Summer hours are in effect: Our offices close at NOON on Fridays from May 17th to July 12th
Please Note: Our office will be closed Wednesday, April 16th.
Summer hours are in effect: Our offices close at NOON on Fridays from May 17th to July 12th
Please Note: Our office will be closed Wednesday, April 16th.
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November 14, 2011
Colorado's Enterprise Zone program provides tax incentives to encourage businesses to locate and expand in designated economically distressed areas of the state. There are 16 Enterprise Zones and 2 sub-zones in Colorado. The taxpayer must be located in an enterprise zone to take advantage of many of these credits. To view the EZ Map, Click Here.
Here are the available credits:
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TAX CREDIT |
CREDIT AMOUNT |
FORM |
FACT SHEETS |
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Investment Tax Credit |
3% of equipment purchases |
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Job Training Tax Credit |
10% of qualified training expenses |
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New Business Facility (NBF) Jobs Credit |
$500 per new job |
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NBF Ag Processing Jobs Credit |
$1,000 total per new a.p. job |
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NBF Health Insurance Credit |
$200 x 2 years per new h.i. job |
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R&D Increase Tax Credit |
3% of increased R&D expenditures |
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Vacant Building Rehabilitation Tax Credit |
25% of rehabilitation expenditures |
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Manufacturing / Mining Sales and Use |
Expanded S&U tax exemption in EZ |
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Commercial Vehicle Investment Tax |
1.5% of commercial vehicle |
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Contribution Tax Credit |
25% of cash (12.5% in-kind) donations |
If your business will perform an activity on or after January 1, 2012 that will earn an EZ business tax credit, Colorado Revised Statute 39-30-103(7)(a) requires that your business receive pre-certification prior to commencing the activity that will earn the credit. Pre-certification is not required for the Contribution Tax Credit or the Manufacturing/Mining Sales and Use Tax Exemption.
Since pre-certification must be completed before activities are performed (i.e. purchase of equipment), we recommend that all businesses located in an enterprise zone pre-certify by 12/31/2011.
Forms DR0074, DR0076 and DR0077 can be certified electronically through the Colorado Web Portal (Click HERE to access.) Please remember to print a copy of the form before submitting. Upon receipt, an email will be sent approving your certificate, which you also need to print. Both the applicable form(s) and approval email must be sent to the Colorado Department of Revenue upon filing your income tax return.
Once a business has received the final "certified" EZ tax credit form, a business that is claiming an EZ tax credit will be required to file their income taxes electronically, unless the business will experience an "undue hardship because the taxpayer does not have access to a computer, or does not have sufficient internet access, internet capability, or computer knowledge to file income taxes electronically.”
(Effective January 1, 2011)
Colorado House Bill 10-200 sets a temporary requirement that businesses defer claiming an EZ Investment Tax Credit (ITC) that exceeds $500,000 in years 2011, 2012, and 2013. Businesses are “allowed to claim the deferred credit as an ITC carryover for 12 income tax years following the year the credit was originally allowed plus 1 additional income tax year for each income tax year that the credit was deferred.”
Since pre-certification must be completed before activities are performed (i.e. purchase of equipment), we recommend that all businesses located in an enterprise zone pre-certify by 12/31/2011.
The Colorado Office of Economic Development and International Trade (OEDIT) oversees the EZ program as staff for the Economic Development Commission. For more information on the EZ Program, visit the Colorado Enterprise Zone website (www.advancecolorado.com/ez). As your business consultant and tax advisor, we would also be happy to discuss any questions you might have. Call us at (719) 630-1186 or through our Secure Email.
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There is much talk about accountability, especially financial accountability for charitable and other exempt organizations.
Nonprofits need to embrace accountability to protect the organization and its people, to demonstrate openness and forthrightness in external dealings and to support the greater good. Embracing accountability also helps not-for-profits fulfill their fiduciary responsibilities to donors, constituents and the public. But how can nonprofits truly embrace this abstract term?
There can be no accountability without good governance. You must set in place the means and measures to keep your organization in compliance with all applicable laws and rules as well as best practices. And most important, your not-for-profit must keep in line with its mission and guiding principles, including integrity.
Author and nonprofit expert J. Steven Ott describes an organization’s governance as “a product of its purposes, people, resources, contracts, clients, boundaries, community coalitions and networks, and actions as prescribed (or prohibited) in its articles of incorporation and bylaws, state laws and codes, and the IRS codes and rules.”
When it comes to accountability and governance, the buck unquestionably stops with your board. Therefore, it’s critical that you help the board understand its responsibilities and focus its attention on carrying out the not-for-profit’s mission — not the process-oriented details best handled at the staff or committee level.
