Prepare for Uniform Guidance Updates Effective October 1, 2024

The Office of Management and Budget (OMB) has issued substantial revisions to the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, commonly referred to as the Uniform Guidance. These changes, effective October 1, 2024, aim to streamline processes, clarify requirements, and enhance the management of federal funds. As this date approaches, organizations must prepare to implement these changes effectively.

Key Revisions in the 2024 Uniform Guidance

1. Increased Audit Thresholds: The threshold for requiring a single audit has been raised from $750,000 to $1 million in federal expenditures, reducing the administrative burden for smaller entities.

2. Equipment and Cost Rates Adjustments:

The capitalization threshold for equipment has increased from $5,000 to $10,000.
The de minimis indirect cost rate has increased from 10% to 15% over modified total direct costs, providing more flexibility in financial planning.

3. Enhanced Cybersecurity Measures: New requirements for cybersecurity internal controls have been introduced, allowing organizations to tailor their security strategies without mandating a specific framework.

4. Simplified Notices of Funding Opportunities (NOFOs): Federal agencies are directed to make NOFOs more concise and accessible, using plain language to ensure broader reach and understanding, particularly for underserved communities.

5. Community Engagement and Evaluation: The revisions encourage recipients to allocate funds for community engagement and evaluation activities, emphasizing the importance of understanding and achieving program goals.

6. Mandatory Disclosures: Recipients must promptly disclose any credible evidence of violations related to federal criminal law or the False Claims Act, aligning with existing federal acquisition standards.

7. Increased Flexibility for Tribes: Tribal governments can now use their internal procurement standards, providing more autonomy in managing federal funds.

Preparing for the Effective Date

To ensure a smooth transition to the new requirements, organizations should consider the following steps:

Review and Revise Policies: Update internal policies and procedures to align with the new thresholds for audits, equipment, and indirect costs. Ensure that procurement policies reflect the updated standards.
Train Staff: Conduct training sessions for staff involved in grant management to familiarize them with the new requirements and ensure compliance.
Update Financial Systems: Adjust financial and accounting systems to accommodate changes in cost categories and thresholds, ensuring accurate tracking and reporting.
Engage with Stakeholders: Communicate with federal agencies and other stakeholders to understand implementation plans and any additional requirements specific to your organization’s funding sources.
Monitor Developments: As the effective date approaches, stay informed about any further guidance or clarifications issued by OMB or relevant federal agencies.

By taking these proactive steps, organizations can effectively navigate the revised Uniform Guidance, ensuring compliance and maximizing the impact of federal funds. The changes represent an opportunity to streamline operations and enhance the focus on delivering results for the communities served.

Contact your Yeo & Yeo advisor to discuss how these changes may impact your organization and to ensure you are fully prepared for the upcoming revisions.

If your organization is tax-exempt, you may be subject to annually filing a License to Solicit with the State of Michigan. Michigan law requires organizations to register with the Department of Attorney General if they solicit and receive charitable contributions in Michigan. Most charities that solicit contributions in Michigan are required to file one.

Keep in mind, soliciting can be in the form of mail, telephone calls, special events, newspapers, television, the internet, or just receiving contributions without doing much of anything.

The following are organizations that are exempt from the charitable solicitation registration requirements:

Organizations that received less than $25,000 in 12 months and pay no individuals for fundraising services of any kind
Solicitations that are exclusively for the benefit of a named individual, so long as the individual is specified in the solicitation and no one is compensated for fundraising services
Churches and religious organizations
Governmental entities
Michigan educational institutions
Veterans’ organizations that are chartered by the U. S. Congress
Licensed Michigan hospitals and their foundations and auxiliaries
Private foundations that receive contributions only from the members, directors, incorporators, or members of the families of those individuals
Organizations that are licensed by the Michigan Department of Human Services to serve children and families, such as day care facilities
Organizations whose sole source of funding is another charitable organization that is registered to solicit, so long as its registration is current

If your organization does not fall under one of these exemptions, then a solicitation form is required. If the organization has never registered before, then an Initial Solicitation Form, with attachments, must be filed. There is no fee to register. For faster processing, the Charitable Trust Section accepts registrations by email or e-filing. If your organization has already filed an initial form, then an annual Renewal Solicitation Form should be filed.

