Significant Changes Impacting PA Non-profit Organizations

As many of you are aware, the Tax Cuts and Jobs Act of 2017 changed the itemized and standard deduction rules for individual taxpayers beginning with the 2018 tax year.  The Act essentially doubles the standard deduction for individual taxpayers.  For good reason, many nonprofit organizations have expressed concern about the negative impact this might have on charitable giving by individual taxpayers that may no longer have a tax incentive to give.

With the potential of reduced support facing nonprofits, organizations required to register with the Pennsylvania Department of State’s Bureau of Corporations and Charitable Organizations (PA BCO) have been provided some relief in its annual reporting obligations.

Pennsylvania has taken steps to reduce the cost burden associated with compliance reporting requirements mandated by the PA BCO.  Pennsylvania Acts 71 and 72, signed into law late in 2017, increased the thresholds of financial statement reporting requirements for nonprofit organizations. 

The new thresholds are:

Gross Contributions

Gross Contributions

 Financial Statement RequirementsType of Financial Statements Required

Below $100,000 Optional
$100,000 to $249,999 Compiled, Reviewed, or Audited
$250,000 to $749,999 Reviewed or audited
$750,000 or more Audited

These thresholds will significantly reduce the number of nonprofits requiring an audit, thereby reducing compliance costs for nonprofit organizations. Many nonprofits will benefit from this legislation by being able to reduce the level of service needed to be performed on their financial statements and ultimately reduce their costs associated with the higher level of services required from an independent CPA.   The new thresholds will be effective for nonprofits with fiscal year ends of 3/31/17 and later.

Although your nonprofit organization may now be able to comply with the PA BCO mandated reporting obligations with a lower level of service, you may want to continue with audited or reviewed financial statements for other purposes.  For example, the Lancaster County Community Foundation still requires reviewed financial statements for nonprofits that desire to participate in the Extraordinary Give.  Also, grantors often require audited or reviewed financial statements from a nonprofit organization applying for a grant.  Nonprofits should carefully consider all reporting and compliance requirements from all funding sources before changing the level of service performed on their financial statements.

Related Article: FAQS About PA’s New Audit Requirement Thresholds

Please contact us if you have any questions concerning the new legislation or which level of service is most appropriate for your organization.

 

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