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 The IRS has released the 2015 instructions for Form 990, Return of Organization Exempt from Income Tax. This year’s instructions remained relatively consistent with the previous year, according to BKD. Some changes to note:

  • Failure-to-file penalties – A penalty of $20 a day—not to exceed the lesser of $10,000 or 5% of the organization’s gross receipts for the year—is possible if returns are filed late, unless the organization can show reasonable cause for the late filing. The penalty for large organizations now is being adjusted for inflation annually. Organizations with annual gross receipts exceeding $1,015,500 (up from $1 million) are subject to a penalty of $100 per day with a maximum penalty for any one return of $50,500 (up from $50,000).
  • Private delivery services – The IRS-designated private delivery services list has been revised. DHL Express has been removed from the list, and additional FedEx and United Parcel Service options have been added. The ZIP code for the private delivery service address also has been changed.
  • Business activity codes – Form 990, Part VIII, Lines 2 and 11 require the use of business activity codes selected from a list included in the instructions. Several revisions have been made to the list; however, if a code isn’t listed for an activity, another code can be selected from the National Association of Insurance Commissioners’ website. The web link in the electronic version of the instructions has been updated.
  • Schedule H – Hospitals are instructed to include disclosures required under Revenue Procedure 2015-21 in Part VI of Schedule H. This procedure provides correction and disclosure procedures for hospital organizations to follow so that failing to meet the Internal Revenue Code Section 501(r) requirements will be excused in certain situations.
  • Schedule H, Part I, Line 7 – The instructions clarify that Columns E and F shouldn’t contain negative numbers. If a net community benefit expense is less than zero, enter zero.
  • Schedule H, Part V, Section B – Expanded guidance has been provided for many of the questions in the “Facility Policies and Practices” section, used to measure compliance with the regulations under 
    Section 501(r).

The instructions can be found on the IRS website.

Written by: Donna Larson, BKD

This article was reprinted with permission from BKD. 

President Obama kicked off the fiscal 2017 budget process with the proposals he submitted to the U.S. Congress on February 9, 2016. His budget calls for unacceptable cuts in Medicare reimbursement to post-acute care providers but also would provide needed funding increases for senior housing and home- and community-based services.

The Financial Accounting Standards Board (FASB) has announced plans to move forward on proposed accounting standards changes for nonprofit organizations, according to CliftonLarsonAllen.


Based on feedback received from the nonprofit community, FASB plans to split the proposed changes that were included in its exposure draft into 2 phases. FASB discussed the first phase at a December meeting, affirming several changes that could result in a final standard in 2016.


This is the latest step in a process started more than 3 years ago when FASB set out to improve financial reporting in the nonprofit sector. The proposed changes will impact financial statements, including note disclosures.


Reporting changes affirmed


New net asset classifications


For organizations that receive contributions or grants with donor-imposed restrictions, the 3 current net asset classifications will be collapsed into 2.


Unrestricted net assets will become net assets without donor restrictions; temporarily and permanently restricted net assets will collectively become net assets with donor restrictions. Footnote disclosures will include the differentiation between temporary and perpetual donor restrictions.


In addition, disclosures relating to amounts and purpose of board-designated net assets will be required either on the statements or in the notes.


Direct versus indirect cash flow reporting


Nonprofits will be allowed to continue to choose between the direct and indirect method when preparing the statement of cash flows. However, if an entity chooses the direct method, it will no longer be required to also present the indirect reconciliation.


All other proposed changes to the cash flow statement will be included in future phases of the project.


Underwater endowments


Underwater endowments are those permanent gifts having a current market value that is less than the historic or original gift amount. The board affirmed its proposal that underwater endowments will be classified in net assets with donor restrictions instead of the current classification in unrestricted net assets.


Expanded notes will also be required to disclose amounts underwater and to present plans for reducing or not spending from these funds.


Items not yet affirmed, but may be in future phases


Liquidity disclosures


The exposure draft proposed new disclosures meant to help the reviewer better understand the organization’s management of liquidity and the financial assets available to meet its near-term demands for cash. FASB will continue to discuss qualitative disclosure requirements surrounding how organizations manage liquidity risk, but may include a quantitative disclosure requirement as well.