The License to Solicit with the State of Michigan expires seven months after the end of the fiscal year, and the form is due 30 days before that expiration. Therefore, if your organization has a calendar year-end, that means the renewal is due July 1, and the previous license expires July 31. The organization may request an extension for filing if they do not feel they can meet the required deadline. There is no official form for the extension, either a simple letter can be submitted to the State requesting an extension or an extension can be premptively requested when filing the prior year’s license.

Keep in mind that the financial information included in the form will also determine if you are required to have audited or reviewed financial statements. If contributions, plus net fundraising and gaming activity, less governmental grants, is between $300,000 and $550,000, then reviewed financial statements are required. If over $550,000, then audited financial statements are required.

If you are uncertain of your organization’s current license status or expiration date, visit the charities section of the State of the Michigan website and look up any registered charity.

In the best of all possible worlds, every employee is engaged, productive and compliant with organizational policies. Back here on Planet Earth, most employers must occasionally take disciplinary action against employees.

When this situation arises at your organization, it’s important to bear in mind that you could be on precarious ground. Although you have every right to enforce legally sound employment policies, haphazardly or inconsistently applied discipline can leave you vulnerable to costly lawsuits and hurt your employer brand.

Put it in writing

Proper documentation is among the best ways to help protect yourself and ensure that your disciplinary actions have the desired effect — positive change. You’ve got to put the problem and solution in writing. Here are some best practices to consider:

Define expectations. Many workplace disciplinary issues arise from miscommunications about what employers expect from employees and what employees come to believe they can or should do.

For example, let’s say you have an employee who’s chronically late. Simply telling the person, “Get to work on time,” isn’t ideal. State in the documentation the specific time the employee should be on-site or online and ready to work.

Setting expectations can be trickier for more complex disciplinary issues. In these cases, supervisors may want to meet with human resources staff and others to review the job description of the employee in question and develop clearer instructions on how to proceed.

Describe problems in detail. Vague or confusing descriptions of what prompted disciplinary actions can only exacerbate already contentious situations.

For instance, writing “constantly rude in meetings,” may describe the problem in general but provides no specifics about what’s actually going on. Documentation should include pertinent details about bad behavior such as:

The date(s) and specific location(s) it occurred,
The actions that constitute inappropriate behaviors, and
How those actions violate organizational policy.

Of course, not all disciplinary actions are prompted by bad behavior. Sometimes you need to give guidance to employees who aren’t misbehaving but, rather, falling short of expectations.

In these cases, specificity is also critical. Phrases such as “poor effort” or “lack of productivity” generally aren’t helpful. Instead, express in detail what they’re failing to do and how their shortcomings conflict with their job descriptions and other stated directives.

Give employees a voice. Many employers view disciplinary actions as a one-way street. They inform troubled employees of infractions or shortcomings and mandate corrective measures. Yet doing so tends to create a confrontational and punitive atmosphere that may leave both parties unhappy.

As part of your documentation process, ask troubled employees for their sides of the story. In some cases, how they respond may not materially change the situation in question. However, giving them the opportunity to explain can reveal critical details that may soften your view. It may also reveal needed changes to your policies, procedures, working environment and/or technology.

Create comprehensive action plans. The final section of every employee disciplinary action document should answer the simple question, “What next?” Lay out both the specific actions troubled employees should take and the timeline over which those actions should occur. Set deadlines and be sure supervisors are trained to follow up.

Last, be sure action plans state the consequences of failing to comply. These may include adverse employment actions, such as termination or demotion, so don’t hesitate to consult an attorney to ensure you’re on solid legal footing.

Do your homework

Employees’ misbehavior and lack of productivity can have a serious impact on employers’ financial stability. A well-thought-out documentation process for disciplinary actions can help discourage lawsuits, protect you in court, and convey to staff that you take these matters seriously and have done your homework.

A difficult aspect of planning your estate is taking into account your family members’ needs after your death. Indeed, after you’re gone, events may transpire that you hadn’t anticipated or couldn’t have reasonably foreseen.

While there’s no way to predict the future, you can supplement your estate plan with a trust provision that provides a designated beneficiary a power of appointment over some or all of the trust’s property. This trusted person will have the discretion to change distributions from the trust or even add or subtract beneficiaries.

