Name: Live Webinar: 2026 Not-for-Profit Executive Forum
Uploaded: 2026-11-05T16:16:10.860Z
Duration: 2 h 20 min 36 s
Description: Live Webinar: 2026 Not-for-Profit Executive Forum

Transcript for "Live Webinar: 2026 Not-for-Profit Executive Forum": Good morning, and welcome to our two thousand and twenty six not for profit executive forum hosted by PK for Connor Davies. Before we get started, I'd like to go over a few housekeeping items so so you know how to participate in today's call. We're pleased to offer live closed captioning throughout the webinar. To access the captions, please use the stream text link located in the chat section of your attendee panel. You will have the opportunity to submit text questions to today's presenters by clicking on the Q and A tab on the right hand panel. You may send in your questions at any time during the webcast. We have a lot of material to cover, and if time permits, we will make an effort to respond. If we cannot get to your questions, a response will be sent post event. This webinar is offering two credits total in... For CPE, one credit in tax and 1.5 credits in c... In specialized knowledge. Polling questions will be launched in the polls tab on your right hand panel, and you will need to respond to 10 of the polling questions to receive credit. Polling questions will only appear as they launch. Please pay special attention as these polls will be launched periodically, and we will close them after a certain amount of time. CPE certificates will be issued within eight to ten days via email. A copy of the PowerPoint slides and a recording of today's webinar will be made available to you via email four to five business days post event. And finally, as we near the end of the webinar, we do have a very short survey which will be prompted, and your response is greatly appreciated. At this time, I would like to introduce Mark Pisco, co practice leader of our not for profit services. Mark. Oh, great. Thank you, Harleen. Good morning, everyone, and welcome to PKF O'Connor Davie's twenty twenty six Not for Profit Executive Forum. Our theme is Balancing Accountability, Change, and Resilience. I'm pleased to be your host this morning, and on behalf of our team, thank you for joining us. Today's boards and management teams face demanding responsibilities, facing financial pressures, keeping pace with compliance requirements, and meeting growing expectations and transparency, all while advancing their missions. That's why today's theme, accountability change and resilience, is so relevant. Accountability builds trust, responding thoughtfully to change supports sound decisions, and resilience helps organizations sustain their work through uncertainty. This morning we'll consider some practical questions, such as how can boards strengthen oversight and support effective leadership? How can CFOs build flexible budgets and provide clear, timely financial information? And what legal tax and regulatory development should organizations be preparing for? Our goal is to offer insights so you can put to work in your boardrooms, leadership meetings, and daily operations. We're delighted to welcome our special guest, J. L. Lillian, partner and co chair of the nonprofit tax exempt organizations practice at Loeb LLP. Jason brings valuable perspective on federal and all and New York state legal and governance issues facing nonprofits, and we're pleased to have him with us. Joining Jason are my PKF O'Connor Davies colleagues, Alexander Buckholz, who's co practice leader of our not for profit, practice services area, Garrett Higgins, who's partner in charge of our exempt organization's tax and advisory services, and even a partner as well in the exempt organization tax and advisory services. So let's get started. We've got a full agenda. Our first speaker will be Jason Lillian. And before I bring him up here, I wanna I wanna go through his resume. I have to read this because, there's just a lot here, and then hopefully, I don't take too much of his presentation time, but but just so you know who Jason is, if you don't know who he is, he serves as the cochair of his firm's nonprofit and tax exempt organizations practice and advises clients throughout the not for profit sector on corporate governance, compliance with state and federal nonprofit laws and regulations, charitable giving and endowments, internal investigations, regulatory enforcement actions, corporate transactions, charitable fundraising, and cause marketing. So the full gamut there of nonprofit services. He is a former bureau chief of the New York State Attorney General's Charities Bureau. He oversaw more than 100,000 nonprofit organizations and developed legislation and regulatory initiatives that serve as national models. As the head of the largest state charities regulatory office in the country, he was responsible for bringing nationally prominent enforcement actions, and led efforts to resolve some of New York's most high profile and complex trust in the state matters. Jason was also the principal author of the New York Nonprofit Revitalization Act of 2013, which spearheaded the most comprehensive reform of New York's nonprofit laws since they were enacted in '19... In the nineteen sixties. The law imposes New York governance, new governance responsibilities on nonprofit boards or of directors and new procedures for corporate dissolutions, mergers, asset sales, and other transactions. By the way, that's one of the reasons, we meet with the, or we are required to meet with the, audit committees and board of directors to discuss our audit plan before the start of the audit. It's part of this, legislation. Jason also authored provisions of the New York Prudent Management of Institutional Funds Act, NEDMIFA, which governs how non for profits can invest and utilize their endowments and other donor restricted funds. As head of the Charities Bureau, Jason was responsible for the development of the guidance now widely used concerning the use of endowments and other restricted funds. Jason also worked on various initiatives that further the development of corporate governance best practices. He's also been a national thought leader on these subjects having written numerous articles and publications and having frequently appeared as speaker at national conferences. He has served as a member of numerous boards, including the board of directors at the National Association of State Charity officials and served as a commissioner on the National Association of Corporate Directors Blue Ribbon Commission on the role of the board in corporate strategy. As a lifelong New Yorker, Jason was instrumental in the formation of the National September eleventh Memorial and Museum, the nonprofit entity established to finance, own, and operate the official memorial and museum at the World Trade Center site. He served pro bono as its counsel to the board, treasurer, and secretary from the entity's inception in 2003 until he was chosen to head the Charters Bureau. And finally, he was also involved in the establishment of the Lower Manhattan Development Corporation, the statewide city agency or or actually the state city agency, charged with overseeing the rebuilding of Lower Manhattan and serving as pro bono counsel to the board. Jason, I said a lot, but as you can all hear, that is quite an extensive, resume, and and and I would consider Jason to be a celebrity nonprofit lawyer. Jason, if you please join me on stage, we're ready for your presentation and and really look forward to, your words of wisdom. Thank you very much. Thank you, Mark. And we'll thank you for that introduction, Wiles. I appreciate that. And, welcome, to the event today, and thank you for having me. I... What I'm gonna try to do today is give you an overview of, what's happening on the federal scene, as well as the state scene. I'm gonna try to tie them together. There's going to be a lot of content later, today focused on the federal rules and federal proposals. So I'm gonna, just touch on them and focus primarily on, where the intersection is with the state and under some overarching legal themes. But, you know, the the short version here is that, the federal and state, governments are not always, pulling in the same direction, as I'm sure you're all aware. And a lot of the folks in this room, of counsel as well and boards are sort of caught in the middle as to what to do. We're gonna go through some of that today, but let me just, get right into this. So in terms of the federal landscape, as I I... I'm sure you you... You're experiencing, in in terms of your work, but also just as a, as an observer, there's a rapidly changing federal landscape. Federal policy is changing, fast, and the legal ground, is uncertain. I think the key theme here, and I think we're all experiencing, is this the federal government's relationship with the charitable sector is being redefined. And long standing assumptions, about policy, about enforcement, about focus are are being tested. And what's sort of different, today is that federal tax rules, federal grand terms, federal policy goals are now being, are converging. They're being used to reinforce each other. It's not that policy is just changing. It's that the federal government is using all these tools together in a way they haven't in the past. Take DEI, for example. We're gonna get into this in a in a few minutes. It's a policy priority, from all the executive orders that came out last year. It's also a tax issue, because the IRS has proposed rules, which we'll get into in a few moments, tying exemption to it. And it's a grant issue too because you have to certify compliance, to get funded. So, for everyone, listening in, especially the finance teams, this means that one federal priority can show up in your nine ninety, your audit, and in your grant certifications at the same time. So the people handling these various functions, need to be in touch. It needs to be much greater coordination, than in the past. How long these, changes will last and and their legal limits are still being unsettled. A lot of this is being, is still being fought out in court and will be, as... You know, for a while. And and and really nobody knows where this is gonna fully land yet. So organizations should continue to plan, for change as well as a lot of uncertainty. And that... And and from a planning standpoint, from an oversight standpoint for those board members in the room, you know, that uncertainty is the hard part. You have to make decisions now, without knowing what will survive, what won't, and and what level the level of risk your organization is willing to take, and what your risk profile is. So with that being said, last year, 2025, you know, was, was the year of executive orders. There are 225 issued. A number of them, impact the nonprofit sector. There's, as I think you've, I'm sure, experienced or read about in one form or another, there were executive orders on DEI. One's on illegal discrimination and merit based opportunity. Doge, a term, it's been a while since some of we... Some of us has heard that term, but it was a, executive order on Doge cost efficiency as well as on federal grant making, numerous others. But a number of, the executive orders, impact the nonprofit sector. And where things stand today, look, the pace of executive orders have slowed. They, you know, have moderated, whereas last year was about the rollout of these orders. 2026 is really more about implementation. The focus is moving to rulemaking, to guidance, to enforcement. The orders have slowed down, but I wouldn't take that as a sign that things are calming down. The action has moved to the agencies. So we're gonna be seeing rules and guidance enforcement, coming, accelerating. And, of course, where we're really gonna see this, is in the courts. The administration has, intentionally employed a litigation strategy, recognizing some of its orders and some of its actions, are pushing the limits, but they're, you know, pushing these issues into the courts. Major legal challenges, to how these executive orders are being carried out remain. The one big beautiful bill act, another term, if you remember, that is still being rolled out. It has several provisions that are aimed squarely at our sector. We'll get into a couple of those in a moment. And the, the the recent, the recently issued priority guidance plan for, 2627 includes a significant focus on, on tax exempt, organizations. Now I'm not gonna spend a lot of time on this. Eva's gonna get into this in much more detail later on. Again, I just wanna touch on some, themes, here and, you know, and for those who are... I'm sure many of you are familiar with the... With this guidance plan that's issued each year, it's the IRS's to do list, if you wanna call it that, for the year. And this year, it has a lot to say for the nonprofit sector. It's a longer list this year, for tax exempt organizations. There are, several exempt organizations items on this list that are that are new. Fiscally, ones focused on fiscal sponsorship, which is something we'll get into touch on a little bit. Donor advised funds arrangements, there are some changes as well as group exemption letters. I would, just highlight at the, at the outset that being on this list doesn't change the law. It means guidance is coming. It means proposed regulations, notices, nine ninety form changes, and that the list doesn't also give dates. Some of these items can sit there for years. Some of these have sat, here for a while. But they can also, and this is the important point, move up quickly, when they're a political priority. And we're seeing that in particular on the first, on the first, item on this list, which is, racial discrimination in public schools. And I'll say this one's a big shift. This is an important one. Under, this is a proposal that, proposed rule that was recently issued. The, you know, under the proposal, a school that considers race, a private school that considers race for any reason, even diversity, could lose its five zero one c three status. Now the IRS has long denied exemptions to schools with racially discriminatory practices or policies. That rule goes back to the Bob Jones era for those who are familiar with that, that case. And it was historically aimed at colleges that excluded minority students. This proposal reverses direction to a certain extent, considering race for any purpose, including diversity. And, and and that would count as discrimination under the rule. So it's sort of being turned around now from its historical approach. A couple things just to point out here, because you're going to be hearing a lot about this in the coming year. The proposal also goes well beyond the supreme court's decision in students for fair admissions. That was the case that, decision that bars colleges from receiving federal funds, that receive federal funds from using race, as a factor in emissions. The proposed rule goes well beyond that. It includes scholarships. It could also, reach clubs, it could reach affinity groups, educational policies, outreach, even classroom activities. You know, so the proposed rule is very, very broad in scope. And, and, I I just wanna just just hold on that scholarship point for a moment. I'm gonna come back to it when we get to New York. But we're also just not talking about federally funded colleges and universities, as was in the Supreme Court