, or gift certificates?


For example, at a College’s annual campus-wide “Thanksgiving Feast,” the President and Academic
Dean of the college go around and give each staff/faculty member a card containing a
certificate/coupon/voucher for a 16-18 pound turkey at a local grocery store. Everyone also gets a
personal “Happy Thanksgiving – we are very thankful for you!” handshake – or hug.

First, it would generally be okay to hand out turkeys or hams. Also, we know that the IRS considers gift
certificates that are redeemable for any merchandise to be taxable income to the employee (and includable
in Form W-2). But what about these “certificates” that can ONLY be exchanged for a turkey?

It is our thought that these certificates/coupons/vouchers would generally not be considered gift cards.
The IRS has stated that whether a “gift coupon” (now more commonly referred to as a gift card) is
redeemable in cash is not the determining factor here.

We would make the case that it would be administratively impractical to try and accumulate each and
every “redeemed value” for every turkey redeemed. Also, given the language used by the IRS in a 2004
Tax Advice Memorandum (TAM), it may be prudent to call these items “certificates” rather than
“coupons.”

Please note that a gift card of a stated amount would clearly be taxable to the employee based upon the
2004 TAM – which ultimately employs the “same as cash” reasoning. Also, as stated by the IRS in
Notice 2017-9, taxable gift cards would not be covered by the Form W-2 “de minimis error safe harbor.”

From Revenue Ruling 59-58:
“It is accordingly held that the value of a turkey, ham, or other item of merchandise of similar nominal
value, distributed by an employer to an employee at Christmas, or a comparable holiday, as part of a
general distribution to employees engaged in the business of the employer as a means of promoting their
good will, does not constitute wages subject to income tax withholding or wages for Federal Insurance
Contributions Act or Federal Unemployment Tax Act purposes.”


“…The foregoing rules will not apply to distributions of cash, gift certificates, and similar items of readily
convertible cash value, regardless of the amount involved.”


From Technical Advice Memorandum 200437030:
Whether a gift coupon is “redeemable in cash” is not determinative of whether a gift coupon is a “cash
equivalent fringe benefit” for Income Tax Regulation § 1.132-6(c) purposes. Neither the statute nor the
regulations pertaining to de minimis fringe benefits define a cash equivalent fringe benefit as one that can
be readily converted to cash. Instead, we look to the language of Code § 132(e) which requires a
determination of whether it is administratively impracticable to account for the gift coupons provided in
this case.

TO REVIEW…

  •  Happy Thanksgiving to everyone and please know that we are very grateful for you and your institutions!
  •  Certificates/coupons/vouchers redeemable only for a turkey equate to distributing turkeys (or Christmas hams) by your organization and should not be taxable to the employee.
  •  Remember that gift cards – which are so prevalent these days – are generally going to be taxable and includable in employees’ compensation.
  •  Be sure you are knowledgeable about the “ins-and-outs” of holiday employee gift giving – in order to keep things “non-taxable.”

Written by
David C. Moja, CPA www.mojacompany.com
The information provided herein presents general information and should not be relied on as accounting,
tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions
regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel
about the facts and laws that apply.

Penalty Relief for 2019 and 2020 Form 990-T Filings

The Coronavirus “Era” (that we are still not through) has hit many of us in different ways.
Through the negatives, we have learned much and – in some cases – become better at what we
do. But it has been a struggle.


Even though the IRS has recently been super-funded by Congress, they, more than many, found
the COVID days to be a steep uphill battle. Coronavirus relief provisions, new tax rules, work-
from-home dynamics, beaucoup retirements provided many challenges for the Service.
Now, as unlikely as it might seem, the IRS has provided another measure of COVID relief. Just
announced with IRS Notice 2022-36, they are “forgiving” some late-filing penalties on some
returns. Included in the list of returns is Form 990-T that some higher education institutions are
required to file annually.


