Jun 20, 2016
Nonprofits aren't businesses, but they do share some of the qualities of companies. They deal in cash and credit, they offer a place of employment and they make promises about financial investments. It's for these reasons major regulatory changes to labor and taxes affect nonprofits, and organizations have to prepare their infrastructures for new rules coming out of Washington. Here are three stories from the recent news that could affect day-to-day operations:
Organizations must prepare for new overtime rules
Starting December 2016, the U.S. overtime pay threshold will increase from yearly salaries of $23,660 to $47,476, according to Lancaster Online. An estimated 4.2 million workers will become eligible for overtime pay and other bonuses after the regulations go into effect. Nonprofit employees may be especially affected because management in mid-sized organizations often have salaries in the low $40,000 range and work long hours.
The Hill explained how some employees in nonprofit positions will not be affected by the changes. Directors who perform interstate commerce, however, fall under the enterprise rules, as do organizations raising money through businesses like thrift stores. Nonprofits should study the rules closely to see if they need to raise the salaries of certain leaders to avoid extra expenses or prepare financials and staffing for new overtime requirements.
This necessitates a stronger focus on an organization's cash flow. Everything from fundraising hours to payment processing should feed data directly into a visible intelligence systems. It's smart for nonprofits to integrate CRM systems with donation management software to see if the amount of money coming in can accommodate the need for staffing.
Nonprofits don't have to name donors in taxes
The choice of what nonprofit to support can indicate a lot of about a person's political interests and values. The St. Louis Dispatch the Internal Revenue Service allowed information to leak about conservative supporters of a traditional marriage organization and created a public scandal. Stories like this one have caused the House to vote in favor of banning the IRS from forcing nonprofits to name names in tax returns.
This means nonprofit organizations don't have to share donor identification data with the IRS and can keep their gifts anonymous. The opponents of the new bill said this lack of transparency will limit the government's ability to enforce tax laws, but supporters believed the privacy and first amendment rights of donors were more important.
This sense of security is important to the modern donor. It's critical for organizations to demonstrate their ability to protect the financial and personal data of people who work with the nonprofit. The new law demonstrates how important information is in the modern political climate, so nonprofits need effective security solutions to accept donations online and manage data.
IRS encourages program-based investments
While a nonprofit's primary interest should be in making an impact on its community and the world at large, it does have other financial considerations to keep in mind. The need to pay for overhead, staffing and other costs means many nonprofits must invest capital to secure future cash. In 2015, The IRS released new rules to encourage putting money to active use through financial incentives, according to the Denver Post.
The IRS encourages financial action through "social investments." This is when nonprofits put money toward projects and other other opportunities that may offer a return on investment while also advancing charitable objectives. This could mean investing in a new drug designed to help poor populations, community recycling centers or small businesses in areas that just suffered through natural disasters. Organizations should see if they can make smart financial decisions while contributing to their central cause instead of choosing one or the other.