Reporting of functional expenses


Existing standards require all organizations to report expenses by function (program services and supporting activities) on either the statement of activities or in the notes. Costs by natural expense classification (salary, occupancy, professional fees, and depreciation) are currently allowed but not required.


Under the proposed standard, all organizations would disclose expenses by both function and natural classification.


This can be accomplished through either a statement of functional expenses or disclosure in the notes.


Reporting investment returns


Organizations will be required to report investment income after deducting external and direct internal investment expenses. Given the varying size and complexity of investment portfolios, this information has been inconsistently tracked by some nonprofit organizations.


This change would provide a more comparable measure of overall investment return among peers. Future discussions would include the types of expenses that should be deducted.


Additional reporting measures in the statement of activities


An intermediate operating measure is currently optional. The proposed standard would have required organizations to report a defined operating measure based on mission and availability.


Based on feedback received, the FASB is continuing to discuss whether this should be required. However, it is anticipated that if an organization elects to show an intermediate measure of operations, disclosures surrounding what is included and excluded would be enhanced.


Next steps


FASB is urging preparers of financial statements to review and understand the proposed guidance. The standards board is expected to continue discussing additional proposed changes in early 2016, and will continue to post updates to the standard on its website.


Once the standard is approved, early communication to the users of your financial statements is also a key to successful implementation. Consider formal training for certain financial statement users, such as your board of directors, to explain the impact of the new reporting structure.


This article was reprinted with permission from CliftonLarsonAllen.

Change is inevitable. We’re all familiar with that saying, and yet when faced with change, this idea brings little, if any, comfort.

I’ve noticed a trend of “change” around me lately. The nature of my role places me in a position with clients to recommend something new – a change. Those are usually circumstances in which an organization is aware that a change is needed, but it still doesn’t make it easy.

There’s also the kind of change that feels like it’s happening to you. This became clear to me when I was at the LeadingAge Annual Meeting in Boston, and it struck me that we’re in the middle of unprecedented change in the field of senior living.

Here are 5 signs of changing times that are at the top of my mind:
 

  1. Changing Consumer – Just when we think we’ve figured them out, it’s time to usher in the next wave of future residents. Boomers will change how we communicate with them and what they value in their retirement living options. You need to understand this next generation of residents and evaluate how your community fits their value set.
  2. Increased Competition – You might have a strong reputation in your market, but all that can change if a new player enters the scene. This is happening at a rapid rate, which forces you to look your community, what it has to offer, and how it’s unique compared to the competition. You’ll need to understand and tell your story.
  3. Evolving Services – How we serve seniors is expanding. There’s more variety than ever in lifestyle offerings, care levels, care delivery and so on. Educate yourself on what’s new in this area.
  4. New Technology – This is a big one. New technology is changing every aspect of senior living. Resident expectations for technology within the community are growing. It’s changing the way wellness is tracked and care is delivered. It’s certainly changing how people learn about your community and contact you. Digital inquiries are on the rise. So from a sales perspective, you need to change how you communicate with prospects and leads – email, CRM, data capture and social.
  5. Life Plan Community – Even the terminology is changing. LeadingAge revealed this name to replace CCRC. It was a buzz topic during the conference. There were lots of questions and it created a dialogue. I could feel a shift in just 3 short days, from the immediate skeptical reaction when people first heard the term to a more open-minded, accepting view after processing it for a bit.

These are just a handful of the major changes underway. Change typically carries with it doubt, fear, uncertainty and a sense of losing control, but it can also be exciting.

Each of the categories above ushers in massive opportunity. It’s a sign that we’re in a growing, booming field. It was invigorating being at the LeadingAge Annual Meeting around professionals who share the same passion and witnessing this change firsthand.

So, as you’re faced with the inevitable change in your own community, I encourage you to look for the opportunity.
 
This article by Molly White was reprinted with permission from GlynnDevins.
 

Late December is the time of year when it seems the local media shifts its focus a bit. There are fewer tales of tragedy on the evening news, or in the local newspaper, and a few more tales of hope. The only question for senior living marketers is what you’re doing to be part of the holiday headlines.