If your institution received penalty notices for late filing Form 990-T, relief is given under
Notice 2022-36. This does not cover late payment/failure to pay penalties.
In another scenario, if an institution has not yet filed their 990-T returns for the 2019 and/or 2020
taxable year(s), they may file prior to September 30, 2022 with no penalties!
In short, the Notice “… provides relief for certain taxpayers from certain failure to file penalties
and certain international information return (IIR) penalties with respect to tax returns for taxable
years 2019 and 2020 that are filed on or before September 30, 2022. This notice also provides
relief from certain information return penalties with respect to taxable year 2019 returns that
were filed on or before August 1, 2020, and with respect to taxable year 2020 returns that were
filed on or before August 1, 2021. The relevant penalties will be waived or, to the extent
previously assessed, abated, refunded, or credited. [Emphasize added.]

From Notice 2022-36:
Waiver and Abatement of Certain Penalties for Taxpayers


The IRS will not impose the penalties listed in section 3.A.(1) through (4) of this notice with
respect to the specified tax returns for taxable years 2019 and 2020 that are filed on or before
September 30, 2022. The penalties listed in this section 3.A of this notice will be automatically
abated, refunded, or credited, as appropriate without any need for taxpayers to request this relief.

  • Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation; and Form 990-T, Exempt Organization Business Income Tax Return (and Proxy Tax Under Section 6033(e)) [one item on the listing]

At the end of the day, you should converse amongst your management team and tax advisors and
discern whether this new “2022-36 relief” may be something your institution might be able to
take advantage of.

Written by
David C. Moja, CPA www.mojacompany.com
The information provided herein presents general information and should not be relied on as accounting,
tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions
regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel
about the facts and laws that apply.

Form 8899 and Donated Intellectual Property

Let’s face it. It can be a challenge for many institutions to ensure that the Finance Team is
notified regarding every single in-kind or non-cash donation. At your school, is there a chance
that someone might donate some type of “know how” and that it would not be communicated
fully nor recorded at fair market value?


Form 990, Part V, Line 7g, asks, “If the organization received a contribution of qualified
intellectual property, did the organization file Form 8899 as required?”
Many folks in the Finance Departments of Bible Colleges and Seminaries aren’t quite sure what
intellectual property is much less anything about Form 8899. Note that failure to file Form 8899
in a complete, accurate, and timely manner could result in penalties. To compound matters,
there is not an entry in the Form 990 Glossary (which can be a great resource) regarding
“intellectual property.”


Even though the Form 990 Glossary does not contain a definition of “intellectual property,” the
Form 990 instructions do provide some guidance (see page 16 of the 2021 990 instructions).
There, we see a listing of intellectual property that includes any of the following:

  • Patent
  • Copyright (other than certain self-created copyrights)
  • Trademark
  • Trade name
  • Trade secret
  • Know-how
  • Software (other than certain “canned” or “off-the-shelf” software or self-created software)
  • Similar property
  • Applications or registrations of such property

Now, that is a pretty broad – and not necessarily crystal clear – listing.  I’d especially like to
know more about “similar property.” The instructions for Form 8899 clarify that the following
items are NOT considered ‘intellectual property’:

  1. Computer software that is readily available for purchase by the general public, is subject
    to a nonexclusive license, and has not been substantially modified.
  2. A copyright held by a taxpayer:
  • Whose personal efforts created the property, or
  • In whose hands the basis of the property is determined, for purposes of determining gain from a sale or exchange, in whole or in part by reference to the basis of the property in the hands of a taxpayer whose personal efforts created the property.

When we dig a little deeper into the 990 instructions for Part V, we get a little bit clearer picture…

Form 990 Instructions – Part V, Line 7g:

Line 7g. Form 8899, Notice of Income From Donated Intellectual Property, must be filed by certain organizations that received a charitable gift of qualified intellectual property that produces net income. The organization should check “Yes,” if it provided all required Forms 8899 for the year for net income produced by donated qualified intellectual property. Qualified intellectual property is any patent, copyright (other than certain self-created copyrights), trademark, trade name, trade secret, know-how, software (other than certain “canned” or “off-the-shelf” software or self-created software), or similar property, or applications or registrations of such property. If the organization didn’t receive a contribution of qualified intellectual property, leave line 7g blank.

