Not for profit organizations and Shuls – Financial & Tax reporting
In America, not for profit organizations usually have tax & financial reporting responsibilities. Sometimes a Yisraeli nonprofit will open an American company to give American donors the chance to take tax deductions for their contributions to the Yisraeli entity. The 501 (c) (3) application is something Weinstein & Company can help you prepare and submit. Obtaining the 501 (c) (3) license allows the Yisraeli Shul or Yeshiva to receive American donations while offering American donors the attractive incentive that they can deduct those contributions on their American tax returns as charitable contributions. Otherwise, if Americans want to donate to Yisraeli not for profits they do not receive tax deductions.
Some Shuls and Yeshivas operate in America and also in Eretz Yisrael. While American not for profit Shuls do not usually have American tax reporting responsibilities, they can in some cases. In general, American tax law calls a “church” any bona fide religious organization that does not require tax reporting to the government. Thus bona fide religious organizations are seldom audited or examined by authorities. This is part of the “separation of church and state” that is built into the American constitution. The IRS does not readily look at books and records of places of worship. They are considered sacred.
Be careful, because for American donors it may be difficult to look up a Shul to determine if their donations are tax deductible because American based Shuls are not required to register with the government or the IRS. They operate just as 501 (c) (3) organizations, accept donations, and write tax deductible receipts without any reporting or registration requirement to the IRS.
Nevertheless, sales of goods or employee payroll can cause the Shul to be required to register with the IRS and file an income or a payroll tax return with America. For example, sales of gifts or books to the public do normally require tax reporting and payment of income tax on those sales as they are considered a business in most cases. But if these goods sales are specifically related to kedusha (holiness), such as the sales of wine or matzah just before Pessach, those sales do not require income tax payments or reporting because they are not considered a business. Those sales are for the benefit of the members and attendees, and wine could be purchased elsewhere by the public. If you send Weinstein & Company your Shul bookkeeping to perform for you, we will help your Yeshiva or Shul understand and meet its tax and financial reporting requirements.
Not for profit organizations including Shuls and Yeshivas often request us to prepare fully noted financial statements signed by a CPA to either attract large donors, qualify to take credit cards, or achieve financing to leverage large purchases. Fully noted CPA financial statements that are prepared in accordance with American Generally Accepted Accounting Principles are very attractive to banks, lenders, and also large donors who may want to see financial statements. When you share a fully noted set of financial statements prepared by a CPA it shows people you honor the generally accepted reporting requirements and also accepted tradition of good proper prudent financial money management. Let Weinstein & Company help you achieve good financial practice and good, prudent financial money management.
One distinctive way not for profit financial statements comply with American GAAP is that they separately report operating cash flows and other, restricted financial assets in both the Statement of Financial Position and the Statement of Activities. When financial statements are prepared in this way, donors and banks can see how much cash going for specific purposes, how much is tied up with donor restrictions and how much is set aside for such purposes as endowments, buildings, and other restricted financial assets. Another way compliant financial statements are distinctive is that they separately report donations and fees. Donations are cash contributions that do not offer any value to the donor, while fees are cash payments that arise from event admissions or sales of mezuzot, tefillin, food, books or gifts, & etc.
A third way financial statements provide that distinctive quality is when applying for grants. Grant writers require specific types of reports that have to please boards of directors and heavy investors. Our financial statements separately track all the proposed and actual spending of grant money in sub-reports to the financial statements. The activity of the not for profit is separated into programs, and each program has a separate revenue and expense report. All of the separate programs add up to report on the face of the Statement of Activities. Then, donors and banks alike can calculate the percent of management costs to make an effective investment decision.
If your Shul or Yeshiva is set up as an American not for profit or wants to organize in this way, it has American tax filing and/or reporting responsibilities and so therefore please call Dov Weinstein & Accountants to prepare financial statements or tax reports and submit those to the proper agencies for you.