If it’s been awhile since you’ve seen your community featured prominently in print or on the local television news, it’s time to look aroound for the seasonal story that makes you stand out. Here are some suggestions to help point you in the right direction:

  1. Does your community collectively donate to a soup kitchen or charity? What’s unique about the way your residents are pitching in this holiday season?
  2. Do any of your residents do anything special on their own time for charity? Any shopping mall Santa Clauses?
  3. Ask around. Not everyone who helps the needy likes to talk about it. Find out from residents if there’s someone who’s doing something spectacular, but might be too humble to share.
  4. Who are the staff members doing unique things this holiday season? Is anyone involved in donating their time to a charity? Is there anyone on staff from another nation who has a unique cultural holiday tradition they brought with them? Try to find those uncommon stories.
  5. Look for the back story. Is there a worthy cause that a resident or staff member is passionate about because of a personal experience, such as the loss of the loved one or the kindness of a stranger?

Once you’ve begun to identify these opportunities, local or regional media outreach is a good place to start. Be sure, however, not to stop there. Use the social media channels at your disposal, as well. Tell those heartwarming stories and ask others to share.

It’s also important to think visually. Do you have a lights display outside of your community? What about an intergenerational story involving kids singing carols to some of your residents? What’s happening this time of year that would look great on video?

Generosity breeds generosity. That’s why sharing your community’s charitable endeavors isn’t just good for promoting who you are. If you’ve got a resident who’s hesitating about having their story shared, remind them that positive news can often lead to more positive news, as inspired viewers begin to find their own ways of making a difference.

The media, with or without your contributions, will run holiday-related, heartstrings-tugging stories in the coming weeks. Making sure yours is one of them could feel like an early holiday gift, wrapped up neatly under the tree.

 

This article by Jeff Bell was reprinted with permission from GlynnDevins.

 

Are you ready to take off the rose-colored glasses and objectively assess your organization’s financial health? A recent BKD webinar explained how to effectively manage your organization’s revenue cycle performance and abandon common misconceptions. The webinar explained the impacts of a mismanaged revenue cycle and key strategies to help organizations improve their reimbursement and cash flow consistency.

The webinar covered:

  • Common misconceptions providers have about effectively managing their organization’s revenue cycle performance.
  • The effects of revenue cycle neglect and mismanagement that can result in poor financial health.
  • Key strategies to help improve their organization’s reimbursement and cash flow consistency.

The webinar is available online.

 

This article was reprinted with permission from BKD.

The fiscal 2016 omnibus spending bill, H.R. 2029, signed into law on December 18 is good news for senior housing and home- and community-based services. 

All of these programs received
higher allocations than would have been available under appropriations
legislation drafted earlier this year. We and our grassroots members advocated
strongly for this additional funding, which was made possible under the budget
legislation enacted in October.   

Medicare and Medicaid are not
subject to the annual appropriations process and are unaffected.  

Home- and community-based
services: While earlier draft
legislation threatened cuts in these programs, the final omnibus spending bill
provides level spending or slight increases for Older Americans Act and other
programs serving seniors.

  • Older Americans Act congregate meal programs receive $448.3
    million, a $10.1 million increase over fiscal 2015. 
  • Home delivered meals will get $226.3
    million, a $9.9 million increase over 2015. 
  • Chronic disease self-management and falls
    prevention initiatives will be level-funded, receiving $8 million and $5
    million respectively. 
  • Alzheimer’s Disease demonstration programs
    will get a $1 million increase, to $19.1 million. 
  • Lifespan Respite Care also will get another
    $1 million for a total of $3.4 million. 
  • LIHEAP, the Low-Income Home Energy
    Assistance program will be level-funded, receiving $3.39 billion. 
  • Social Services Block Grants, which many
    states use for services to seniors, also will be level-funded, at $1.7 billion. 

Housing: 


While we did not see any expansion of housing programs, the
gains should fill any gaps in renewal of existing rental subsidy programs on
the multifamily and the public housing side. So we can claim
victory this year, as shortfalls were otherwise expected.

Rural rental
assistance shortfalls were addressed, and HOME and the Housing Trust Fund also
came out much better, too.

Details:

Section 202 housing will receive
$432.7 million, a $12.7 million increase over 2015 funding.;

This amount includes $77 million for service coordinators and existing congregate services grants. 

With carryover balances and residual receipts, the funding should be sufficient for all renewals and amendments of project-based rental assistance contracts, senior preservation
rental assistance contracts, and existing congregate services grants.

