News Updates

In light of the troubled economy, rising unemployment, the sub-prime lending fallout, and recent business failures, we thought that it was an opportune time to remind employers of what could happen if one fails to pay the IRS employment taxes withheld from employees.

Recently the Financial Accounting Standards Board published a Proposed Staff Position on the net asset classification of donor-restricted endowment funds of nonprofit organizations. This article outlines some of the highlights of the FASB’s position.

Section 1031 of the Internal Revenue Code provides that no gain or loss is recognized on the exchange of property held for productive use in a trade or business or for investment if the property is exchanged solely for property of like-kind that is to be held either for productive use in a trade or business or for investment. The IRS recognizes that many taxpayers hold dwelling units primarily for the production of current rental income, but also use the properties occasionally for personal purposes. A newly issued revenue procedure provides taxpayers with a safe harbor under which such a dwelling unit will qualify as property held for productive use in a trade or business or for investment under section 1031 even though a taxpayer occasionally uses the dwelling unit for personal purposes.

A new guide for charities and foundations from the Panel on the Nonprofit Sector

We understand that the Connecticut Department of Social Services has created an audit checklist to evaluate compliance with Section 6032 of the Deficit Reduction Act of 2005 and Provider Bulletin 2007-41. The Act requires providers that receive at least $5 million in Medicaid reimbursement to document their policies for detecting and preventing fraud, waste and abuse. Provider Bulletin 2007-41 calls for providers to, among other things, reference certain statutes and regulations in their employee policies. Elements of the audit checklist, as we understand it, are incorporated in the attached memorandum.

On August 1, 2007, CMS issued the final rule to update the SNF Prospective Payment System (PPS). Based upon the final rule, we have prepared and enclosed the RUGs rates for Connecticut SNFs.

The Internal Revenue Service recently published Revenue Ruling 2007-41, giving guidance to nonprofit organizations concerning political activities. Among other things the ruling outlines twenty-one factual situations that may be applied when evaluating compliance. The ruling is a “must read” for all nonprofit organizations.

A few weeks ago CMS issued a proposed rule associated with the SNF Prospective Payment System (PPS). If adopted, the rule would update PPS payment rates for FY08. The purpose of this memorandum is to provide information on how the proposed rule, if finalized in its current form, would impact payments to Connecticut nursing facilities.

The Spring 2007 edition of the Health and Human Service Reporter is now available on our website. The following were some of the articles covered in this editions: Rules for Deducting Charitable Contributions, Amendment to Long-Term Care Benefits, Pension Protection Act of 2006, DSS Increases Burial Allowance, and Reliance on Third Party to Pay Employment Taxes.

This year, taxpayers will find an extra line on their tax return for a one-time payment available by the IRS. Individuals, businesses, and tax-exempt organizations are eligible for the Telephone Excise Tax Refund (TETR) which is designed to credit or refund the tax paid for long-distance telephone service between March 1, 2003 and July 31, 2006.

With respect to audits of financial statements, the Auditing Standards Board recently published new standards associated with auditor communications. Among other things this article outlines how the new standards affect those charged with governance and the importance of two-way communication between the auditor and members of an organization’s governing body. Organizations, whether for-profit or nonprofit, are better served if management as well as those charged with governance have a clear understanding of their auditor’s responsibilities.

Embezzlement prevention and detection is not an exact science. All your best efforts may not prevent it and if it occurs it might not be detected for years! Nevertheless, it would be imprudent to rely on your instincts or hope that it will never happen to your organization. And, although you may not have the resources of a large business, there are indeed certain important yet inexpensive steps you can take to reduce your risks.

The Winter 2007 edition of the Health and Human Service Reporter, our quarterly newsletter, is now available on our website. The Health and Human Services Reporter can be viewed on the News page of the website.

The IRS has published a new Internet-based version of its exempt organizations workshop covering tax compliance issues facing small and midsized tax-exempt organizations. The workshop, entitled Stay Exempt—Tax Basics for 501(c)(3)s , consists of interactive modules on tax-exempt status, unrelated business income, employment issues, Form 990, and required disclosures, with links to related forms and IRS publications.