decision. But around, almost 18,000 schools could be affected from K through 12. So this is a pretty significant, rule change if it were to become, were to be, implemented. The comment period on the rules just ended a couple days ago, received about 2,500 comments on this. It was a very, popular, if you wanna call it, comment period. But, well, you know, while it's possible we're gonna see changes, and the effective date is intended... Targeted for 03/31/2027, you know, if the core proposal remains in place as we expected will, we're gonna see many change... Legal challenges as to this. So it will almost certainly be delayed. So I I... This is one that I would just pay attention to, but not, pay attention to monitor because it would have a significant, could have a significant impact, but it's gonna be a while for this, plays out. I'm gonna just touch on a couple other things just to keep the, keep us on track. Certifications, federal certifications on funding. You know, their executive order, was issued last year directing agencies to require that grantees certify that they comply with federal anti discrimination laws. There's litigation over that that's over that certification that continues. Just wanna just point out there are two, proposals, government wide proposals that are pending right now. One at the GSA, one at OMB. The OMB one has been blocked until at least December 11, but, they would expand the certification. The OMB rule would focus on, more on legally, DEI, including gender ideology, while the GSA is focusing on other aspects including, illegal immigration and terrorism, and that's a different focus. But, again, this is an area of continued focus, and interest on the federal government level, on the administration I should say, and we're going to continue to see some more activity, in this space. Just a couple other points here which I believe he was going to get into later. There is at the federal level, ongoing focus on fiscal sponsorships. Again, I I just, you know, wanna go back to what I was saying earlier, this convergence of, you know, tax and and and policy. You know, this is another area that, you know, fiscal sponsorships, you know, is is been an area of focus on on congress, area of focus on the, on on on the administration as serving as, improper conduits in their mind, of funding, and creates an opaque, opaque disclosure as to, find both funding and as well as, projects. There are, there are... IRS has announced plans, to change the form nine ninety require much more, much more extensive disclosure around fiscally sponsored projects. There's also a bill that's been introduced, that's cleared ways and means on this issue as well. Look, as a as an overarching theme, obviously, the midterms are going to affect quite a bit of what we're talking about today. Could have, in one way or another. But, just understand this bill is out there, that it moved in in this current Congress, and the question is whether it's going to continue to move. But fiscal sponsorships is an area that I will say has transcended both federal and state level. We're going to talk about this in a few moments. I would just keep on your radar federal sponsorships. To the extent you, or your organizations or your clients are engaged in fiscal sponsorships, understand that there will be some form of rule making or guidance coming whether in the federal or state level that will promote us transparency, and greater reporting. It's gonna happen in some level, in the near future and just, starting to inventory those projects, and and have greater awareness of this, would be, advisable. I'm gonna skip this a little bit. I think Eve is gonna get into this, but, both in terms of the OBBA and and other guidance, there are, excise tax proposals, that have been implemented, will be implemented regarding executive pay that expands the excise tax on compensation, for, highly compensated individuals. It's just the point there is it's gonna expand beyond. Currently, it targets the five highest compensated employees. The, proposed excise tax going forward is gonna cover a much greater greater, group. And then there's also, in the, in the OBBA, there's also a change in the endowment tax. Again, he's gonna get into this later. I don't wanna spend too much time on this now. But just awareness that there are still, implementation... That bill is still being implemented in a number of, number of fashions. So let's just turn to New York now, and try to connect with what I just mentioned to what's happening in New York and and bring... You know, in in terms of the New York, in terms of the the the New York, landscape. I... You know, it's it's, it's an interesting period here. The states, particularly the blue states and particularly, for those of us who are in New York, have seen the states becoming central players in challenging a lot of what's happening on on the, on the federal level. There is a pronounced, blue state red state divide at the state AG level. You know, you see, the blue state AGs bringing coordinated challenges, to a lot of the Trump, administration's proposals. And the New York AG in particular, is is leading that effort and is, has obtained, numerous injunctions and has led many... And led, I think it's 60, 70, more cases, in this regard. And that activity and that divide, I think, is gonna be continuing. It's not going in... It's not going away. But what is it, produced for for nonprofits and those who revise them is a is a, you know, a significant level of, of confusion, you know, as to where the state AG's views might contrast with the host of the federal government, particularly of state AGs... State, blue state AGs. And, you know, in in many respects, the federal state positions are in direct tension. I'll give you... Let's just talk about the race based discrimination, initiatives, for a moment. The federal government treats, race based reference... Preferences as illegal discrimination, as we just talked about. On the other hand, state charity law protects owner intent. It sharply limits, leasing or modifying gift restrictions and requires court approval to do so. The New York AG, and other AGs sent a letter, last year, and have, continued, this this viewpoint whole... You know, regarding charitable, scholarship funds. And what that, and what that that letter, said is where a donor has expressed an interest... And I'm sorry, an intent to restrict a scholarship gift to benefit members of protected classes, State law requires good faith efforts to honor that, intent. So on the one hand, you know, you have the federal government saying these, race conscious scholarship programs are illegal, and the AG, is, is creating at least an expectation, that, nonprofits, are gonna make good faith efforts to honor, the donor intent. So institutions using scholarship funds as an example, institutions holding restricted scholarship funds are caught between these two regimes. And, I think it's important, as you're thinking through what to do here, you know, to get advice before changing any of these terms. And and so what does it mean? What does the AG really want you to do? For those of you, in New York and these states that have signed on to this memorandum, what they want you to do is keep honoring the restriction. If that becomes, impossible, they want you to try to start, focusing not on the purpose, but how the gift is administered, before changing the purpose. Then only as a last resort would you seek... Go into court and seek, narrowly tailored, sigh pray relief. So, you know, so you have if you have to change something, they want you to, you know, change the method, not the purpose. But that doesn't... It's not really that, helpful. Practically, that means they're suggesting maybe moving funds to another institution that can honor the restriction or pooling and matching, picking students on neutral criteria first and then deciding which fund play pays the award. But even those changes need to go to court because they're changing the terms of the restriction. So to be clear, the AG really... The AGs, the New York AG as well, isn't really offering a, you know, do it yourself fix. You know, moving the fund or changing who benefits means going to court. Their point is more about asking the court to, change the method first, rather than changing the purpose. So it's really not, in my mind, all that useful. I will say that I was at a conference a couple of weeks ago of the National State Associations... Basically, AG regular charities regulators around the country. And the takeaway there is they're now sort of moving away somewhat from the guidance and encouraging, charities that have these restricted scholarship funds to basically, hold tight for a bit because they're expecting litigation coming shortly that will, especially regarding the new IRS rules that will help, define responsibility in this area and provide greater guidance. But the the the bottom line is that nonprofits, in situations like this, are really caught in the middle and it's not a it's not a great, position to be in right now. Let me just talk to you a little bit about the charities bureau. I'm gonna try to give you some practical, practical points here on, on... And tell you... Help you to sort of stay out of the, stay out of the crosshairs a little bit, here. So, look, I led the charities bureau for for, for a long time. I know it can be a, a difficult, a difficult office, to navigate, but I wanna just highlight a a a few things for you here. We're gonna get into some of the enforcement, focal points in a moment, just to make sure everyone is aware. I I just... One one... So the charity bureau has six main functions, enforcement, track transactions, trust and estates, fundraising, registration. They also do public education and guidance. Two areas where I think there is most attention and where most of their staffing has been concentrated in recent years has been in enforcement and in transactions. I'm gonna hold for one moment on enforcement, so I'm gonna go into that a little bit more depth. But I'll just note... Make one note on, on transactions. It is a challenging period of time, for any nonprofit trying to get a transaction through the AG's office. Just for those who may not be aware, New York is one of the few states in the country, and really the, I would say the only state that has the level of AG or court involvement in transactions that it does. Virtually any major transaction, requires either AG or court approval. And the AG has taken a very expansive view of what, of when approval is required. For example, the statute requires that AG or court approval is needed when an organization sells substantially all of its assets, all or substantially all. Now in a plain English definition of all is substantially all, you would think that would be a really high percentage. But the AG's position is it doesn't, need to be. Generally speaking, the rule of thumb is you're approaching around 50%. The fair market value of the assets you're trying to transfer or dispose of represents 50% of the total asset value. You should be talking with them. But the... But where they take a, I would say, again, a more expansive view is is in their view that that the that standard is not just a quantitative one, it's also a qualitative one. And whenever a transfer of assets may... Or disposition of assets may impact, an an organization's ability or impair an organization's ability to carry out its mission, carry out its activities. If it's selling a major building where, functions, are significant functions are carried out. Even if that building doesn't represent, you know, a majority of the assets or significant, substantial majority of the assets, it still views, court or AG approvals required. The reason this is, I would say, has become challenging, it's not just because there are... It encompasses many more transactions, but it... It's it's it's it's... They're really backed up right now. It is taking a very long time to get any transaction through the AG's office. So it's not just asset sales. It's mergers. It's dissolution. It's amendments to certificates of incorporation, which also require attorney general approval across the board. It's taking, an... A very long time to get the transactions reviewed. It typically takes, at least thirty days for the matter to even be assigned. Then they're, telling nonprofits to expect at least ninety days for the first round of comments. Often, it's well beyond that. And then the second and, you know, successive rounds of comments are taking a long time. So anyone who is, anyone who is, involved in a transaction, considering a transaction, it's really important to factor in, a significant amount of, significant amount of time. A couple of things here. Trusted estates, we're gonna get into this a little bit while we we talk about NEMIFA. Registration, I will say in in some respects, registration, this is filing your... Registering with the charities bureau filing annual forms has improved. In some respects with their new... Relatively new electronic system, it's, it's, it's gotten worse. The switch in the AG's website, to some new new technology and a new platform the last couple of years, a lot of organizations feel it's complicated this situation. But, what I wanna do now is just focus a little bit for a few minutes on the common areas of of enforcement focus. And this is if you're trying to stay out of the crosshairs of the AG. And, you know, I mentioned before how, you know, you know... Well, I I would say, look, I I... I'll say about the New York AG's office. They're the largest enforcement office, charities enforcement office in the country. Many other states look to the AG to bring cases and raise issues and to create teaching moments, if you want to call them that, for the nonprofit sector. The goal here is to try to stay out of, out of their, their reach if you can. Because once you once you're in an enforcement posture with them, it can get very difficult to to get out of it. It's just, very difficult at times. And the areas where I would say, sort of the low hanging fruits here... Well, let me take a step back. Big picture, for a while the AG's office was focused on fundraising. You saw a lot of, you know, a lot of press releases coming out of the office. Even when I was there, it was a lot of focus on on fundraising, fundraising fraud. You've seen a significant shift in the last four or five years into governance and fiduciary duty issues, oversight issues, less emphasis. I'm not saying they're not doing fundraising, but there's a greater, emphasis on governance. And part of that has to do with the nonprofit revitalization act. It gave the AG's office a lot more tools to use, and remedies, to, powers, than it had before to enforce a law. And the areas where we're seeing, where I'm seeing, and my clients were seeing a lot of active... Continued activity, Conflicts of interest related party transaction inside of transactions remains the lowest of hanging fruit. Very important that, organizations adhere to the conflict of interest and related party transaction rules that are set forth in seven fifteen and seven fifteen a of the not not for profit corporation law. Make sure you have a compliant policy. Make sure the disclosure statements, the annual conflict of the disclosure statements go out, and, and you receive them and then they're not just put