 So, consider having a conversation with your management team – especially the development crowd – about making sure the Finance/Accounting Team is aware if/when a contribution of “intellectual property” comes to your institution.

Written by
David C. Moja, CPA www.mojacompany.com
The information provided herein presents general information and should not be relied on as accounting,
tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions
regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel
about the facts and laws that apply.

IRS Changes Mileage Rates for Second Half of 2022

As they do annually, in late 2021, the IRS released the standard mileage rates for 2022. Prior to the
beginning of any given calendar year, it is a good idea to update your various polices, guidelines,
worksheets, and templates to reflect the new rates.

The original 2022 rates were as follows:
* 58.5 cents per mile for business purposes
* 18 cents per mile for medical purposes (the moving deduction is not available for 2022)
* 14 cents per mile for charitable purposes (set by statute, thus does not change annually)

However, in a rare – but not unprecedented – move, the IRS has increased the standard mileage rates for
the second half of 2022. These new rates “kicked in” as of July 1, 2022. Both the business mileage rate
and medical mileage rate increase by 4 cents per mile greater than the original 2022 posted amounts. The
details may be found in IRS Announcement 2022-13, issued June 9, 2022.


Beginning July 1, 2022, the standard mileage rates for cars, vans, pickups, and panel trucks increases to
62.5 cents per mile for business purposes, 22 cents per mile for medical or moving purposes, and 14 cents
per mile for charitable purposes.


The updated 2022 rates were as follows:
* 62.5 cents per mile for business purposes
* 22 cents per mile for medical purposes (the moving deduction is not available for 2022)
* 14 cents per mile for charitable purposes (set by statute, thus does not change annually)


Consistent with the past few years (following the 2017 TCJA), the rates cannot be used to claim an
itemized deduction for unreimbursed employee travel expenses or for moving expenses (except for
certain members of the U.S. Armed Forces).

Written by
David C. Moja, CPA www.mojacompany.com
The information provided herein presents general information and should not be relied on as accounting,
tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions
regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel
about the facts and laws that apply.

Does Your Institution have “Laundry Operations?”

Here’s a question we get occasionally: Our school has coin-operated washing machines and
dryers are used by resident students to wash linens, clothing, etc.  Do the revenues from the
Laundromat constitute unrelated business income? What if the Laundromat is open to the general
public for their use as well as use by students?


Let’s start with the student use and answer “No” – generally due to the “convenience exception”
(see below).


If, however, there is use by the general public – beyond the obvious security risks (and that’s an
“Enterprise Risk Management” (ERM) discussion) – potential unrelated business income issues
would generally depend upon the percentage of public use. For the fun of it, let’s say that the
Finance Team at this college has done some analysis and 27% of their laundry revenues come
from the general public (not students nor staff).

From IRS Publication 598:

Convenience of members.  A trade or business conducted by a 501(c)(3) organization or by a
governmental college or university primarily for the convenience of its members, students,
patients, officers, or employees is not an unrelated trade or business. For example, a laundry
operated by a college for the purpose of laundering dormitory linens and students’ clothing isn’t
an unrelated trade or business. (Color added for emphasis.)

The laundry is clearly for the convenience of the college’s students.


So, would this college be safe (in the UBIT sense) in operating a laundry facility where 27% of
revenues came from the non-student public?  Hmmm. I would suggest that the “public” limit
would be closer to 15%, based upon other UBIT provisions in the Code. And, if the college
actively advertised the laundry to the public and/or competed with for-profit, local laundries in
other ways, the IRS might deem the income from the general public to be unrelated business
income and subject to tax. Note that the college could deduct direct and allocable expenses
against this income when the filed Form 990-T each year. Also, the college would need to
ascertain which “silo” (from NAICS two-digit codes) their “laundry operations” fit into for
completing Form 990-T, Schedule A – but that is another topic…


Written by: David C. Moja, CPA www.mojacompany.com

The information provided herein presents general information and should not be relied on as accounting,
tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions
regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel
about the facts and laws that apply.