In 2005 the Medicaid Commission was established to, among other things, offer recommendations on the future of the Medicaid program. Its final report was issued on December 29, 2006. The report makes recommendations on the future of the Medicaid program designed to ensure its sustainability. Taken as a whole, the recommendations promote Medicaid’s long-term fiscal sustainability, while emphasizing quality of care. Key principles include recognizing the long-term value of investments in quality, supporting state flexibility, and changing how beneficiaries partner with the Medicaid program by encouraging personal responsibility for health care decisions and promoting and rewarding healthy behaviors. From the provider’s perspective, the report presents forward thinking ideas and opportunities.

The following summarizes certain important points expressed by representatives of the Department of Social Services during a presentation that occurred on November 16, 2006.

Under the Pension Protection Act of 2006, distributions from IRAs to supporting organizations, as described in section 509(a)(3), are not excludable from the IRA holder’s income. In addition, distributions from private foundations to certain supporting organizations described in section 509(a)(3) are not qualifying distributions and may be taxable expenditures for the private foundation. For this reason, organizations currently classified as supporting organizations, as described in section 509(a)(3), may wish to seek reclassification under section 509(a)(1) or (2). The IRS recently published guidance on the procedures to seek a reclassification. The guidance is reproduced here. Organizations should consult with a qualified tax advisor before they seek reclassification. You may direct questions to Vincent Ruocco, LLC, CPA at 203.932.2931 or vruocco@artcpas.com

IRS Notice 2006-96, released in October, provides temporary guidance on the new definitions of “qualified appraisal” and “qualified appraiser” for purposes of substantiating deductions for charitable contributions of property. The notice also provides guidance associated with new penalties for appraisals that result in substantial or gross valuation misstatements. This information may be useful for both donors as well as charitable organizations. Questions may be directed to Vincent Ruocco, LLC, CPA at 203.932.2931.

Recently, the Office of Inspector General (OIG) issued its Annual Report on State Medicaid Fraud Control Units. The report covers two fiscal years from October 1, 2003 to September 30, 2005. Among other things, it describes a series of examples involving Medicaid fraudulent activities, the types of providers involved, and the penalties imposed. It’s a must read by all compliance officers.

The purpose of this article is to provide information about the tax benefits available under Section 199 of the Internal Revenue Code. Section 199 allows a special tax deduction to qualified taxpayers involved in certain domestic production activities.

The recently enacted Pension Protection Act of 2006 contains a package of provisions to help prevent abuse in the charitable sector and provide additional tax incentives for Americans to give more resources to the charitable community. The following provides a brief overview of those provisions.

In July, 2006, CMS issued the final rule to update the SNF Prospective Payment System (PPS). Based upon the final rule, we have prepared and enclosed the RUGs rates for Connecticut SNFs.

We have added a new section to our website that includes the articles from our quarterly newsletter. The Health and Human Services Reporter can be viewed on the News page of the website.

The State of Connecticut Department of Social Services has issued a reminder that personal needs allowances of Medicaid recipients who reside in long term care facilities will increase every July 1st, by the cost of living adjustment afforded to Social Security recipients. Read the article to find out about other increases as well.

This article is a brief summary of The Energy Tax Incentives Act of 2005, which contains a series of federal tax benefits to encourage conservation and fuel efficiency by individuals and manufacturers.

This new section of the website offers a variety of seminar topics. In addition to meeting with clients, we also offer our services to trade shows, conferences, and company events. For a list of seminar topics, please see our SERVICES page.

Adoption of a conflict of interest policy is not required to obtain tax-exempt status. However, by adopting the sample policy or a similar policy, conflict of interest policies help to ensure that no person benefits inappropriately from any transactions in which the organization is involved. The following is a sample conflict of interest policy.

The Internal Revenue Service recently issued a publication that provides guidance for charities operating vehicle donation programs. Among other things, the guidance warns that a penalty applies if a charity knowingly furnishes a donor with a false or fraudulent acknowledgment for a vehicle contribution deduction of more than $500, or knowingly fails to furnish an acknowledgment with the required information.

Last June we posted the Panel on the Nonprofit Sector report. Due to the complexity of the issues it was considering and the short time available, the Panel and Work Groups continued to analyze additional areas related to transparency and accountability. This work led to recommendations in nine different areas, which are presented in this supplemental report.