Housing Trust Fund (HTF) and
HOME funding: 

The bill does not eliminate resources for the HTF or
redirect its mandatory resources to increase resources for the HOME
program, as included in the House bill.  The HTF was authorized in
2008 as a mechanism for states to create affordable housing for extremely
low- and very low-income families, and this provision would have
eliminated the HTF as a resource for state and local jurisdictions to
build and preserve affordable homeownership and rental opportunities for
those families. 

HOME Investment Partnerships Program (HOME):

The bill
restores funding for the HOME program to $950 million, $884 more than the earlier draft Senate bill.  This level is $50 million more than fiscal year 2015
and results in the production of more than 35,000 affordable housing units
for fiscal year 2016.

The HOME program helps states and local
governments increase housing affordability through the building, buying,
or rehabilitation of affordable housing.  This funding level creates
affordable housing opportunities where units are otherwise limited or
unavailable to low-income families and individuals. 

Tax extenders: The omnibus bill also included extensions of several
tax provisions that expire every year. 


In a major victory for our
advocacy and that of other stakeholders, the extenders package makes permanent
the tax-free rollover of IRA funds to charitable organizations, a potential
fundraising mechanism for our members. This tax break now will not expire every
year, as it has in the past, so donors will have the security of knowing that
the rollover always will be available.

We also are extremely pleased that the legislation makes permanent the low-income housing tax credit's 9% rate for new construction. We worked hard for this provision, since the low-income housing tax credit currently is the only federal source of capital to build affordable housing for low-income seniors.

Rural Development:

The omnibus spending legislation provides $1.39 billion for Rural Development
rental assistance (Section 521), which is $301 million more than the fiscal
year 2015 level.

This increase reflects the growth in expiring agreements
that will need to be renewed in fiscal year 2016.  Without this funding,
many low and very low income rural households, generally occupied by elderly,
disabled, or female-headed families would face rent increases they could not
afford. Almost 300,000 households will receive assistance this fiscal
year.

The bill also removes a provision that previously blocked renewing
agreements in less than 12 months if the needed funding had been underestimated.

The bill provides $37 million for multi-family housing
revitalization and preservation, which is $13 million more than the fiscal year
2015 level.

Housing vouchers received $15 million, an increase of $8
million, while the preservation program received $22 million, an increase of $5
million.  This funding will jointly address the issues of the
deteriorating physical condition of the multi-family housing stock, and the
looming problem of maturing mortgages.  Almost 4,000 low and very low
income rural households will be assisted by these vouchers.

These victories would not have happened without the work done by hundreds of LeadingAge members at the grassroots level. We greatly appreciate your engagement and are happy to report on its success.

IRS Withdraws Proposed Rule update:


The IRS has withdrawn its proposed rule on an alternate substantiation verification mechanism for donations in excess of $250. LeadingAge, and a host of other tax-exempt organizations, filed comments against the rule last month.  The withdrawal notice in the federal register. 


Proposed Rule:


 


LeadingAge has filed comments to a proposed rule issued by the Internal Revenue Service (IRS) that would allow charities to voluntarily forgo the current gift substantiation process of providing contemporaneous written acknowledgments (CWAs) upon the request of donors in favor of filing a new annual form with the IRS, in addition to the already-required Form 990.  


The new form would include donor names, addresses, and Social Security Numbers for all gifts in excess of $250. In addition to collecting donor information and filing the additional form, participating charities would also be required to provide each donor a copy of the report that contains his or her personal information.


LeadingAge commented that the rule, while presently optional, would pose serious compliance obstacles and carry with it the potential for significant limitations on members’ ability to sustain their current level of fundraising.  Specifically, LeadingAge pointed out the following:


  • Members, many of whom are reliant on federal health care reimbursement for their operating revenue, simply don’t have the technological expertise or infrastructure to protect donors’ personal information, nor do they have the means to acquire such expertise or infrastructure.

  • Any investment in technology to protect donors’ personal information would necessarily siphon much needed funds away from their mission. 

  • The proposed rule would increase the administrative overhead of charities. 

  • Donors may be reluctant to give amounts in excess of $250 out of concern for the security of their personal information or may limit their large donations to fewer organizations. 

  • While the proposed substantiation process is voluntary, there may be significant pressure from watchdogs and others to make it obligatory. 

Accordingly, LeadingAge recommended that the proposed rule be withdrawn in its entirety. 

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