Raffles and Other Gaming Activities

These days, post-COVID, many colleges are looking toward new fundraising ventures in order to raise
much-needed dollars. One opportunity may be in the form of “raffles.” Institutions should diligently
research and ensure that they are staying within the law when it comes to “gaming” activities.
The glossary of the Form 990 instructions (2021) defines gaming as:

Includes (but isn’t limited to): bingo, pull tabs/instant bingo (including satellite and progressive or
event bingo), Texas Hold-Em Poker, 21, and other card games involving betting, raffles, scratch-
offs, charitable gaming tickets, break-opens, hard cards, banded tickets, jar tickets, pickle cards,
Lucky Seven cards, Nevada Club tickets, casino nights/Las Vegas nights (other than events not
regularly carried on in which participants can play casino-style games but the only prizes or
auction items provided to participants are noncash items that were donated to the organization,
which events are fundraising events), and coin-operated gambling devices. Coin-operated
gambling devices include slot machines, electronic video slot or line games, video poker, video
blackjack, video keno, video bingo, video pull tab games, etc. See Pub. 3079, Tax-Exempt
Organizations and Gaming.


Recently, the IRS published a new “Issue Snapshot” entitled, “Gaming and Unrelated Business Taxable
Income.”
“Issue Snapshots” – according to the IRS – “provide an overview of an issue and are a means for
collaborating and sharing knowledge among IRS employees. Issue Snapshots may not contain a
comprehensive discussion of all pertinent issues, law or the IRS’s interpretation of current law.”


Here are some other gaming resources:
– IRS Publication 3079, “Tax-Exempt Organizations and Gaming” at:
https://www.irs.gov/pub/irs-pdf/p3079.pdf
- Schedule G (Form 990) – Instructions, at:
 https://www.irs.gov/pub/irs-pdf/i990sg.pdf
- The IRS webpage – “Exempt Organization Gaming and Unrelated Business Taxable Income”
may be found at:
Exempt Organization Gaming and Unrelated Business Taxable Income | Internal Revenue Service
(irs.gov)

Excerpt from IRS Exempt Organization Issue Snapshot, “Gaming and Unrelated Business Taxable
Income”:

Gaming is a recreational activity and, if conducted for a profit, a trade or business. Gaming includes
bingo, beano, raffles, lotteries, pull-tabs, scratch-offs, pari-mutuel betting, Calcutta wagering, pickle jars,
punchboards, tip boards, tip jars, certain video games, and other games of chance.

Gaming is also a common type of fundraising engaged in by tax-exempt organizations. In addition, many
types of organizations conduct gaming in furtherance of social or recreational purposes. Gaming is
normally regulated by state and local law in the jurisdiction in which the activity occurs.
Most gaming, if regularly carried on for profit, is an unrelated trade or business activity, which may
produce unrelated business taxable income (UBTI).  As with other unrelated trade or business activities,
the fact that an organization uses the proceeds from its gaming to pay for its exempt purpose programs
does not make the gaming activity related to its exempt purposes.  Therefore, gaming income received by
exempt organizations is treated as UBTI, unless a specific exception applies.

Audit Tips:

  •  Determine whether gaming is an unrelated trade or business. Factors to consider:
  •  The frequency of the activity,
  •  The length of time it has continually been conducted,
  •  How the organization promotes the activity, and
  •  How nonexempt businesses conduct similar activities. 
  •  Determine the organization’s meaning of “membership.”
  •  Distinguish guest income from income from members of the general public
  •  Determine whether the organization’s gaming activities are regulated by state or local law.
  •  All workers involved in the operation of the gaming activities must be taken into account in determining if substantially all of the work is performed without compensation.
  •  Bingo dauber sales and food/beverage sales don’t meet the bingo exclusion and are unrelated business income unless one of the IRC Section513(a) exceptions applies or bingo is conducted with members only (as applicable).
  •  Determine if gaming activity is primary activity and/or if receipts are substantial which may affect foundation classification (for IRC Section 501(c)(3) organizations) and/or exemption status. 