into a draw, which unfortunately a lot of organizations do. That conflict process is an active and live process throughout the year. It needs to be reminders, that, as potential conflicts arise during the year, they need to be considered. There needs to be active committee involvement. Typically, it's the audit committee that's involved in reviewing disclosures and reviewing these, matters as they come up across the year and training in this regard. This is the number one area where, you know, where the AG, there's interaction, interface with the AG's enforcement section and the greatest risk enforcement section. And it's very difficult, to, escape from, their reach when you're having an insider transaction. Board governance and fiduciary duty compliance, again, I'll just reiterate, is an area of focus for them. You know, quality of the oversight and then, again, when it comes to duty of loyal... Fiduciary duties of loyalty, are are... Is the board and are the officers of the organization, acting in the best interests, of the organization and not any personal interests. Executive compensation, this remains an area of focus. Just a few points here. We're seeing most of the activity, their interest, severance packages, severance payments, exit packages, making sure they're reasonable in amounts, that they were, considered not just on the way out the door, ideally, but but, earlier on with the benefit of, outside compensation consultants, catch up payments is an area where almost, you know, where you can... Can't... May expect some scrutiny, where, towards end of someone's tenure, long standing CEO, long standing officer is, leaving and there's a recognition, oh wait we should have put together an incentive plan or a deferred comp plan years ago, never did and and there's an attempt to make up or provide a catch up payment for that person becomes difficult, to bring that within the zone of reasonableness sometimes given the amounts here. Again, definitely need a, definitely need an outside consultant, to help on that. And remember, we're talking about total comp, all elements, including deferred comp, any special, any special payments, any special bonuses. And one thing I'll just say on on on just outside consult... Compensation consultants, because I think this is important. Many organizations believe that relying on the process rebuttable presumption framework that the IRS has set forth, to help protect organizations, against IRS excess benefit, you know, executive compensation challenge is sufficient for state law. And in many ways, it it might be. Right? The process, that that forty nine fifty eight follows, you know, independent border committee review obtaining, independent... Obtaining benchmarking data to independently objective review, you know, proposed compensation against peer groups and against comparable, individuals positions at comparable organizations and then documentarying that those comp decisions contemporaneously. That process, is is a good one and is one that will often, protect, boards and protect organizations from AG claims, compensation related claims. But the AG has made clear in matters that, I've been involved in that reliance on compensation consultants alone is not enough. That, that, that that reliance needs to be reasonable. So even if you have a comp opinion, a comp consultant saying someone's multimillion dollar severance package is reasonable for purposes of the Internal Revenue Code, the AG's office may question that and make sure that, it still comports with fiduciary duty requirements and expectations under state law. One other aspect I'll just talk about for a moment here, restricted gifts. We're going to get into this briefly in a moment. Restricted gifts is something that we're talking about both in terms of use and spending, endowments, and, you know, use as well. It remains an area of focus, and the AG continues to, not just in New York, but states across the country, continue to actively monitor compliance with with NEMIFA's rules and with, any, estate or trusted estate, related restrictions as well. Moving now to the... There was... So just a couple recent enforcement actions. Again, there are a couple cases that are highlighted here. These again are focused on misuse or use of charitable assets. These are high profile matters. The NRA is probably the most high profile matter, that the AG is as focused on, but they're... The AG... This demonstrates how, how the AG is interested in board oversight, in protecting against insider transactions, and the quality of, the quality of, quality of oversight as well to protect the organization from, diversion among other things. I'm going to just mention a few areas here that the AG is focused on. To the extent any of anyone in this room is in, works for, or assist hospitals, the AG is focused on charity care, which is providing hospitals must maintain certain financial assistance programs to benefit, to benefit, to benefit the lower income individuals. The AG is focusing on making sure hospitals are in fact complying with those with those, with those programs. They've entered into agreement with one major national hospital chain and expect to do more with others. A couple quick reminders about NITMIFAA. If you remember, NITMIFAA is the, is the statute created now almost fifteen years ago governing governing management of, of what are called institutional funds, and how boards, and organizations, manage those funds, but particularly around how they spend or appropriate from endowment funds. New York has, rules that, differ somewhat slightly from, the form... National form model that I was based on. But I just want to just mention a few reminders for everyone in the room, to ensure you remain compliant. As organizations are, considering spending spending endowment funds. Remember that NIMIFA, the statute in New York that, is relevant here, requires organizations to document how they're considering application of the factors that Nemefa spells out, in your minutes. You want to make sure that if the AG steps in, there is, adequate record of how the organization thought through the spending decisions regarding the endowment funds, and that it complied with the statute. Just again remember that release of modification of donor restrictions on use and spending require donor or court approval. There is a exception for small old funds. As a general rule, donor, any donor, restricted fund requires court approval, or the, or donor, but donor court approval. And the AG is actively involved in that process. One reminder is that public fundraising campaigns may also impose use restrictions on those assets, just like an individual donor could. That might require, court, approval to change depending on what the solicitation to the public said. So if you're saying money is going to be used to build a hospital, the law may infer a use restriction on that and you just can't use that for general operating expenses. At your wish, you may need to go into court. At Fund, you may need to go into court and, seek relief as, seek relief as as well. Just really quick here. I've mentioned before fiscal sponsorships. Again, AG is focused on fiscal sponsorships. They're gonna be issuing guidance in this area, and we should be expecting rules later this year, on on those, on fiscal sponsorships. One area of national focus is on these online fund rate platforms. The AG has joined others, in, these crowd funding and other platforms. There's a lot of perceived abuse regarding those platforms. Money may not be going where they're supposed to be going, and we're gonna potentially see legislation in that area as well. Two last things I'll just mention really quickly, and then I'll, end here. AGs also focuses on college... Smaller regional colleges that are at risk. They're trying to, work with them to develop plans, but they wanna make sure that schools are considering financial, their financial planning earlier, not waiting until it's a crisis. They're they're more proactive in considering, alternatives to closing. And the AG is reiterating that they're focused on critical service charities, meaning that if charities providing critical services to the public, whether it's in childcare or domestic violence, and there's a potential the charity may need, maybe, may may need assistance, may not be able to get funding, may be closing down, they wanna intervene and work with the charity to assist them. Whether that means also enforcement, that's a different story. But they are they are focusing on... Increasingly focus on, on, these critical charities... Critical care charities as, as an area of focus. Mark, I think I'm, I'm gonna hold here and make sure we have a couple of minutes for questions. Yep. Okay. Jason, I appreciate that. Thank you. I know you you can talk all day about this and there's so many things to talk about. Just a reminder to folks that if you do have questions and not they're not answered because of the time constraints here, we will be having the speakers answer the questions over the next several days and we'll get those back to you. So so fear not, you will get those questions answered. Just a few and these came in order. This was the first one that came in and the question is how is all the things you talk about relevant with, the occurrence of the elections the other day and the change in in in power in the power structure there, especially the DEI aspects? Yeah. Look. I I think we're... Look. I I think, we're not sure yet. I mean, I I... And this goes to a part... Analyzing, I think, the psychological profile by president too to a certain extent how he's reacting to to this. Look. I think the... His administrative agencies, the IRS are instruments of lever for him that I think he's gonna continue to, and some power they're gonna continue to try to leverage in the next few years. You know, I think we're gonna... You know, at the same time, we're gonna see we're gonna see, we're gonna see, you know, increased congressional oversight and attempts by Congress to stop, roll out of these of these protocols. And you'll, so I I think we're unfortunately in a wait and see mode. Where most of this is gonna be playing out and play out is gonna continue to play out is in the courts. Again, you know, I think the administration has a Trump Supreme Court strategy here. It recognizes it's not gonna win at all, but if it wins some of it, it'll declare a victory and it believes it's gonna win some of it at the Supreme Court. So we're we're in that mode and can continue to be in that mode. Understood. Okay. Thank you for that. I'll give you one more here as we run out of time. Jason, most of the nonprofits I am familiar with are quite small. Regarding the chariots bureau enforcement, how common is it to have violations of the seven areas of focus? What happens when violations are found? It depends on this... On the situation. I mean, I I I don't think it... Unfortunately, I don't think, the charities bureau distinguishes between small or large organizations. Just put that to the side, for a moment. I think the position they, bureau takes is if there's... If the public, is being harmed in some way, whether it's, you know, $300,000 or 30,000,000, it believes it needs to step in. So I I I don't think there's much, you know, change here in terms of focus. I have a number of clients who are relatively small. AG's office is going through the same subpoena processing, requiring depositions, the same same sort of process. Okay. But there is a level of practicality here. I do think they, you know, to the extent that you're dealing with a small organization, you know, I think there is perhaps a more... A greater understanding outside of the area of self dealing and outside the area of insider, you know, transactions. If we're dealing with, you know, traditional governance failures, if you want to call it that, I think there's a greater level of understanding the AG's office has when I was there and still is emphasizing public education. I think they do want to work, with with nonprofit organizations, through their public outreach and their public guidance, that they issue. So I think in that respect, if we're talking about, you know, just, you know, non... Nonprofits maybe not aware and may not have the resources needed to have the same level of controls or policies or procedures. I think there's a greater willingness to work with those organizations. Excellent. Okay, folks. That's all the time we have. Jason, I wanna thank you for for your expertise and and sharing, some of your insights with us this morning and and sharing your time with us. Greatly appreciate it. Again, questions will be answered in in the coming days and such. So you can keep the questions coming during the course of the of the the presentations this morning whether they're focused on Jason or the other speakers and we'll get to those. Jason, thank you very much. And, we're gonna be ready now to to transition to another speaker, Alex Buchholz who is a co practice leader in our not for profit area, and he's gonna have a a great session on best practices for today's CFO. So if you don't know not for profits, you might think, well, you know, sure. The not for profits, they get their money, it magically appears, they spend it, we all go home and everybody's happy. Well, you you know, just from just from a perspective of a regulation, you just heard, Jason speak about, you know, what goes on in terms of federal and state oversight, you know, when you'll hear Garrett and Eva talk about the IRS. And and and then there's the FASB and the accounting regulations, you know, and there's there's responsibility to all those folks as well as donors, most importantly as well. So there's a lot that goes on and there's there's ways of doing things. There are better ways of doing things. And, of course, there are best practices that that that include, the things that, Alex will speak about in just a moment. So so, Alex, looking forward to your session. I know you got the whole gamut here of of of of of things that you're gonna discuss from accounting rules to best practices to to all sorts of things that are on the horizon. So, again, I welcome you and and I look forward to your presentation. Thank you. Thank you, Mark. And good morning, everybody. So happy to be here with you today. And as Mark said, we'll go through kind of a nice sprinkling across the gamut of, you know, what are the the best practices for today's chief financial officer or, you know, pretty much anybody in that financial role. So let's go through a couple of these things. Our agenda today is hopefully in our time together after completing this session, we hope that participants will be able to, number one, better understand the current accounting, governance, operational issues that are impacting not for profit organizations and, of course, the boards. Secondarily, to implement the best business practices to address those issues. And as Mark said, we'll try to answer and entertain any questions you might have along the way. If not, we'll definitely respond to them in short order. Alright. So the way we kind of structured this is, I don't wanna call it a top 10, but we're gonna just say for now 10 issues that we kind of felt were most prevalent in the not for profit space, and kind of we'll take a look at some of these issues and and how, you know, organizations should be