Adding flexibility

Assuming the holder of your power of appointment fulfills the duties properly, he or she can make informed decisions when all the facts are known. This can create more flexibility within your estate plan.

Typically, the trust will designate a surviving spouse or an adult child as the holder of the power of appointment. After you die, the holder has authority to make changes consistent with the language contained in the power of appointment clause. This may include the ability to revise beneficiaries. For instance, if you give your spouse this power, he or she can later decide if your grandchildren are capable of managing property on their own or if the property should be transferred to a trust managed by a professional trustee.

Detailing types of powers

If you take this approach, there are two types of powers of appointment:

“General” power of appointment. This allows the holder of the power to appoint the property for the benefit of anyone, including him- or herself, his or her estate or the estate’s creditors. The property is usually included in a trust but may be given to the holder outright. Also, this power of appointment can be transferred to another person.
“Limited” or “special” power of appointment. Here, the person holding the power of appointment can give the property to a select group of people who’ve specifically been identified by the deceased. For example, it might provide that a surviving spouse can give property to surviving children, as he or she chooses, but not to anyone else. Thus, this power is more restrictive than a general power of appointment.

Whether you should use a general or limited power of appointment depends on your circumstances and expectations.

Understanding the tax impact

The resulting tax impact may also affect the decision to use a general or limited power of appointment. The rules are complicated, but property subject to a general power of appointment is typically included in the taxable estate of the designated holder of the power. However, property included in the deceased’s estate receives a step-up in basis to fair market value on the date of death. Therefore, your heirs can sell property that was covered by a general power of appointment with little or no income tax consequences.

In contrast, property covered by a limited power isn’t included in the holder’s estate. However, the new heirs inherit the property with a carryover basis and no step-up in basis. So, if the heirs sell appreciated property, they face a potentially high capital gains tax.

Your final decision requires an in-depth analysis of your tax and financial situation by your estate tax advisor. Contact us with any questions.

Yeo & Yeo, a leading Michigan-based accounting and advisory firm, has been recognized by INSIDE Public Accounting (IPA) as a Top 200 Firm in the U.S. for the sixteenth consecutive year. In the 2024 IPA ranking of more than 600 participating firms based on net revenue, Yeo & Yeo ranked 120. This recognition underscores Yeo & Yeo’s commitment to strategic growth, agility, and helping clients thrive.

“We would not be where we are today without the trust and partnership of our clients,” said President & CEO Dave Youngstrom. “We are continually adapting, implementing new technologies, and working to bring meaningful solutions to our clients every day.”

The firm’s forward-thinking approach is exemplified by its strategic planning and commitment to adapting to change. Yeo & Yeo’s dedicated Technology and Innovations Team regularly evaluates technology tools, ensuring access to secure, compliant, and efficient software applications for its employees and clients. Moreover, the firm has strategic goal champions focused on client experience, diversity, training, recruiting, and more. This dedication has led to continued growth for all of Yeo & Yeo’s companies: Yeo & Yeo CPAs & Advisors, Yeo & Yeo Technology, Yeo & Yeo Medical Billing & Consulting, and Yeo & Yeo Wealth Management

“The driving force behind our success is the talent, passion, and dedication of our team,” said Youngstrom. “Their expertise and teamwork have allowed us to build strong, lasting relationships with our clients. I am truly thankful for their dedication and the confidence our clients have in us.”

With a team of more than 225 professionals and over 15 specialized industry teams and sub-teams, the firm offers a comprehensive suite of services, including audit, tax, business consulting, medical billing, and technology solutions. As an independent member of the BDO Alliance USA, Yeo & Yeo leverages the resources of other Alliance members to expand its capabilities and address clients’ unique challenges and opportunities.

“We have extensive experience and capabilities, but our true mission is to create success stories for our clients,” added Youngstrom. “We are purpose-driven, helping our clients see what is possible and achieve their goals.”

About INSIDE Public Accounting

INSIDE Public Accounting (IPA) is a leader in practice management resources for the public accounting profession. IPA offers a monthly practice management publication and four national practice management benchmarking reports every year. IPA has helped firms across North America grow and thrive since 1987.

View the list of top-ranked IPA firms.

Yeo & Yeo is pleased to announce the promotion of four professionals to manager.