Many employers outsource some of their payroll and related tax duties to third party payroll service providers. This can be a sound business practice; however it is important to know your tax responsibilities as an employer. This article contains helpful information on how to protect yourself and your business.

The Congressional budget resolution for fiscal year 2006 (H. Con. Res. 95) instructed several committees in both the House of Representatives and the Senate to recommend legislative changes that would reduce outlays from direct spending by about $35 billion over the 2006-2010 period. That process is known as reconciliation and its results are embodied in S. 1932. We have attached a summary for your review.

Not long ago, Congress enacted legislation to change the tax attributes of certain so-called nonqualified deferred compensation plans. Generally, nonqualified plans are deferred compensation arrangements for employees other than qualified pension and 401k retirement plans. Part of the new rules called for certain reporting requirements for taxable amounts. In that regard, the IRS recently released a special announcement to employers on how to report such payments. We have attached the announcement for your review.

On February 8, 2006, Governor M. Jodi Rell introduced the FY 2006-07 Midterm Budget Adjustments at a joint meeting of the Connecticut General Assembly. The following is a brief summary of major budget policy changes.

Although hurricane-related legislation (the Gulf Opportunity Zone Act of 2005 and the Katrina Emergency Tax Relief Act of 2005) dominated the tax news in the last quarter of 2005, there were many other important tax developments that may affect you, your family, your investments, and your livelihood.

In December 2005, the IRS announced increases in selected user fees including fees for letter rulings and determination letters for exempt organizations. According to the IRS, the Office of Management and Budget directed federal agencies to charge user fees reflecting the full cost of providing goods or services when the benefits to the recipient otherwise exceed those received by the general public. Many IRS user fees had remained unchanged for years. The IRS stated in its announcement that the new fee structure will more accurately reflect the resources expended. Although the fees have increased, the Service indicates that it will continue to be sensitive to the financial resources of smaller organizations. For a list of the changes, Click here.

The House Committee on Ways and Means recently adopted H.R. 2830, the Pension Protection Act of 2005. The proposed legislature, if enacted, would make significant changes in retirement plans affecting virtually all employees and employers.

On October 21,2005 Governor M. Jodi Rell gave a press release expressing her opinion on Legislative requests for tax returns. "Tax returns are one of the most personal documents any of us possess," Rell stated.

Find out about special events and seminars that the partners are involved in. Click on the Events Calendar link to the left to find out about upcoming events and seminars. Remember to check periodically for updates to the Events Calendar.

The following is a summary of the most important tax developments that have occurred in the past three months that may affect you, your family, your investments, and your livelihood.

In September 1999, the Office of Inspector General issued a notice concerning, among other things, excluded individuals and entities. More recent events have indicated to us that with the passage of time providers may have forgotten about the OIG’s warning. Therefore we have reproduced excerpts from the notice.

Ceasar Anquillare, Senior Partner at ART, was recently announced as the Business Development Consultant for The Community Bank, headquartered in Bridgeport, Connecticut.

View our Links page for a list of informative websites dedicated exclusively for nonprofit organizations.

In July 2005, CMS issued the final rule to update the SNF Prospective Payment System (PPS). Based upon the final rule, we have prepared and enclosed the RUGs rates for Connecticut SNFs.

President Bush recently signed the new Energy Act of 2005. Find out how making energy saving (and some energy creating) improvements can lead to new and substantial tax incentives.

Part II of a multi-part article about how to use insurance to compensate management personnel. Part I is also available on our News page.

This discussion of like-kind exchange rules will outline how you might be able to dispose of appreciated property without being taxed on the gain.

The Panel on the Nonprofit Sector has finally issued its report on how to strengthen the sector's accountability, transparency, and governance. The report includes 15 major recommendations that, if implemented, would have an impact on virtually all nonprofit organizations that file Form 990 or 990-PF. (NOTE: File is 740k)

The latest estimates (as of June 21, 2005) associated with sBH 6940 as amended by HB 7000 and related nursing facility cost adjustments included in SFY 2006 budget according to the State of Connecticut, Department of Social Services. The following is both the provider tax summary and detail by home.

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