addressing them. The first issue, and, again, these are not ranked in order of importance. These are just, you know, out there. Issue number one, ethics in the workplace. So we know that right now, you know, we have a lot of things going on. We'll talk later about AI, but we wanna make sure at the top of your minds, ethics is somewhere in the organization. What are the best practices that you see out there? What are the best practices that we see out there? Number one, a code of conduct. Your organization should have one. It establishes guidelines for what's appropriate, what can promote ethical behavior, what's a reference in case of ethical violations. A lot of you are dealing with situations on an everyday basis in your programs, in your administration, so you need to make sure there's a go to for that code. Second, training and education. Do you have training and education about ethics and ethical behavior? Is it simply a webinar that's done once a year? Is it something that your employees have access to year round and could take it at their leisure? We basically would expect that you've got something to help promote your culture of ethical behavior. Ethical leadership, the tone at the top. Do you ensure that those in the c suite exhibit a culture of ethics in the workplace? Are they held accountable? Do they hold themselves accountable for ethical violations? Do they admit when they might have made a mistake? Man, it does take a big person to do that, but we would hope that, you know, organizations do have that kind of structure in place when it comes to ethical in leadership. The second issue, budgeting. Now we know a lot of you do budgets. This is nothing that... Well, hopefully, this is nothing that someone is saying, wow. I never heard about that before. So I'm hoping that's not the case here, but let's talk about budget tips. Right? So we won't call it budget planning. We'll call it more of a budget tip. Don't view the budget process as a necessary evil. You need to do budgets, especially now. You go on many webinars. You read the news every day, the LinkedIn posts that, you know, funding is being cut on a regular basis, and it is important to take into account that, you know, what's my budget? What do I need to do? How do I need to manage the organization? Does that budget articulate to the organization wide strategy? So, obviously, this is not something that can be done in a silo of accounting. This needs to be done with coordination with, maybe the finance department, maybe the development department, certainly the c suite department. You know, sometimes we have people that are in a chief operating officer position and have all these great ideas. But, you know, now when we sit down and put those numbers down on a piece of paper, that's where finance and accounting may say, wait. This is a great idea, but now we've got a budget gap. Our our grants are not gonna support this. How do we need to close that budget to try to get a good balanced budget? Create a detailed timeline. Start the process very early. Okay? You don't wanna be doing this thing, you know, six months into your new year. You wanna have this done prior, really, to starting the new fiscal year. Try to limit the number of scenarios that you do have. Obviously, there should be a couple of scenarios, and, you know, with technology and Excel spreadsheets, you can kind of have a formula that, you know, if we change x, the data output will be automatically derived, but have those scenarios. Keep key key performance indicators, KPIs, in mind, including the need to grow operating reserves. Yes. A lot of you that are in the nonprofit space, especially those of you in the social service arena know, it's sometimes difficult, Alex, to keep an operating reserve. Sometimes my funding sources don't want me to have an operating reserve, but you do need something for that rainy day. Okay? So keep that in the back of your mind. Be aware of external forces that may impact the budget. There's always federal, state, local jurisdictions that may cut funds. They may hold funds. What are you gonna do in a case like that? What's the financial viability of a new program considering exiting programs at a loss? I know myself, many of my other partners are seeing clients now in the past, I would say, two to three years that have really had hard discussions of closing programs. Yes. We've had the program ten years. It's operating at a deficit. We we just not able to do what we need to do. We need to shut down this program. How do we build in contingency amounts? Zero budget based if path is applicable. So, again, budget tips. I'm sure many of you are doing these, but you need to have these scenarios and plans, and your budget should be moving. You know, back in the days, you would do a static budget. That was it. Now you may have to revise the budget as new information comes on out. Issue number three, succession planning. So, obviously, one of the big things that we're seeing is people, you know, after COVID, people are now getting to the stage where, well, you know what? I've been doing this now for a hundred years, and, maybe it's time to think about the next generation. So we are seeing a lot of succession planning come up. And, really, the the key that we wanna know is how to do it successfully. You know, maybe you still have a CEO slash founder for that organization, or what happens when that person leaves? Or maybe you've got people that are so knowledgeable. Well, how we're going to keep keep the operation going when they go? So succession planning needs to be done as a risk mitigation strategy to maintain long term sustainability and continuity succession planning can also serve as a recruitment and retention strategy. Your succession plan should be for all, and I'm gonna highlight the word critical staff, not just the CEO. How you do it on the finance level? CFO, controller, chief operating officer, development officer, CIO. Gee. How old are they? Do they have plans of possibly leaving? Have they given you a timeline? Again, we're talking a simple plan, but it's something that you need to keep in the back of your minds. You don't wanna have a sudden surprise that, alright. Gee. I'm I'm the CEO, the founder. I'll be leaving in a year. A year. Wow. That may not be enough time to allow for a proper transition. Make sure that the planning for that succession plan encompasses unexpected and expected departures. CFO walks in tomorrow. Listen. My family has a personal issue. I I I need to leave. I'm giving you a week's notice. Sorry. I love the organization. I I just can't do it. What is your plan going to be? We've all seen that the operations still continue. Who's gonna be accountable for this process? Obviously, yes, your board's gonna wanna be involved. We wanna make sure also that the right players are are, you know, involved in the process. And is our succession planning going to be home based, or we're gonna bring in somebody from the outside? If we're gonna bring somebody in from the outside, are we considering what that's going to do to the people inside? Gee, I thought I was gonna be the next CEO. Now they brought in this other person from the outside. Alright. Let me start getting the resume out there and seeing what's available. That's got to be considered. We need to look at the cost and the benefits of all that. Issue number four, limited staff capacity and turnover. Probably for many of the organizations here, you probably would limit that and say, Alex, that should have been issue number one, limited staff capacity and turnover. Because I know a lot of you are gonna say, I don't have staff. We put out all these these advertisements. Can't find anybody. The real question is, where are they all going? We'll save that question for another time. But it sounds like whenever we put a posting out there, very hard to recruit. And I... And I'll even pose the question here. Well, I'm sure we'll get a couple of chuckles there and then... Off camera that the question back in the good old days, when you go on a job, everybody would kinda skirt around the issue of well, you know, his job sounds great. How much money would you maybe be paying possibly? Hopefully possibly for the job. If I don't mind it asking you now, what's today's question right off the bat? What's the work at home policy? Can I come in when I want to? And how does that work? That's the number one question. And don't lie to me. I know a lot of you laughing right now and saying Alex is spot on. Definitely. You can put them in the chat if you want to, but that's that's it. What's the work at home policy? So that's making recruitment a little more challenging. Okay? And retaining staff. Now we need to take a look at, you know, the work life balance. A lot of staff in the nonprofit space, that's what they're looking for. What's the the work life balance? What's our recruitment going to be? What's our training, our wellness initiatives, creating a best in class culture? Alright? How do we recruit people? Modernizing systems, modernizing processes, restructuring through the digital transformation. You wanna make sure that you can get things done. But if you can't, how do you do more with less? I can't find someone to take on my program director for these two programs. I only have one program director. Alright. Can I have this program director handle two programs? Yes. Can we possibly utilize technology to help us? I mean, we keep hearing about technology in every seminar. You've heard it in your program seminars. You're... You'll hear it today when I'm going through it. But technology, we we can't shy away from it. What can we do? If we can't find the talent, is there a way to somehow replace it with some sort of technology? And many of you, I know, as clients have started to implement that that, you know, you... You've tried to automate. You've tried to see what you can do. Again, not for the elimination of jobs, but to make things smoother. And now issue number five, artificial intelligence, AI, and cybersecurity issues. So right now, we all know that everybody is using some form of AI somewhere in the workplace. Right? You're using your chat GBTs. You're trying to to see what you can do to streamline things. And what are the most concerning emerging threats? Maybe we could say threats, opportunities. Right? We could change that word around. The use of AI. How are we using it? How do we use AI? How do we monitor the use of AI? AI is not authoritative. It could be wrong as we have seen in various newspaper articles and various, you know, online postings that AI sometimes does have flaws, and it's funny. If you ever run an AI and you, you know, read it, I encourage you to read the output. Go to the very bottom. Usually, it's in very small print, italicized. You know, the information here could be wrong. We suggest you give it a read, So, you know, AI is not the end all. It's the help, right, but not end. We'll shift to on device processing, enhancing privacy, but raising new security questions. Personal AI tools in the workplace could lead to increased data breach risks. Are you making sure that your budget, going back to our earlier issues, really encompass a lot of budget for IT? Obviously, your salary because it's your number one cost. Your secondary cost, I hate to tell you, are gonna most likely be information technology and cybersecurity. Making sure with social media. Right? AI scams are out there. You need to make sure are you gonna be... You know, if you're gonna be hacked. What's your policies on training, making sure employees can't access different websites they might be able to access at home? Ransomware. We've seen a lot of ransomware coming more prevalent in the health care organizations. Rise in fake chat apps with hidden crypto stealing features or spyware. You know, training your staff is gonna be very, very important. You know, a accounts payable clerk gets an email from the CEO. Listen, need a check right away for $10,000. No time to pick it up. Please wire the money into this account. Well, you now have to train that accounts payable person to say, wait. Wait. Wait a second. This email doesn't seem right. What should I be doing? And, you know, go and check that email. Look at the where it's coming from. Look at the address. Be cautious, you know, pick up the phone, talk to the person in person in person to find out, hey. Did you really send this email? Digital transformation, organizations are looking for greater opportunities, greater efficiencies, investing in technology to help them do so. Not for profits, obviously, are placing greater demands, a greater emphasis on don't... On donor retention strategies, donor giving trends, demographics. AI can help you. Again, let's not look at AI as as something negative. AI is a positive. Putting data into different AI searches, you can see what are the trends. Where is my cost? How much does it cost to raise the dollar? Where are my donors coming from? What demographics? Who's giving? Who's not giving? There are very powerful tools. But with any powerful tool, you need to make sure we can harness its potential and, of course, safeguard it as well. Using the management letter as a tool for change. You know, back in the day, many, many, many moons ago, those might remember that the management letter was oftentimes used as the gotcha tool. Okay? The auditors would use it as a gotcha. We don't think of it as a gotcha tool. We think of it as a tool for change. And I think a lot of organizations are starting to to see it that way. You know, what is a management letter? A management letter is something that provides insights into your internal controls, into your financial operations of a nonprofit. It's essential to carefully review and and develop those comments and address the comments. Discuss them with your auditors. See what's realistic, and you should have a plan. You should prioritize those plans, especially those of you that get management letter comments that are dealing with uniform guidance or single audits. Okay? Because what we are seeing right now is if you're doing single audits and you do get management comments, please note that, you know, the feds are following up with the agencies. You will get an email from your oversight agency saying, hey. We noticed you got a management comment. How did you identify that comment and what are you doing to remedy it so it won't be there next year? We are seeing an uptick with that, so make sure when you get a management letter comment that you have a plan, a realistic plan, and a timely plan of following up on those actions. Issue number seven, governance considerations. K. Let's talk about governance. So, you know, you wanna take a look at the culture. What type of attitude do your employees have? Do they get along with everybody in their department? Right? You have to make sure that the culture is a place that people wanna come to your place because they like the environment. You're a not for profit. Right? You have that culture of giving, that culture of, you know, amiability, friendship. Do they feel secure? And that's really how you communicate it. You know, if you're if you're sending out emails every day, all they're cutting the grants. Oh, boy. We're not sure. You know what? You may hold off on going on vacation this year. We're gonna let you go on PTO, but I wouldn't plan anything big. You know, do