Brandon Brom, CPA, serves in the firm’s Tax & Consulting Service Line and is a member of Yeo & Yeo’s Cannabis Services Group. He specializes in tax planning and preparation for the real estate, nonprofit, and cannabis industries. Brandon is a member of the firm’s Yeo Young Professionals and is actively involved in the Auburn Hills Chamber of Commerce and Troy Chamber of Commerce. He holds a Master of Accountancy from Adrian College. Brandon is based in the firm’s Auburn Hills office.

Shawn Davis, CPA, serves in the Tax & Consulting Service Line. He is a member of the Trust & Estate Services Group, the Death Care Services Group, and the State and Local Tax Services Group. Shawn specializes in tax planning and preparation services for individuals, partnerships, and corporations, as well as multistate income and sales tax nexus analysis. He holds a Bachelor of Business Administration in accounting and management from Northwood University. In the community, he serves as a board member of the Bay City Noon Rotary Club. He is based in the firm’s Saginaw office.

Meg Warner, CPA, serves in the Assurance Service Line. She is a member of the firm’s Government Services Group and specializes in audits for governmental entities, school districts, and nonprofits. She is a member of the Michigan Association of Certified Public Accountants’ Governmental Accounting & Auditing Professional Panel and the Gratiot Area Chamber of Commerce Young Professionals Network. In 2023, she received the Women to Watch – Emerging Leader award from the Michigan Association of Certified Public Accountants. In the community, Meg serves on the Gratiot County Community Foundation’s grant committee and is board secretary of the Yeo & Yeo Foundation. She is a volunteer leader for Central Michigan Youth for Christ and was recognized by the organization with the “Whatever It Takes” award for going above and beyond in service. Meg is based in the firm’s Alma office.

Michael Wilson II, CPA, serves in the Tax & Consulting Service Line. He specializes in business advisory services, consulting, and tax planning and preparation with an emphasis on the cannabis industry. As a member of the Cannabis Services Group, he assists clients with cannabis advisory services, including license application consulting, entity selection, and finding access to capital assistance. He is a member of the Saginaw County Young Professionals Network and president of the firm’s Yeo Young Professionals group. Michael is based in the firm’s Saginaw office.

“These promotions are well-deserved and highlight the incredible talent of our team,” said Yeo & Yeo President & CEO Dave Youngstrom. “Brandon, Shawn, Meg, and Michael have consistently gone above and beyond, demonstrating a profound ability to lead and innovate. I have no doubt that they will continue to excel and inspire those around them.”

A nonprofit organization may wind up its affairs and close its doors for many different reasons. Whatever the underlying reason is, it’s important to follow the proper steps to report the liquidation, dissolution or termination of your nonprofit organization to the IRS and the State of Michigan. The required steps will vary based on details particular to your organization. The purpose of this article is not to discuss every possibility but to overview the basic process.

Several assumptions are made in the following discussion: Your organization is a Michigan nonprofit corporation that is recognized by the IRS as a 501(c)(3), it has been in operation, and is voluntarily dissolving. If this does not describe your organization, please seek additional guidance.

Authorizing Dissolution

When discussions about closing your organization begin, the procedures depend on whether your organization has shareholders or if it was formed on a membership or directorship basis. You can find this information in your articles of incorporation. The Michigan Nonprofit Corporation Act allows voluntary dissolution to be authorized in several ways, dependent upon how the organization was organized.

If your organization has shareholders or members, the board may propose dissolution, unless there is a conflict of interest or other special circumstance, or if the power to dissolve rests with the shareholders and members without action by the board. All shareholders or members must be given ten days’ notice of the meeting and be informed that the purpose of the meeting is to vote on the dissolution of the corporation. The dissolution is approved if a majority of the votes are in favor unless other provisions are made by the articles of incorporation or bylaws.

Many nonprofit organizations are created on a directorship basis. In this case, notice of the meeting to vote on dissolution must be given to the board at least ten days ahead of the meeting. The dissolution is approved if a majority of the directors who are then in office vote in agreement.

Attorney General – Dissolution Questionnaire

Once the dissolution is approved by the members, shareholders and/or the board, the organization must submit a Dissolution Questionnaire to the Michigan Department of Attorney General. The Dissolution Questionnaire identifies the corporation, identifies a contact person at the corporation, names the person who will retain the books and records, and verifies the IRS exempt status.