There are really two issues with gaming activities. First, is it gaming for Form 990 purposes. Second,
might the activity be considered an unrelated business activity. As to gaming, we should look at the
definition in the glossary of the Form 990 instructions. With the UBIT issue, the IRS actually released an
‘Issue Snapshot’ on gaming a few years ago. Also, remember that ‘gaming’ activities will generally need
to be reported at Form 990, Part VIII, Line 9 and on Schedule G (Form 990), Part III.
Take care to gather data and obtain great counsel when it comes to gaming activities.

Written by
David C. Moja, CPA www.mojacompany.com
The information provided herein presents general information and should not be relied on as accounting,
tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions
regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel
about the facts and laws that apply.

The New Lease Standard, Part I

Starting in 2016, the Financial Accounting Standards Board (FASB) began releasing new “lease
rules.” After several “exposure drafts” and much discussion, we now have Topic 842, Leases.
These new rules will mean a huge change in accounting for leased assets and the associated
liabilities.
Generally, for “our size” institutions, these new standards will be required to be implemented for
fiscal years beginning after December 15, 2021. This means that – for schools with a June 30
year-end – your June 30, 2023 audit report will be the first affected. For institutions on a
calendar year, it will be December 31, 2022. All this means that you are already – or soon will
be – under the new rules.
As an overview of the new standards, let’s take a look at some “key concepts.” We will break
several of these down further in upcoming installments of “Finance Lab.”
Leases (defined): “A contract, or part of a contract, that conveys the right to control the use of
identified property, plant, or equipment (an identified asset) for a period of time in exchange for
consideration.” The leases that will be the focus of the new standards are those greater than 12
months in length. However, there are several factors – such as are the agreements “extendable”
– that may affect the analysis.
Then, under Topic 842, there are two types of leases: 1) Operating leases; 2) Financing leases.
One of the provisions of this new standard is that all leases must be recognized on a company’s
balance sheet.
For operating leases, ASC 842 requires recognition of a right of use asset (ROU) and a
corresponding lease liability upon lease commencement. Then, as you make lease payments,
those will be recorded as an expense and a reduction to the ROU(s).
Leases/contracts/agreements that qualify as financing leases under the new rules will be recorded
on your institution’s books of account (at the present value of lease payments, with potential
adjustments) as “ROUs.” Correspondingly, the liabilities associated with those ROU’s will be
recorded as a “payable.” Future effects on your Statement of Activities will include
Amortization expenses and Interest expenses – much like entries to record payments on bank
loans.
When the rubber meets the road, for most of us, this will mean lease agreements/contracts with
respect to copiers, audio/visual equipment, vehicles, internet equipment, etc. Contributions or
donations of facilities or other items would generally not be considered subject to a “lease” under
the new rules as they do not involve “consideration.”
For now, it is time to “inventory” all of the agreements and/or contracts that your institution is
party to. Then, there is a five-step process to analyze with of these contracts might require the
new treatment.

  1. Identify all leases
  2. Measure the term and consideration of each lease
  3. Classify Leases: separate “operating leases” from “financing leases”
  4. Disclose leases
  5. Separate leases and contributions.

Further, as you “inventory” your leases, you need to be looking for “embedded leases.” These
would be agreements/contracts that are ultimately classified as leases even though they are part
of another agreement.
We will continue to unpack this new standard in future installments. For now, get busy on the
“inventory” of your institution’s “leases.”

Written by
David C. Moja, CPAwww.mojacompany.com

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

Fringe Benefits: Bicycle to Work?

As Spring begins to bloom around our country, we tend to get “outdoor” tax questions.  Recently, we were asked about the “bicycle to work” fringe benefit.