a staycation. If that's the message you're giving out, people are not going to be secured. Are they valued? Is the work important? Do the individuals leading set an example of ethical business practices back to that, you know, first issue. Do they admit to making mistakes and fix them when they're found? Okay. Do they enforce and, emphasize the importance of controls? If the CFO says, listen. These internal controls are just... They they need to be there. Don't worry about the auditors. They they... It's not the kind of culture we wanna see. And are you the leader that says, you know what? I did make a mistake. Thank you for pointing it out. I appreciate that. That's a good culture. Is there an open environment that allows employees to come forward with issues, questions, or ideas? You know, that whistleblower protection, that corporate hotline. If I see something, can I really say something without the fear of getting in trouble? Governance documentation. So, obviously, we always emphasize to clients, you know, that you should have, accounting policies and procedures manual, Okay? And a conflict of interest and whistleblower policy. You should have that accounting manual somewhere on your intranet. Listen, somebody leaves, somebody sick. Someone's got to step in. There's got to be a how to. It's got to be there. You know, there should be a formal conflict of interest and whistleblower policy. It's important. It's needed. Take the time at board meetings to discuss those conflict of interest. Make sure you document if there's a conflict of interest or in a board member accuses themselves. Ensure that employees are protected against the retaliation and are reporting anonymously. You may wanna consider, should it be outsourced? It happens. Alright. Maybe you don't wanna handle it inside. Have someone call an outside agency, but that outside agency may wanna be linked up to the members of the audit committee, not the CEO directly. Issue number eight, compliance matters. So, again, we're gonna have more discussion on this, you know, shortly. We've had a little bit so far, but the IRS beginning to start field audits of not for profits. Right? They've been able... They they found staff. They actually found staff, believe it or not. So they found staff. Maybe that's where everybody's going. And right now, they're starting their field audits of the not for profits. Alright? So that's number one. Be on the lookout for that. The Department of Labor, the DOL, they're making sure the timeliness of the form 5,500 submissions as well as annual audits, they have really been cracking down. Federal oversight agencies sending letters, emails to nonprofits that have received findings, see, I didn't mind you, on their single audit submission, looking to ensure that corrective action plans are in place. Hey. We see a finding. What are you doing to correct it? So this is compliance. Now let's hit home. The New York City standard audited financial report, SEFFER. Suffer. We'll call it suffer or sapphire. We'll figure it out, but this is something new on the pike. So if you've been snoozing, you may want to wake up at this point and just tune on in. This is the important part of the show. So we've got a new sapphire project out there by New York City. Alright. The goal, the objective we hope is to improve timeliness and audit coverage of its health and human services contract expenditures. Safra will provide benefit will benefit provider agencies with a streamlined audit process. The goal is to reduce the duplication and utilize either existing single audits or CFRs, which will hopefully eliminate unexpected requests from New York City engaged auditors and reducing the burden. So right now, you may have New York City auditors coming on in. The goal of SAFR is to hopefully reduce that burden. Again, we'll put hopefully in quotes, and we'll see where it comes. What are the key takeaways beginning in fiscal twenty twenty seven? Alright. So June providers is gonna be you. New York City nonprofit human service providers, more than 1,000,000 in annual expenditures from participating agencies must comply. Now, again, that million dollars should seem familiar. Wait, Alex. Isn't that the federal level? You got it. New York City's duplicating it for their own agencies. Safra establishes a risk based audit process to strengthen oversight, improve audit timeliness, and reduce duplicative reporting for nonprofit providers. Safra is gonna require the audits to be filed thirty days of the audit to receive or nine months after fiscal year end. Alright. We... We've heard this before, so at least the timing is similar to the single audit or for those of you that file ACS reports or, Department of Education reports. These are the participating agencies. So if you have one of these programs, you are going to be under that guidelines for this potential SAFR audit. What's the scope? So we kinda spoke about that already. More than a million dollars. The threshold may consist of one or more smaller contracts if the total aggregates to a million. The provider must submit a waiver request when payments to the provider exceed a million, but the provider has not documented a million dollars in allowable expenditures. However, keep in mind, look what it says. In this case, the provider must also return overpayments back to the agency. Okay. Providers of these programs that are subject to a federal single audit will follow the audit requirements that you currently do and just upload a copy of the audit report with the SAFR submission. If you also provide... Do a CFR, consolidated fiscal report, you're also gonna upload. If you don't have either of those two, but let's say you have ACS administration for children services, that are more than 1,000,000, then you're gonna be subject to this New York City specific single order. We'll call it New York City, SAFR requirement. SAFR needs to be done by a CPA firm in the New York City comptroller's prequalified CPA list, which we are, by the way. The frequency, the timing, and the submission of the SAFR. So they've got their own schedules, their own Excel workbooks. It should be conducted at the same time as you're doing your regular audits. And, again, it's by the same CPA firm. So the SAFR audit reports, schedules, and informational must be submitted, again, thirty day... Thirty calendar days or nine months. If the due date falls on a Saturday, Sunday, or federal holiday, the reporting package is due on the next business day, which is nice. You all know for federal, they're a little more stringent. They don't care if it's a Saturday, it's electronic. You gotta fill it in no matter what. The SAFR order reports are gonna be also followed up with Excel informational spreadsheets, so that's going to be out there as well, and the manual is out as well for providers to look at, so keep that in the back of your mind. That is going to come up as you begin your planning meetings. This will be next year. We have a whole year to to digest and reflect, and trust me, you will be receiving more information. We do have thought leadership that that Mark Pisco did put out already, so definitely obtain a copy of that. Give a nice perusal of it, and, you know, we'll be providing more information as more comes out. Alright, issue number 10. Do we have any accounting updates that will impact my not for profit organization? Let's take a look what we have over here. So, okay. We had the credit losses Cecil for short. So Cecil has been out there. There was a little bit of a change that are that's going on. That will be effective for your audits for 12/31/2025. Okay, there is a practical expedient and the practical expedient is where, current conditions of the balance sheet date do not change for the remaining life of the asset. That's the expedient. The election is now where an entity considers activity after the balance sheet date, I e subsequent receipts, and this applies for really your exchange contracts. So, again, we're a nursing home. This would apply to them. Maybe you've got some program fees. This does not include contributions per se. It may it may not include government grants either. So you do need to take a look at that when this credit loss comes into effect. So what this basically means is if we look at this example, right now, if you apply the practical expedient, these are your receivables, here's your credit rate loss. This is what you expect to have as your bad debt, which we now call credit loss. K? Now we'll add on where we've got an a specific identification of the practical expedient. We know that this particular customer, $2,000 customer s, is gonna be in doubt. We'll reserve him a 100%, and, of course, the rest will be subject to our estimates. Fine. Now we apply the practical expedient with the election. What we say is, well, if I have this much in receivables and I've collected this much, this is what's left over. This is now what I'm going to estimate, 17,000. Again, a much more scientific way of doing it, more practical. The other approach when Cecil came out wasn't as practical as the FASB intended, and there was a lot of feedback that, you know, we're using subsequent receipts. Why can't that be in effect? And, of course, they listened and therefore have changed it around. So this will be effective for those of you getting into the 12/31/2026 audits, which is almost, almost upon us. Another one that's out there. Okay. An internal use software cost. Background and project objective. This is internal use software. They wanted to modernize the accounting for internal use software costs. So, again, let's just make sure we differentiate between the two. If there are costs that were incurred to develop software to be sold or licensed to customers outside, that's a different FASB not covered here. Not covered. If you're talking about, however, solely for the entities use, okay, Costs that are incurred by a customer for a cloud computing arrangement, a hosting platform. Alright? That's going to really be this particular FASB. Okay. So what are the targeted improvements? Alright. So the targeted improvements at this point in time is the way they want us to treat this is that we look at this concept of uncertainty and probable to complete threshold. So what we wanna look at is, for capitalization, is the software being developed, does it have techno... Technological innovations? Is it novel? Is it unique? And whether or not significant performance requirements have been identified and don't need to be substantially revised. So, again, that's the real key with it. That's that probable to complete. If you're doing this testing, you're in the beta testing, and now all of a sudden, you know, you just realize, hey. You know what? This is not gonna work. And you know what? I don't know that we're gonna be able to move forward with this. We would expense it. But if we know that we've authorized, we've committed to funding the software project, it's probable. The FASB says let us capitalize it. Alright? So that pretty much is is what we have out there. So with that, the transition is going to be effective for periods... Reporting periods after 12/15/2027. So, again, 12/31/2027. Early adoption permitted. Those of you that know me well enough with clients know we do not wanna be the champions for nothing, so do not early implement. That's always my personal recommendation, not that of the firm, just Alex Buckholtz himself. Let somebody else do the work, and then we'll leverage their hard efforts. So we'll just wait and see approach. Alright. So with that, we've got the single audit background and effective date. Just keep in mind, right now, the single audit, those of you that are doing it, remember a draft is out there. The draft is not yet finalized. Okay? So keep that in the back of your mind. So a lot of clients will ask, can I issue a 06/30/2026 year end single audit before the supplement is released? And the answer there is no. Your auditors can do the testing. Alright? But they are not able to release it. Alex, do we know when it's coming out? We do not have an idea at this point. We've had people emailing, OMB, and they really do not know. Are we expecting a lot of changes from the draft to the final? No. But we're just not able to really, you know, finalize that testing. Okay. The compliance supplement expectations, again, there's gonna be some changes. There's really not gonna be that much new funding as far as we can see. Certainly, a lot of the COVID funding has now been depleted. No more of that. And with that, I see our our host has come back to ring me off, but, hopefully, I have time for some question. But, Mark, any, question? Alex. Yes. Yes. Very good. Very comprehensive as well. So I've got a couple of questions for you, and I'm gonna I'm gonna actually ask Jason and Stephan as well because there's a couple of questions that that, probably we'd like his perspective on. But, Alex, will the single audit satisfy the SAFER or is that in addition to? So from the guidance out there so far, the single audit will satisfy the SAFR. You just have to file it alongside their requirements as well. Right. And it depends, right, on on the programs that are on your CIFA and the ones that are being loaded in the in the single audit. Correct? Yeah. Exactly. There was another question here. Is this safer for New York City only or for all of New York Yep. New York City at this point from the guidance that we've? seen. Right. Okay. And one last quick one for you. What are your thoughts regarding budget modifications during the year of the budget? I think, you know, back in the day, the old old days, we probably wouldn't do it. Now I think it's a necessary evil. It's just just a matter of copying from one Excel tab to another, modifying it. I think I have to do it because things change on a daily basis, unfortunately. Oh, right. And that's a living, breathing sort of document that that could change, I could say, you know, depending on circumstances and and and the finances of the organization. So so what you do at the beginning of the year, it certainly may need modification during the year, but the the the whole point there is to make sure that it's sort of real time, budgeting and and you're not sort of just doing something, you know, ten months ago and and and letting it sit there and and and ignoring it. So, good point, good question. Okay. Jason, here's the question. Can you talk more about reviewing potential conflict of interest once it's disclosed? Sure. So, the starting point in New York is the organization's conflict of interest policy under, you know, under New York requirements, each organization must have a conflict policy, and that conflict policy must address the procedures, that organizations have to follow. Once once the conflict has been disclosed, depending on the size of the organization and whether the organization has an audit committee or another committee reviewing it or or a board, or has compliance staff, or general counsel in house, The procedures may differ, but generally there's some initial review of disclosure, to determine whether or not, it... I would say it's an issue, if you want to put it that way, and whether it requires, a, you know, a full review. And what I mean by a full review is, you know, if it's a staff person that initially receives it or if it's the, you know, head of the audit committee, who, receives the