If the organization has no assets and has already wound up its affairs, then you must provide the following:

Copies of Form 990 or 990-EZ for the last three periods (or internal financial statements or treasurer’s reports if Form 990 or 990-EZ were not filed)
A financial accounting for subsequent periods if the last 990 or 990-EZ does not have zero assets
The last three years of audited financial statements, if prepared.

If the organization has assets (other than a minor amount for final expenses), you must provide the date you expect to wind up affairs, a current listing of assets and liabilities, and the plan to dispose of the remaining assets. The Attorney General will not approve the dissolution until a final accounting has been provided. Like many nonprofit corporation documents, the Dissolution Questionnaire is public record and may be accessed by any interested person.

Winding up Affairs

The organization may have outstanding receivables and payables when dissolution is approved. You are allowed to continue in existence until assets are collected, debts and other liabilities are paid, assets are sold or transferred, and any other actions are performed that are required to complete the liquidation. The process may include notifying existing claimants and publishing a notice of dissolution. Specific guidelines exist related to these notices, and you should seek additional direction if you wish to provide the notices.

To qualify for 501(c)(3) exempt status with the IRS, your organization was required to have a dissolution clause in its articles of incorporation. This clause dictates that upon dissolution, the assets must be distributed for one or more exempt purposes and may even name one or more recipients. Though your organization is no longer going to pursue its mission, the remaining assets will be able to further pursue the organization’s purpose when they are transferred to another like 501(c)(3).

Department of Licensing and Regulatory Affairs

Once the dissolution is approved by the Attorney General, the organization can file a Certificate of Dissolution with the Michigan Department of Licensing and Regulatory Affairs. This form identifies the organization and how the dissolution was proposed and approved. It must be accompanied by the letter from the Attorney General and remittance of a nonrefundable fee.

Michigan Department of Treasury

If your organization was registered for Michigan taxes, within 60 days after submitting the Certificate of Dissolution the organization must request tax clearance from the Michigan Department of Treasury. Clearance is requested by writing a letter and submitting it to the Michigan Department of Treasury, Tax Clearance Division, Lansing, MI 48922.

Notify the IRS

So far, we have discussed only the steps needed to dissolve at the state level. To dissolve at the federal level, the organization must file a final Form 990 or 990-EZ by the fifteenth day of the fifth month after the termination date, which may require a short-year return.

If you file Form 990, you must check the box Final Return/Terminated; answer Yes to Part IV, Line 31 “Did the organization liquidate, terminate, or dissolve and cease operations?” and answer Yes to Part IV, Line 32, if applicable “Did the organization sell, exchange, dispose of, or transfer more than 25% of its net assets?”

If you file Form 990-EZ, then you must check the box Final Return/Terminated in the header; answer Yes to Part V, Line 36 “Did the organization undergo a liquidation, dissolution, termination, or significant disposition of net assets during the year?”

In both cases, Schedule N, Liquidation, Termination, Dissolution or Significant Disposition of Assets, must be included with the return. With this schedule, you’ll describe the assets, fees, date of distribution, fair market value of assets, and information about the recipients. When you file the return, you’ll also include the Certificate of Dissolution, minutes of the meeting where the dissolution vote was taken, a list of the last directors, trustees or officers, and a signed statement describing the final distribution of assets.

Other Considerations

If your organization has employees, you must also file final employment tax returns at the federal and state level. Also, you must notify the Registration Section of the Michigan Department of Treasury by completing Form 163 Notice of Change or Discontinuance. This can be filed by paper or online through Michigan Treasury Online.

The process described above may not include all the steps that your organization must take to dissolve. Your organization may need to seek additional guidance from your attorney or CPA. It’s essential to be familiar with your organizing and governing documents, which will help you determine the necessary steps to ensure the organization is correctly terminated and dissolved. For additional information, visit:

It usually takes between two and six weeks for management to prepare financial statements that comply with the accounting rules. The process takes longer if an outside accountant reviews or audits your reports. Timely information is critical to making informed business decisions and pivoting as needed if results fall short of expectations. That’s why proactive managers often turn to flash reports for more timely insights.

The benefits

Flash reports typically provide a snapshot of key financial figures, such as cash balances, receivables aging, collections and payroll. Some metrics might be tracked daily, such as sales, shipments and deposits. This is especially critical during seasonal peaks, when undergoing major changes or when your business is struggling to make ends meet.