Internal Revenue Code section 132(f)(1)(D) historically has contained a pretty nice opportunity for workers who choose to make their commute into a bike ride.  Prior to the enactment of the 2017 Tax Cuts and Jobs Act (TCJA), “qualified bicycle commuting reimbursements” of up to $20 per qualifying bicycle commuting month were excludible from an employee’s gross income. 

HOWEVER, the TCJA “suspended” this benefit through December 31, 2025.  Here’s the precise wording from the TCJA…

SEC. 11047. SUSPENSION OF EXCLUSION FOR QUALIFIED BICYCLE COMMUTING REIMBURSEMENT.

(a) IN GENERAL. – Section 132(f) is amended by adding at the end the following new paragraph:

‘‘(8) SUSPENSION OF QUALIFIED BICYCLE COMMUTING REIMBURSEMENT EXCLUSION. – Paragraph (1)(D) shall not apply to any taxable year beginning after December 31, 2017, and before January 1, 2026.’’.

Bike Bummer!

So, for now, we have to wait until 2026 to have this benefit be non-taxable (pre-tax) once again.

A qualifying bicycle commuting month was any month during which the employee regularly used the bicycle for a substantial portion of travel to a place of employment and during which the employee does not receive transportation in a commuter highway vehicle, a transit pass, or qualified parking from an employer.

Reasonable expenses were those incurred in a calendar year for the purchase of a bicycle and bicycle improvements, repair, and storage, if the bicycle was regularly used for travel between the employee’s residence and place of employment.

If your institution has continued to pay workers this benefit (or desires to begin paying it), note that the qualified bicycle commuting reimbursement would be taxable to the worker through 2025.

Written by
David C. Moja, CPAwww.mojacompany.com

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.

Donations of Labor or Services

With April 15th looming, a question we get several times a year goes something like this: Are donated services/labor tax deductible on the “donors” tax return per IRS rules?

Example:

College A is in the process of making budget cuts. A few of their current adjunct professors have decided to forego being paid for the remainder of the semester. College A plans to write these employees a letter thanking them for donating their time to the college. Can those adjuncts claim the value of their donated labor as a contribution for a tax deduction on their tax return?

It is a good question.  But the short answer is no. You cannot claim the value of donated services as a tax deduction (generally because the “donor” never included the income from those services as taxable income). Remember that unpaid “workers” essentially become volunteers, so there can be some legal considerations also.

However, as “volunteers”, the adjuncts may be able to deduct certain expenses related to their “donation” of labor/services.


IRS Publication 526 (Charitable Contributions) states:  “Although you cannot deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualified organization. The amounts must be:

• Unreimbursed,

• Directly connected with the services,

• Expenses you had only because of the services you gave, and

• Not personal, living, or family expenses.”

Q&A (Publication 526, Table 2):
*I volunteer 6 hours a week in the office of a qualified organization. The receptionist is paid $10 an hour for the same work. Can I deduct $60 a week for my time?
No, you cannot deduct the value of your time or services.

*The office is 30 miles from my home. Can I deduct any of my car expenses for these trips?
Yes, you can deduct the costs of gas and oil that are directly related to getting to and from the place where you volunteer. If you do not want to figure your actual costs, you can deduct 14 cents for each mile.

There are numerous misconceptions when it comes to donated services. In many cases, the service providers misunderstand the “non-deductibility.”  On the other hand, they often are not aware of the opportunity to deduct certain related expenses. If your college acknowledges this type of donation in writing, be sure to be thankful, but – as with all non-cash contributions – never include a value in the acknowledgement letter. It can be a blessing to your college if workers forego wages, but you should also carefully consider any legal implications that may arise from this type of arrangement.

Written by
David C. Moja, CPA www.mojacompany.com

The information provided herein presents general information and should not be relied on as accounting, tax, or legal advice when analyzing and resolving a specific tax issue. If you have specific questions regarding a particular fact situation, please consult with competent accounting, tax, and/or legal counsel about the facts and laws that apply.