disclosure, whether it's in the disclosure statement or an interim disclosure, that initial review would be done, to see whether or not it should be, reviewed by the full audit committee, for example, and then, potentially by the full board. The person that is, who disclosed the matter, just as a starting point, New York requires and the AG expects full recusal, no participation, and that involves whether you're a director, an officer, or a key person member conflict provisions in New York. Also, these differ a little bit from, the federal rules. We... New York has a defined term key person, not just a key employee. So if you're an officer or a key person, somebody who has a significant influence in the operations of the organization, conflicts involve them too. There's some people don't have an officer title and may not be formal employees but they may have some skin in the game, so to speak, or may have some involvement in management, it covers them too. So, you know, that though none of those individuals who have disclosed or have are impacted by the transaction arrangement giving rise to conflict, can participate. And again, if you know, normally again, there's a screening process once ago, but it... But there's an expectation, in New York law that it it will be reviewed by a body of the board or the board itself, either an audit committee, that's been tasked with... Formally tasked with reviewing conflicts. They will assess whether or not, the conflict is one that, or the transaction giving rise to the conflict is one that can proceed, but with recusal, or whether or not that conflict is so significant, so systemic that it... Whether it's a financial... A potential financial harm or reputational harm to your organization, it's just a transaction that, would be considered. Now implicit in the New York law as well as just general best practice is that if there are alternative transactions that are available, that, would not result in those... Would result in a conflict, those should be considered. But but the New York AG as well as, you know, other regulators acknowledge that conflicts in nonprofits are inevitable. Boards are, composed of individuals, often due to relationships. It's the process for ensuring that those individuals, what matters is the process for ensuring those individuals are not involved in the review of the transaction and that the audit committee makes the assessment I just mentioned. Now it is possible that the audit committee itself wants to get the full board, if there is an audit committee for a full board's review, on it. But, generally speaking, it'll stop at the committee or whatever the audit committee, is reviewing the transaction. One last thing, Mark. Very important at all stages to document not just the disclosure, but the review. You want to be able to demonstrate in your minutes, in your in your, other records, not just the disclosure, but the process the organization followed for addressing it, particularly if the organization is gonna continue to actually enter into it. You wanna make sure the person document the recusal, make sure you consider... Document the consideration. of alternative transactions and why this transaction, even though there is a conflict, if you're going forward with it, is still in the best interest of the organization. Excellent point, Jason. You know, this is not something to be taken lightly. And as as we order to say when we're doing our own work, if you didn't document it, you didn't do it. So documentation is definitely key. I know backstage, you had one more point, before we bring on our text folks. Jason, relative to AI, and and I guess this this is something important there to remember in terms of, security and such. Yeah. I I just wanted to point out. I think Alex did a great presentation, AI, and and we're living in the real world of AI. It's not going away. But just a reminder when when you're using, you know, public platforms, publicly public generative generative AI tools like chatbots or cloud based AI transcription or note taking software, Those can destroy attorney client privilege or make the those conversations, those transcriptions, those recordings much more easier, for regulators to to access. There's some recent, case law in this field is developing, as we're speaking, but some recent decisions ruling that, documents and summaries generated via public consumer platforms like anthrop... Like Claude, you know, are not protected by attorney client privilege. There's no reasonable expectation of privacy. So I would just, exercise a word of caution. If your if your systems are automatically set to default to take AI transcriptions or AI recordings or you even have, the option as you're considering this, just be careful. It's a lot easier for regulators to access these. You may not have the confidentiality privileged protections. And I've seen examples where a recent example where the attorney general was investigating, it was a compensation arrangement involving a charity. And, you know, part of their subpoenas norm... You know, historically subpoenas indicate please provide us all records, transcript, you know, etc of all discussions. Sure. You know, in the past you never said there was nothing nothing existed. There were some minutes that you those are manage the minutes. This organization had a full AI transcript of the entire board proceeding. I'll just say it was not helpful to their cause. So I would just exercise caution about reflexively using these AI. Let the law play out to a certain extent to understand better what the protections are and make sure your systems either are proprietary or can be customized, to protect this information or managed so that, these records, whether it become permanent records, don't present harm to the organization. Great. Well, thank you for that, Jason. Excellent, addendum to to Alex's, presentation. Well, Alex, thank you as well for for those those reminders and and best practices that that organization should be following. And hopefully, folks take some of these home with them and and and apply them to their organization. So thank you both. I'm going to now introduce our next speakers. And, Garrett and Eva are partners, of course, in our tax exempt organizations practice. They have been doing this for, probably their entire career. So they live and breathe taxes and they love taxes and they're here to share their knowledge of taxes and things that you should be aware of from an IRS perspective, from a a compliance perspective, and, and and talk about some interesting cases as well. So, looking forward to hearing from from both, and and welcome Garrett and Eva, and I'll leave the stage and and, and, leave the presentation up to you. Thank you. Thank you. Welcome, everyone. Thank you for joining us. So today I will be covering the emerging, tax and regulatory developments. There are a number of fast moving topics, and some of the tax guidance is just hot off the press. So we'll be explaining what has changed, what is still being proposed, and what this all means for the not for profit sector. So just a quick overview of the full, presentation. We will begin with federal tax and IRS guidance, then cover some of the prominent court cases and IRS rulings that, Garrett will speak to. Next, we'll cover organizations with affiliates with those structures and fiscal sponsorships, and then followed by pending federal legislation. And then at end, we'll cover some tax compliance areas, form ten ninety nine w two reporting changes, and some, tax matters. Will there be some overlap with Jason's presentations today? So the repetition, you know, just basically reinforces, you know, the key developments that are out there. Jason's perspective with some more legal governance. This is going to be from a different set of lens from a tax perspective. So moving on to the first area, on the agenda is section forty nine sixty. Next slide. So to recap, section forty nine sixty imposes a 21% excise tax on certain compensation that's over a million dollars and then also, certain excess parachute payments. And this tax falls on the employer, the not for profit organization. So the change is, under the previous rules, covered employee was generally one of the organization's five highest compensated employees or someone who had been previously covered. But the taxable years beginning after 12/31/2025, the definition generally now covers all current employees, not just the top five. So that's the biggest change. So for a calendar year organization, this expanded definition, for supplies in 2026, for those fiscal year filers, and applies to the first taxable year that begins after 12/31/2025. One thing to point out is that once an individual becomes a covered employee, that status generally continues into future years, even even if the individual leaves. I wanna quickly speak about the parachute payment rule because that's a separate test. So under that, test, it applies when the present value of a separation contingent payments equals or exceeds three times the employee's base amount. So those rules are different than the $11,000,000. If that threshold is met, then the excess is generally, measured above one base amount, not the three times base. So some things to think about, the action items, review and update the covered employee listing, coordinate with your payroll departments. If there's related organizations in your system, you know, all of that needs coordination. Also deferred compensation, severance pay, and pay from related organizations may affect this calculation. Now moving on to the next slide is the group exemption application, which reopened, under Rep Proc twenty twenty six dash eight. So this matters all those national, organizations with chapters and other, groups operating that have subordinate organizations. And, the biggest takeaway here is that, under under this new ref proc, the standards for the central organization involve general supervision or control over its subordinate organizations. For new group rulings, you need at least five qualifying subordinates. There's also a matching and a purpose statement requirement. So, you know, those applying for group exemptions, need to rewrite their or take a look at their governing documents, to satisfy those requirements. Central organizations are required to submit an annual supplemental group ruling information, on form 15,644, and that includes any additions, deletions, or any required changes to the subordinates. The the transition provisions, for these existing groups ends on 01/22/2027. So ensuring that the affiliation, supervision, and controlling the matching principles, and requirements are met by that due date. Now the next slide is the private schools, that Jason touched on, the non discrimination proposal. So, let me start by, kind of explain what what is going on in English. So private schools have long been required to have racially nondiscriminatory policies to qualify for tax exemption. The IRS is now proposing a rule that would prohibit schools from using race, color, national, or ethnic origin in their policies and programs regardless of the, the purpose behind that distinction. So this proposal comes, at a time of increased scrutiny of race consciousness admissions and scholarship programs. So in other words, if a program intended to increase, opportunities for maybe students from a particular racial or ethnic group that could be affected under the proposal. So, you know, this rule, you know, would reach beyond admission to scholarships, financial aid, athletics. And these regulations are proposed, so not final. If finalized as, as proposed, these would apply to schools, school tax years beginning after 05/31/2027. So for now, schools should just continue, business as usual, meeting the existing requirements, including, the publication of their nondiscriminatory policy record keeping and, and all that stuff, the annual certification, Schedule E, and if you're not a nine ninety filer, the form 5,578. On the next slide, I will... I want to, briefly touch on why this is so, this provision is why so why it's so complicated for scholarships. So some schools have scholarship funds that are... That may have been created, many years ago by donors who, perhaps specified that the awards should support students of a particular race or ethnicity. So current IRS guidance has permitted certain minority preferences, intended to promote nondiscrimination, but this proposal, would remove those, specified provisions. So for many schools, this this may be a difficult pill to swallow. Some scholarship funds were established years ago, maybe with the goal of expanding educational opportunities for students, you know, from maybe, underrepresented, communities. So now schools are being asked to consider whether those problems could affect those, affect their tax exempt status. Also respecting the donors' wishes. So it's not an easy balance, and that's why this proposal deserves, close attention. So what schools should schools be doing now? You know, reviewing admissions, scholarships, loans, athletics, you know, reviewing the pipeline programs for any race, race eligibility criteria, inventory, their gift agreements, and endowment restrictions. And, stay tuned, for more developments in this area. The next slide is for nine ninety Transparency Initiative. So it's a development that we are watching closely. It calls for clearer reporting of three main areas, government grants, government contracts, and fiscal sponsorships. So basically, the IRS is honing in and looking at... And the focus is where the funding is coming from, how it is being used, and who controls any sponsored projects. We don't know yet when these changes may appear on the form nine ninety. You know, our guess is that they may appear in part four, a supplemental schedule or maybe another format, and the timing gets uncertain. So, I mean, we could see developments as soon as 2027 within the next two years. It could be sooner than that. It could be later than that. This is just our, perspective and our, our outlook. It's not an IRS, perspective, or they haven't released any guidance on that. Hospital, charity care is just another area to watch. Hospitals already report financial assistance and community benefits on Schedule h. So this is a good opportunity for not for profits to review the nine ninety, their narratives, look at your... Purpose. Is it clear? Is it accurate? Who do you serve? Who are your beneficiaries? How do your activities further that purpose, and and so forth. You know, watch nine nine... Not for profits should watch language under nine ninety, that may suggest a nonexempt purpose, improper private benefit or normant, partisan campaign activity, political activity, those are all audit triggers. Next slide. On the priority guidance plan, I briefly wanna speak a little bit about some of, what's going on with the IRS. So the IRS has expanded, some some areas. You know, they have now on their website a business tax account that not for profits have access to, can view their balances, their payroll, payment history, make payments, and look at transcripts and certain notices. The IRS, that's welcoming news, although there are still some resolving issues that still involve delays, long telephone waits, disconnected calls, so, things like that. The IRS has been moving towards, and has been, you know, using