Effective flash reports are simple and comparative. Those that take longer than an hour to prepare or use more than one sheet of paper are too complex to maintain. Comparative flash reports may help identify patterns from week to week — or deviations from the budget that may need corrective action.

The limitations

Flash reports also can identify problems and weaknesses. But they have limitations that management should recognize to avoid misuse.

Most importantly, flash reports provide a rough measure of performance and are seldom 100% accurate. It’s also common for items such as cash balances and collections to ebb and flow throughout the month, depending on billing cycles.

Companies generally only use flash reports internally. They’re rarely shared with creditors and franchisors, unless required in bankruptcy or by a franchise agreement. A lender also may ask for flash reports if a business fails to meet liquidity, profitability and leverage covenants.

If shared flash reports deviate from what’s subsequently reported on financial statements that comply with U.S. Generally Accepted Accounting Principles (GAAP), it may raise a red flag with stakeholders. For instance, they may wonder if you exaggerated results on flash reports or your accounting team is simply untrained in financial reporting matters. If you need to share flash reports, consider adding a disclaimer that the results are preliminary, may contain errors or omissions, and haven’t been prepared in accordance with GAAP.

What’s right for your organization?

There’s no one-size-fits-all format for flash reports. For example, billable hours are more relevant to law firms and machine utilization rates are more relevant to manufacturers. Contact us for help customizing your flash reports to incorporate the key metrics that are most relevant for your industry. We can also answer questions about any reporting concerns you may be facing today.

Get ready: The upcoming presidential and congressional elections may significantly alter the tax landscape for businesses in the United States. The reason has to do with a tax law that’s scheduled to expire in about 17 months and how politicians in Washington would like to handle it.

How we got here

The Tax Cuts and Jobs Act (TCJA), which generally took effect in 2018, made extensive changes to small business taxes. Many of its provisions are set to expire on December 31, 2025.

As we get closer to the law sunsetting, you may be concerned about the future federal tax bill of your business. The impact isn’t clear because the Democrats and Republicans have different views about how to approach the various provisions in the TCJA.

Corporate and pass-through business rates

The TCJA cut the maximum corporate tax rate from 35% to 21%. It also lowered rates for individual taxpayers involved in noncorporate pass-through entities, including S corporations and partnerships, as well as from sole proprietorships. The highest rate today is 37%, down from 39.6% before the TCJA became effective.

But while the individual rate cuts expire in 2025, the law made the corporate tax cut “permanent.” (In other words, there’s no scheduled expiration date. However, tax legislation could still raise or lower the corporate tax rate.)

In addition to lowering rates, the TCJA affects tax law in many other ways. For small business owners, one of the most significant changes is the potential expiration of the Section 199A qualified business income (QBI) deduction. This is the write-off for up to 20% of QBI from noncorporate entities.

Another of the expiring TCJA business provisions is the gradual phaseout of first-year bonus depreciation. Under the TCJA,100% bonus depreciation was available for qualified new and used property that was placed in service in calendar year 2022. It was reduced to 80% in 2023, 60% in 2024, 40% in 2025, 20% in 2026 and 0% in 2027.

Potential Outcomes

The outcome of the presidential election in three months, as well as the balance of power in Congress, will determine the TCJA’s future. Here are four potential outcomes:

All of the TCJA provisions scheduled to expire will actually expire at the end of 2025.
All of the TCJA provisions scheduled to expire will be extended past 2025 (or made permanent).
Some TCJA provisions will be allowed to expire, while others will be extended (or made permanent).
Some or all of the temporary TCJA provisions will expire — and new laws will be enacted that provide different tax breaks and/or different tax rates.

How your tax bill will be affected in 2026 will partially depend on which one of these outcomes actually happens and whether your tax bill went down or up when the TCJA became effective years ago. That was based on a number of factors including your business income, your filing status, where you live (the SALT limitation negatively affects taxpayers in certain states), and whether you have children or other dependents.

Your tax situation will also be affected by who wins the presidential election and who controls Congress because Democrats and Republicans have competing visions about how to proceed. Keep in mind that tax proposals can become law only if tax legislation passes both houses of Congress and is signed by the President (or there are enough votes in Congress to override a presidential veto).