Keeping the financials spotless is critical. So make sure you conduct regular, board-approved audits that are attested to by the executive director and principal financial manager. Management should present internal financial statements to the board — or its audit or finance committee — and review performance against approved budgets on at least a quarterly basis. In addition, the board should establish and regularly assess financial performance measurements.
Your nonprofit must comply with all legally required reporting procedures — and certain financial practices that may apply to a specific activity. For example, one of your major funders or a national affiliate of your organization might require you to provide key performance indicators or other reports linking operational results with financial information.
As you carry out your initiatives, do so fairly and in the best interests of your constituents and community. Your status as a not-for-profit means you’re obligated to use your resources only toward your mission and to benefit the community that you serve. Programs should be evaluated accordingly, both in respect to the activities and the results or outcomes.
Communication is a big part of accountability. Your annual report, for example, should reflect your mission and summarize the year’s activities. It’s best practice for the report to also provide financial data for the year and other information, such as a list of board members, management staff and other key employees.
As a public document, your nonprofit’s Forms 990 for the previous three years will give your public a good overview of your organization’s exempt activities, finances, governance, compliance and compensation methods.
Your organization’s demonstration of accountability is likely to generate a positive response from your constituents, whether it’s in the form of donations, funding, volunteering or simply spreading the word about the merits of your nonprofit. And that’s the kind of outcome worth pursuing.
Do you bite your nails before your not-for-profit’s external audit each year? Does your staff start showing signs of anxiety in anticipation of the auditors walking in the door?
If this sounds like your situation, take a deep breath. Here are five tips for making the audit experience run more smoothly for you and your auditors.
Ask your auditor for a list of items they’ll need during the audit, with deadlines for each item, if such a list isn’t provided automatically. Talk to your auditor before the fieldwork if you have questions about any of the items, and let your auditor know right away if you won’t be ready by the agreed-upon dates.
Because surprise is a required element in the audit, you’ll also need to produce some information on the spot, such as specific expense reports, journal entry support, or grantor or program reports. But you can still prepare by establishing files during the year to collect the information you may need.
Your expectations of the audit should mirror your contract with the auditing firm. It will spell out what the audit will accomplish and your responsibilities.
Auditors once did accounting “clean-up” work for their clients during the audit, such as preparing year-end journal entries, fixed asset schedules, and various prepaid expense and accrued liability analyses. But today’s professional standards draw a clear line between accounting and auditing services, and your auditor must stay independent of your accounting processes, and as a result may be limited as to what he or she can do.
If there are accounting tasks you can’t do internally due to a lack of expertise, consider hiring a different firm to handle them. But if you’re fully capable and “own” the process, you can engage your audit firm to assist with certain analysis and adjustment information outside of the audit.
Draft and review your accounting and procedures manual. Self-assess inherent internal control weaknesses and determine the necessary internal controls to mitigate such weaknesses. Periodically ascertain whether your organization’s policies and procedures are being followed.
If your operations have changed or evolved, discuss these developments with your auditor during the year and update your policies and procedures accordingly. Waiting until fieldwork begins can delay the audit process.
Your auditor will apply risk standards during the audit. AICPA Statement on Auditing Standards No. 115, Communicating Internal Control Related Matters Identified in an Audit (SAS 115), defines deficiencies in internal control and other “material weaknesses” and “significant deficiencies.”
The auditor, for example, will look to see if there’s:
After reviewing the risk and internal control information you’ve assembled, your auditor could determine there is a “significant deficiency” or the more serious “material weakness.”
For any matter identified in the auditor’s SAS 115 letter, prepare a written response including whether you have taken or intend to take any action in response to the finding. This is important to the audit committee and board as they oversee the audit and the overall system of checks and balances.
Don’t let the annual audit be the only time you talk to your auditor. If you save up all your questions, it’s likely to extend the length of the audit.
Also ask if there are new accounting pronouncements or changes for the year so you and the board aren’t surprised after year end. Be proactive in understanding the new guidance and its impact on your next audit and future financial reporting.
Although the audit — and the preparation that precedes it — requires some work, the benefits are plentiful. The audit not only assesses your overall financial condition, but also can pinpoint problems with financial management and financial reporting, identify ways to reduce risk and strengthen internal controls.
Since the revised IRS Form 990 debuted a few years ago, many nonprofits have been reviewing the policies on their books, improving them, and adding new policies to their collections. Form 990 doesn’t state that these policies are required, but asking about them implies that they should be in place. Form 990 aside, the public — concerned by stories of nonprofit mismanagement — has put more emphasis on nonprofit governance, including policy adoption and enforcement.