data driven and risk based with its audits. Of of course, I'm sure it's implementing AI into compliance operations and and, you know, how AI will, you know, impact any audits, and exam... Examinations in the future. The IRS issued statistics, and for the fiscal year 2025, the IRS examined approximately 8,000 of returns across the not for profit organization sector. So So it included the retirement plans, the government agent, entities, taxes, dumped bonds, and only about 12 to 15%, covered the nine ninety, the nine ninety easy, the nine ninety n, the nine ninety and the eleven twenty POL in those categories. So just wanted to briefly, speak, just a background of that. But from a priority guidance plan, Jason had covered, the areas that are gonna be, you know, the private school proposal, the Johnson Amendment guidance, which is the, prohibition on campaign intervention political activity. And the plan is just an agenda. It's not a change in law. Doesn't really guarantee when, when guidance will be completed by, by, by the IRS. On the next slide is a donor advised, fund. So, donor advised fund guidance is on the plan, under, forty nine sixty six. It addresses certain taxable distributions and section 6,033, which covers informational, information reporting. So we may be seeing some questions on the nine ninety. The next slide covers, this is new, scholarship granting organizations. So there is a new credit. In a few minutes, I'm just gonna... Gonna just briefly explain the new new credit. It's starting in 2027. So an individual can make a qualifying cash contribution to an approved scholarship granting organization. It's also called the SGO, and it may, receive a federal tax credit up to 1,700. And then the SGO uses those contributions to award scholarships for eligible elementary and secondary school expenses. So this program depends on State participation. State must elect to participate and submit a list of eligible SGOs. A donor does not necessarily have to live in that State, contribute to the listed SGO, but the SGO must use the qualified contributions for eligible students within the state where it's listed. On the next slide. So what does, an organization need to qualify to be a SGO? First, it needs to be a five zero one c three public charity, cannot be a private foundation, and it has to maintain one or more separate accounts exclusively for disqualified contributions. So there's no commingling of funds allowed. There's certain other requirements that must provide the scholarships to at least 10 students, who do not attend the same school. There's a 90% income requirement, and the SGO cannot set aside a contribution for a particular student. So here we're seeing the earmarking rule. So this is a new fundraising opportunity with, real administrative requirements. A school is not automatically a SGO simply because it's tax exempt. So before promoting this credit, you know, confirming state participation is key, ensuring that the organization is, listing and is eligible and, you know, maintaining the system needed to administer the program. And last is the Trump accounts. So the Trump accounts raises two separate opportunities for not for profits. One, the charitable funding and an employer... And two, an employer benefit. So let, let me start with the employer program, because this is new as well. So under section 128, a not for profit can establish a written program to contribute to a Trump account for an employee or an employee's dependent. The qualifying contribution can be excluded from the employee's gross income, which is good. And for 2026 and for 2027, the maximum exclusion is $2,500 per employee per year. The limit is per employee not per child. To offer the benefit, the not for profit or the employer needs to, have and maintain a separate written plan, and it must satisfy the, you know, all the applicable, requirements including non discrimination rules. And, the qualifying employer contributions would be reported on the W-two box 12, using the IRS implemented all these new codes, code TA. One important payroll point is it's excluded from income tax, but not, from payroll taxes and so subject to Social Security and Medicare. The, Department of Labor says that these programs generally are not ERISA covered plan. And then also, there's a charitable funding option under section five thirty a, and this is where a qualifying charity can, can basically contribute through a treasury for a qualified class, with equal, you know, amounts going to eligible amounts in that in that class. So this is a separate program from from the employee benefit. And now I'll turn to Garrett. Thank you, Eva. So good, morning. Yeah. She's morning. Tax season, so days merge into one another, I guess. But, it's good to be here again. And I'm gonna go over right now the court cases and IRS rulings that that kind of, took center stage, during the last year or so. A court case that we were filing... The first court case up is the Mayo Clinic case, and, we've been watching this for quite some time and and it is very specific, but not many times you talk about a case that actually involves tax dollars. This involved $11,500,000 worth of debt finance real estate, unrelated business income that, you know, that was paid. And, the Mayo Clinic was given its exempt status as a research organization. And when... Usually, nonprofits, five one c threes, and others that that have real estate, that rent it. Rental is typically not taxable unless, there's, acquisition indebtedness, associated with that, and they had it. But they actually... It was a nice planning strategy, and, we looked here and they they, they took a position that, well, we're not just a research organization or medical research, we're actually an educational institution. And there's a specific rule, and the law is five fourteen c nine that exempts educational institutions from the debt finance or acquisition indebtedness laws. And that's what they they filed for a refund. The IRS did not acquiesce in the beginning, and, eventually, the courts came out and said, no. The the Mayo Clinic met the definition and the the criteria for an educational institution as well. So technically, class of... It could be classified under either, five one c three status, and therefore, refunded the money. And and and that's basically it. So the takeaway here, I I would say, is if you have an organization that does a substantial amount of education as well alongside and doesn't hold an educational status, it should be looked at if your investment structures, the demand that you look at it. Here, you obviously were paying unrelated business income. Their investment strategy was real estate, and there was that specific exemption. So I I I think it's worthwhile if you're that type of organization. Moving to the next slide, we're gonna go over the Janeth, Jack... Jaganneth, rather, case. This was a tax court memo, on excess benefits. Now for those, you know, that know the nine ninety, the nine ninety is a probing document. It provides a lot of information, and it shouldn't be taken lightly. It should be filed completely inaccurate, and, obviously, the information on that form talks about excess benefits, and that's critical to five one c three status or actually, taxes and status in general. One of the provisions in your your governing documents says that, individual cannot nor benefit, privately, you know, from a nonprofit that exceeds reasonableness. Right? So in this case, that you had the charity president who withdrew $590,000, and the court found insufficient evidence that he repaid it. And they basically charged him with excess benefit, and and and he he paid a substantial amount of money, $1,300,000 in excise tax. The charity also reported the insider receivable on the 990, but omitted schedule l. So this is very, very important. Not only the IRS is looking at this, but also, we talked about state attorney generals. They know about schedule l. So I know for... Particularly, the New York state attorney general is active in this in this area, especially when it comes to loans. It's impermissible. So these are types of disclosure that seem like innocent questions on the nine ninety, schedules that say, oh, I missed schedule l. No big deal, but I, you know, but can result in in excess benefits. In this case, $1,300,000 in excise tax. The takeaway from this case, I think everybody, you know, should pay attention to, is that you need to document all insider transactions. Document how they were either approved, you know, pursuant to a conflict of interest policy, that they obtained independent oversight, and that, more importantly, they're reported correctly and accurately, and, they correct any improper, transactions promptly. So I think that's what this case highlights and why I think it's important to be brought up on on this, brought up today, this morning. Going to the Vicente case, the next case. Right? We talked a lot about the Johnson Amendment litigation. So basically, it talks about political activity and five one c three specifically are prohibited from conducting political activity. The... This case actually, involved religious organizations that challenged the restrictions the IRS imposed on these types, and the IRS actually expressed a position that certain commit... You know, communications can be okay. And, you know, maybe if, there are political things that, that are brought up during, at at the altar or, on the pulpit. And that's what it kind of indicated. If you remember years ago, I think president Obama and the reverend Wright, he actually expressed his opinion, to his congregation on the altar. So the IRS is... There's a little bit of leeway, although it's not written in the code. It... It's strictly prohibited. So that's kinda what the Johnson amendment had done, and, you know, this was obviously, the the, challenge in the National Religious Broadcasters versus Besent for lack of jurisdiction under the Anti Injunction Act, and the tax exempt in... To the Declaratory Judgment Act. So what does all of us mean? This this dismissal of this case did not decide the constant, you know, constitutional merits or establish a general exemption, for five one c threes or particularly for religious organizations. So the takeaway here is you still need to follow the old rules. Five one c threes need to be very, very careful, when talking about politics, whether for a candidate, against a candidate, etcetera. And that's kind of the takeaway you have from that case. Bob Jones University talks about public policy. The issue here was... And we heard it, you know, both from Jason and Eva, is could schools with racial... Racially discriminatory policies qualify for exemption? The law, as it stands right now, is the charitable tax exempts... Exemption, requires an organization to serve a public benefit and be consistent with public policy. The outcome of this case is the Supreme Court upheld the the denial of exemption, findings on racial discrimination in education contrary to public policy. You know, there are separate opinions that that that dispute the breadth of the IRS reach and authority here, but the takeaway is the decision helps to explain the IRS proposed private school regulations, but for the court's holding, and the broader proposal should be evaluated separately. So this is more to come on this, as as as, the IRS teases... Teases it out and and and provides a little bit more guidance on this. But you need to be careful, when when, that that your policies are not against the public policy when it comes to discrimination. The students for fair admissions, again, along those lines. Now this... You know, the issue here was could Harvard and UNC use race, conscious admission programs before the court? I know Eva and Jason also spoke on this. The, you know, the the law here is, you know, whether the case involved equal protection and federal civil rights rules governing the admissions. And the outcome, was the Supreme Court rejected these programs, and applicants may still discuss race affected, you know, in their, admission... In admissions, but it could be subject to court limitations. Takeaway here is the case does not answer every scholarship or tax exempt question, so you still have to review each program, the selection criteria to make sure you're not in violation, when it comes to comparing it to the case. But, again, we expect more, rules coming out. So tax exempt rules, federal civil rights obligations, state donor restriction rules required distinct analysis. You just can't rely on this one one case. You can glean what they're trying to interpret, but I think we gotta wait for further guidance. And last case, I'll talk about is is private foundations and asset transfers. You know, what... This is, you know, this is specific guidance, this case, about when you have two controlled private foundations and one wants to liquidate into the other. There's a specific code section, specific revenue procedure, that deals with this. It's it's five zero seven, b two, addresses certain transfers between controlled, private foundations. The private letter ruling two two, two zero two six three zero six, the IRS treated this transaction as a five one... Five zero seven b two transfer that's consistent with the RevProc with specified tax attribute... Attributes. The reason why when you... You're looking at control is not the the, responsibilities of the liquidating, foundation still have to be carried out by, I'll say, the the the surviving entity. So the takeaway here is a transfer may simplify administration, right, rather than worrying about meeting both foundation's responsibilities, but it does not erase the history of that or, of that of of that foundation automatically, and and satisfy the payout requirement. So it's a transfer of assets, and any expenditure responsibility, disqualified persons, that will carry over, into the new, fountain... The surviving foundation. And so, that was that case, regarding foundations that I found very interesting, the misinterpretation of the revenue procedure. But this PLR actually, you know, doubles down and and supports that that revfrock, and and basically says you don't have a new entity, and the responsibilities of the old entity still exist. So I think I'm gonna throw this back over to EVRA at this point, to go over affiliations and fiscal sponsorship. Yes. So, now covering affiliated, entities, those are... Those arrangements that that can help not for profits share resources, and then fiscal sponsorships since fiscal sponsorships are so hot in in, in in the news. I just wanna cover some of the models. So when it comes to affiliated entities, you know, you may have a not for profit that's maybe working with, another related... One of its other related not for profits. You know, it's common between five zero one c four type organizations, having maybe a five zero one c six, advocacy, type organizations, or even having a taxable subsidiary. So, you know, the key, tax questions from a tax perspective are who's conducting the activity, you know, who controls the money, and who's responsible for reporting it. When, these agreements, and arrangements are in place, a shared service agreement, is important to put in place because, you know, putting the arrangement in in writing and should identify, you know, who provides, you know, the staff, the the office space. It could