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New Tax Laws and Non-Profits


Beth Bird



At the end of 2010, we saw a flurry of legislation, including the Small Business Jobs Act and the Tax Relief, Unemployment Insurance Authorization and Job Creation Act of 2010 (Tax Relief 2010), which created some significant tax changes for businesses. Although the majority of the provisions of this new legislation impact for-profit businesses and individuals, certain aspects will also have an impact on non-profits. This article will summarize some of the key aspects of the new legislation that may impact non-profits.

  • In the hope of stimulating the economy, Tax Relief 2010 creates an employee payroll tax holiday. For 2011, employees will pay 2 percentage points less (4.2 percent rather than 6.2) on Social Security wages. For those non-profits that work with contractors, this same tax holiday extends to them with a tax reduction to 10.4 percent from 12.4.
  • If a non-profit’s 401(k), 457 or 403(b) plan has a qualified Roth contribution program and provides for in-plan rollovers, a distribution to an employee or surviving spouse from an account under the plan that is not a designated Roth account is permitted to be rolled over into a designated Roth account under the plan for the individual. Such a rollover is taxable.
  • Non-profits that provide an educational assistance benefit to employees can exclude up to $5,250 in employer-provided education assistance annually from income and employment taxes. Originally scheduled to expire after 2010, Tax Relief 2010 extends these provisions through December 31, 2012.
  • Tax Relief 2010 provides for tax-free distribution from individual retirement plans for charitable purposes. Such distributions are limited to $100,000 and will expire on December 31, 2011.

In addition to extending tax-free distributions from retirement plans for charitable purposes, Tax Relief 2010 also extends the following provisions through 2011:

  • Certain charitable deductions for contribution of food inventory
  • Charitable deductions of computer equipment for educational purposes from corporations
  • Basis adjustment to stock of S corporations making charitable contributions of property

If you have additional questions, please contact your Eide Bailly representative.