There’s good news about this policy-making uptick: Because so many organizations already have policies on the books, you can learn from their successes.
What types of policies do nonprofits need? Form 990 asks nonprofits if they have policies on:
Policies on gift acceptance, investment practices and joint ventures also have become more popular in recent years.
Here is a selected listing of organizations and websites that can help you in developing or improving your nonprofit’s policies:
BoardSource. At http://www.boardsource.org, you can purchase policy samplers on a variety of topics. An extensive policy sampler contains 241 policies on 48 topics under the categories of ethics and accountability, board and board members, chief executive, finance and investments, fundraising, personnel, communications and committees.
Independent Sector. This nonpartisan coalition of approximately 600 national organizations, foundations and corporate philanthropy programs posts model policies at http://independentsector.org under “The Principles for Good Governance and Ethical Practice Resource Center.” You can download them for free.
National Council of Nonprofits. At http://www.councilofnonprofits.org, members have access to a variety of policy-related information, including a Form 990-related “governance practices” checklist and sample policies on conflict of interest, document retention and destruction, board review of compensation policy, joint venture and partnership, and other topics.
Although you should customize your own policies — rather than go with a boilerplate — there’s something to be said about not reinventing the wheel. Just be sure to carefully adjust policies from other sources to fit your operation. Make sure, for example, that the processes are practical for your size and structure, and that the titles and positions listed for policy oversight are correct.
Your CPA can help you customize a policy or review the one you devise. Your lawyer also should review any policy before it’s adopted.
DATE: Tuesday, December 6, 2011
TIME: 3:00-4:30 p.m.
LOCATION: The FIne Arts Center, Music Room
PRESENTERS:
Judy Kaltenbacher, CPA, Managing Tax Partner
Doreen Merz, CPA,Tax Manager
Jordan Empey, CPA, Supervising Senior Tax Consultant
For more information on this seminar, CLICK HERE
Date and location to be determined.
For more information on this seminar, check back with us.
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If your nonprofit needs to finance a project or program, you may be discouraged by reports that credit is still tight. But if you understand the choices available to you, your chances of securing financing will grow.
Bank financing generally comes in two basic forms: line of credit or term loan. Your nonprofit’s underlying cash needs will determine which one you should pursue.
A line of credit is a negotiated amount of financing you can draw against as needed. When the goal is to smooth out cash flows over the year, it’s usually the best option. The maximum amount is available to you, but you use only what you need.
If you obtain a $200,000 credit line, for example, you may use up to the $200,000 limit. Once the line has been paid down to $180,000, you again have $20,000 available to borrow. You can continue this draw-down and repayment cycle until the credit line’s term expires. (But check with your lending officer, because some banks are terminating unused lines of credit.)
Required monthly payments may be limited to interest expense, while principal payments can be made any time cash flow permits. So you have flexibility in how much you repay each month.
When you obtain a term loan, you receive a lump sum, usually for a specific purchase. The term loan application process is usually more complicated, and approval typically takes more time. Repayment is in installments, which means you’ll make equal monthly payments consisting of interest and principal throughout the entire loan term.
An alternative to a traditional bank line of credit or loan is a tax-exempt bond issued by a municipal, county or state government. The interest payments to investors aren’t subject to federal income tax and may be exempt from state and local income tax.
Tax-exempt bond financing may benefit your nonprofit because tax-exempt interest rates are generally two to three percentage points lower than on money raised from other sources. The Internal Revenue Code allows a nonprofit to use the proceeds, which are borrowed from the issuer, to further the organization’s stated charitable purpose.
The first step in planning a bond issue is to identify which local government unit has the ability to issue bonds on a nonprofit’s behalf. This unit (the issuer) then lends the bond proceeds to you.
The next step is selecting a team of specialists to work out the mechanics of the bond issue, including a bond counsel who’ll draft the documents and deliver an opinion. An underwriter advises on the bond issue’s structure and then buys the bonds from the issuer and offers them to investors.
Tax-exempt bonds make the most sense for larger capital investments. Although interest payments over the bond’s term can be significantly lower than on a term loan, the up-front legal and other fees can be substantial.
Also consider that the process may take longer due to more stringent financial disclosure requirements and tighter scrutiny overall. While a line of credit or term loan can be approved in a matter of weeks, bond financing can take six months to a year before the funds are received.
In any economy — whether credit is tight or plentiful — a smart nonprofit will research and weigh its options carefully before seeking financing. Your CPA can assist you in preparing the financial documentation, such as a multiyear cash flow projection and a project budget, which you likely will need to secure financing.