be technology or other services that's being shared. Then also, the agreement should consider, you know, the the charge. Is it appropriate for the transaction? Is it at fair market value? Is there any private benefit concerns? And then does this transaction, trigger unrelated business income? So something just to put out there, they're quite popular these days. Moving on to the next slide is the fiscal sponsorships. So I'm going to only cover the two models, the more popular models, model a and model c, although there are six models. I recently just reviewed a a fiscal sponsorship agreement for a client that involved, independent contractor arrangement and a single member LLC. So those are two other models out there. But model, model a is, the model where a charity supports a project that needs a charitable home or financial oversight. This is different than model C because model C is the grantee grantor type relationship. Model A is the project is a program of the fiscal sponsor itself. So, you know, think of a community foundation that's operating perhaps, a new arts program as one of its own activities. You know, the sponsor receives a contribution, accounts for the restricted project funds, approves the expenses, and is responsible for the project. It's, you know, looking forward to, new reporting perhaps under 990. So that's why this is all important. So what does this mean, you know, for the sponsor that needs real oversight over the budget activities, you know, if there's any contract or, and and staff. A written agreement should also explain, the project's purpose. Under the next model, the next slide is model c. So model c is different. This is the grantee, grantor type relationship, and this, is pretty popular if the, the recipient doesn't have a five zero one(three) tax exemption or it's in pending status. And in this scenario, you know, the sponsor still needs to exercise discretion and control over the funds and and any grant decisions. As Jason mentioned earlier, it just can't simply promise to act as a... As that automatic pass through, and that conduit theory. So, and then last is the agreement. So having that agreement in place is, of course, that starting point, but the, the sponsor's actual oversight is what what makes the the structure credible. And now going to the next slide, just briefly want to speak about the shared employees. And so there's this joint employer risk, and shared employees raise, a question and, you know, which entity is the employer and could more than one organization have, have employer responsibilities under the law? So things to consider are who directs the work, you know, who sets the schedules, who supervises performance, and who can hire and terminate. Garrett, I'll pass it to you. Sure. Yep. Pending some federal legislation. Obviously, we know the midterms elections change the, legislative landscape, and and these are all proposed bills. So although the current congress can still act through 2026, if these bills are not, passed, then, you know, it's gonna be difficult and they have to be reintroduced. But with that with that being said, I think there's a couple of, legislation I wanna bring to everybody's attention. Why? Because even if they don't, you have to really look at the passage outlook, who supported it, and it could present itself down the road even under, the new congress. So, getting to the fiscal sponsorship transparency act, h r nine seven two one, You know, you have to look at the reason and what it would do. Right? So the reason for the proposal is congress is focusing on transparency and whether fiscal sponsors, as Eva just mentioned, maintain control over the charitable funds. So you have an entity, fiscal sponsorship, an entity with five one c three, you know, status. They filed an application. They demonstrated they meet certain, operating and organizational tests. But now you're allowing somebody to operate a program or you're giving funding to an entity that doesn't have five one one c three status. So that's that's why it's imperative that fiscal sponsors maintain control, and this act basically, you know, supports that. And so what it would do is require additional reporting on fiscal sponsorship arrangements and impose, consequences, particularly, I think was being floated at 20% excise tax for certain improper conduit arrangements. This prevents the five one c three from saying, oh, well, we didn't do it. They did it, you know, and they are you. So So you have to pay attention. You know, what what is the, passage outlook? I think it's pretty low. The bill advanced, from the committee along the party... Along party lines. Right? So unless this gets passed by the end of the year, I think it's gonna have to be reintroduced, and you're gonna have to have some bipartisanship. And, although, you know, Democrats take control of congress, I think it makes the proposal less likely to advance. But we'll see. Nevertheless, having this in mind, so, you know, sponsors should document pro... Project approvals, written arrangements, and financial oversight monitoring. It is just best practice to do that to protect your exempt status. The next is the fun... Foreign Funding Transparency Act, which is h r nine seven seven two. And and the reason, for this proposed, bill was congress is seeking seeking greater visibility into foreign contributions to tax exempt organizations. They believe it somehow comes back in in politics. That's that's what they're they're looking at here. So this bill would require certain organizations to report aggregate foreign contributions and amounts associated with designated countries of concern. So, you see this at the federal level. Some states have passed similar laws like Florida at at at at at their level as well, so you have to look at that. The reported text uses prior year gross receipts of 200,000 and year end assets of at least 500,000 as thresholds. That's what the bill right now is calling for. I guess the proposed 500 asset threshold, I should mention, is also measured at the end of the preceding tax year. And those are the thresholds they'll... That they're likely to, look at. The passage outlook here, you know, this law is, I I think is low to uncertain in its current form. The bill advanced along party lines. That's the reason why. Although foreign funding transparency could remain an issue in future legislation, so you you know, you both both sides have to deal with this. So maybe they will get together and and and actually, do something about it. Whether it passes or not, organizations with foreign donors should assess whether their records could support the proposed reporting. It's good to track, have a reason, know who you're dealing with, sort of like a know your client type thing, and whether you you... If it hit the papers that you got a contribution from that foreign national, would it look appropriate? So I think there's some good things to come out of this either way. Going to, h r nine seven seven one, which is the stopping foreign influence in elections act. The reason for this proposal was congress, obviously, is addressing concerns about foreign funding and contributions, to political entities. So, basically, to flow through. Right? A foreign person gives to a c three or or, just another or... A nonprofit organization. They flow through a political organization or a five one c four. So what what this bill would do is affect certain organizations receiving foreign contributions, subsequently contributing to that PAC or five one c four within the... Within a proposal period, which I think is two years. It proposes monetary penalties and escalating tax consequences, and repeat... You know, they would look out for repeat violations, and cause a two year loss of tax exemption. Again, the passage outlook is low in its current form. The bill did advance a lot... Largely along party lines, and its broad treatment of transfers to five one c four organization remains contentious. Again, there are those that, you know, I guess, get supported by foreign funding, that would have, you know, a problem with this. But either way, I think it... It's still, those in congress could debate something like this because it affects both sides. So, again, the takeaway here is organizations should understand that their foreign funding and transfers a lot like what I just mentioned before, including a track... Their transactions with affiliate social welfare organizations and other, political, type organizations. Moving on to h r nine five zero, four, it... It's taxes and transparency act. You know, it seems like hospitals are always under attack. You know, we have a few hospitals we we do as well. This is always a concern. The community health needs assessment, meeting the requirements, drawing distinctions about, what differentiates them from a for profit hospital. So the reason for these proposals, congress is seeking more detail about community benefits provided to taxes and hospitals. They're... Congress, you can just read read the last year of comments from congress. They feel that, you know, that's... Hospitals are big business. They get big tax benefits, and they wanna make sure the community is receiving a reciprocal, benefit in return. So it calls for community health needs information, audit financial statements, and financial assistance measured at cost, you know, not what would... What, you know, what we would charge. That's the true true, you know, they realize that some of the rules they put in place on the five zero one r, and and community benefit rules, can be... Are very subjective. So, they found hospitals being very creative with with the way they interpret things. So they would provide greater, rules over that regulation. Hospitals will report complete financial assistance, applications received, approved, and denied. Again, how they provide this assistance. Again, benefit back to the community. The passage outlook uncertain, and I say it, this really... I I I believe, is a concern on both sides of the aisle, but there is heavy lobby, with the hospital association, pushing back on some of some of this and and saying, you know, this is not an... The IRS doesn't know how to police this. Right? And we we know how to police this better than the IRS. So the takeaway here is hospitals should continue to assess whether their teams can collect and reconcile this proposed information, whether they're meeting... You know, they have to really operate under the current rules, with community benefit, community needs assessment reports, and schedule h making sure that they're always benchmarking themselves against similar hospitals in their area. HR, 10, one zero three five seven, which is the digital asset certainty act, you know, in these days, of digital, currency. The reason for this proposal right now, digital currency is not, treated like stock, so it's treated as a non cash, so therefore, substantiation rules require, an appraisal, qualified appraisal. This bill would ease the appraisal requirements for certain qualifying stable coins with a stable market, similar to similar, like, similar to to the stock market. So other digital assets gifts would, face separate rules, including conversion conditions, and and and whatnot. The passage outlook, this looks actually more promising, but it's still uncertain, obviously, due to the change. The bill received bipartisan committee support, so the provisions could be, you know, reconsidered, under the new congress as well. Takeaway here is continue current substantiation. So if you receive these digital assets, making sure that you're filing the eighty two eighty threes, eighty two eighty two's, your donors are are getting appraisals so they can get qualifying deductions, and and that's, what what what I would, you know, take away from this, particular bill itself. And the last one, I believe, is, nine seven two two, which is the Fair Treatment of Religious Organization Act. We talked about this already at length. The reason for this proposal was to address how certain religious beliefs and practices are considered when turn... You know, when determining exempt status. What this bill would aim to do is address, specified beliefs or practices concerning marriage, sexuality, gender identity, in in in the exemption, determination. It actually expands what was con... You know, you don't have... There's a difference between a church and a religious organization. And what they're saying is if you're a religious organization, we're gonna actually re... Redetermine that. This bill would change how religious purpose is determined in the five zero one. Specified beliefs about marriage, sexuality, gender identity could be treated, you know, could not be treated as contrary or... To law or public policy. You know, it was written pretty strict in the past, but, again, things have evolved, so that's what they're looking to take that evolution step. The passage is low, due to current... You know, it it it was a bill along current lines. But nevertheless, religious organizations should monitor developments and continue to apply current exemption requirements. And I'll I'll just say that these six bills discussed remain proposals. They are not law. If a bill is not enacted before congress ends, it generally must be reintroduced to congress. So that's why, the passage on most of these is is probably not likely by the end of the year. Back, to you. thank you. Garrett and Eva, thank you very much. That was such a comprehensive presentation. I am so happy that you're the tax folks and I'm not, because there's just a lot to go through and a lot to learn. We unfortunately don't have time for questions but again repeating that any questions that did come over, will be answered in the coming days. So rest assured you'll get you'll get your responses in in in a short while. Harlene will come by in just a moment. I just wanna thank Jason and Alex and Garrett and Eva for sharing your insights and practical guidelines, and thanks to all for joining us today. This is our annual executive forum and we always welcome you on an annual basis to share, you know, in the ideas and sharing the guidance that we provide and the resources as well. As you return to your organization, just know, I encourage you to identify one or two actions that you can take from today's program and apply it to your own organizations. Feel free to reach out to any of our speakers. If you wanna continue conversations, we welcome the opportunity to help you consider how the topics apply to your organizations. On behalf of PKF Okanen Davies, thank you for your time and for the work you do at your organizations and serving our communities. We appreciate the opportunity to be a resource to you. Enjoy the rest of your day. But, Arlene, if you can just come on and then give final directions to our participants, please. Absolutely. Thank you, Mark, and thank you to all of our speakers today for hosting a wonderful webinar, and thank you everyone for attending today. If you haven't completed it already, we have launched our survey located in the survey tab of your panel. We really appreciate your feedback. A copy of the PowerPoint slides and a recording of today's webinar will be made available to all attendees via email four to five business days post event. We have launched our final polling question. 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