Look to the future

As the TCJA provisions get closer to expiring, and the election gets settled, it’s important to know what might change and what tax-wise moves you can make if the law does change. We can answer any questions you have and you can count on us to keep you informed about the latest news.

Yeo & Yeo is pleased to welcome Madi Moreau, CPA, to the firm as a manager.

“We are excited to welcome Madi to the firm,” says David Jewell, Principal and Tax & Consulting Service Line Leader. “We are confident that she will bring valuable insights and leadership to our engagements, and we look forward to the positive impact she will have on our clients and the firm.”

Moreau brings more than ten years of experience in both private and public accounting. She specializes in tax planning and preparation for corporations, pass-through entities, and individuals, with a focus on the real estate industry. She has served many clients throughout her career, providing business advisory services, preparation and analysis of financial statements, and guidance for regulatory compliance. She holds a Master of Business Administration in forensic accounting from the University of South Florida. Moreau is a member of the American Institute of Certified Public Accountants and the Michigan Association of Certified Public Accountants. In the community, she has volunteered for Ronald McDonald House Charities. She is based in Yeo & Yeo’s Flint office.

“Joining Yeo & Yeo is an incredible opportunity. I look forward to building lasting relationships and helping clients navigate challenges and achieve long-term success,” Moreau said.

Yeo & Yeo is pleased to announce the promotion of Kelly Brown, CPA, MST, to senior manager.

In speaking on her promotion, Brown said, “I am excited to take this next step in my career and embrace more leadership opportunities. As our clients at Yeo & Yeo continue to grow their businesses and cross state lines, I enjoy the challenge of addressing their tax questions and finding solutions to meet their unique needs.”

Brown specializes in State and Local Tax (SALT) income tax returns and related filings for C-corporations, S-corporations, partnerships, and individuals. As co-leader of Yeo & Yeo’s State and Local Tax Services Group, she leads projects involving nexus determinations, taxability analyses, identifying and quantifying state modifications and determining proper state apportionment. She holds a Master of Science in Taxation from Walsh College and, with her advanced education in complex tax topics, assists the firm’s individual and business clients as they face a challenging tax environment. Brown has participated in several episodes of Yeo & Yeo’s Everyday Business Podcast, providing insight on topics ranging from sales tax to overall tax strategies and multistate nexus tax exposure.

Brown is a member of the Michigan Association of Certified Public Accountants and the American Institute of Certified Public Accountants and has served on the Michigan Tax Conferences’ Planning Tax Force. In 2019, she was among five finalists nationwide for the Sales Tax Institute’s Sales Tax Nerd Award, which recognizes professionals who demonstrate a dedicated passion and commitment to learning about indirect tax. She joined Yeo & Yeo in 2016 and is based in the firm’s Saginaw office. In the community, Brown serves as a 4-H volunteer.

Dave Jewell, managing principal and the firm’s Tax & Consulting Service Line leader, praised Brown’s expertise and value to the team, stating, “Kelly’s in-depth knowledge of state and local taxes has been invaluable to our clients and our firm. We are thrilled to see her advance to senior manager, a role in which she will undoubtedly continue to excel.”

The Michigan Supreme Court ruled on the case that challenged the handling of two 2018 ballot proposals – one raising the minimum wage, including that of tipped employees, and the other enacting paid leave benefits for full-time, part-time and seasonal employees.

The Justices found the actions of the Michigan lawmakers unconstitutional. This decision cannot be appealed.

Beginning February 21, 2025:

Under the Improved Workforce Opportunity Wage Act (IWOWA), Michigan’s $10.33 minimum wage will likely climb above $12 next year and continue to rise through 2028, depending on the state’s inflation calculations. The lower minimum wage for tipped workers – now $3.93 – will be completely phased out over the next four years.
Under the Earned Sick Time Act (ESTA), all Michigan employers, regardless of the number of employees, must provide all their employees with paid medical leave.

Small employers who are currently exempt from providing paid medical leave should think about how the new law will impact their payroll costs and plan to include new policies in employee handbooks. All employers should review their current paid time off policies and wage schedules well before the effective date.

Watch for more guidance from Yeo & Yeo regarding implementing the paid medical leave benefits.

Yeo & Yeo CPAs & Advisors, a leading Michigan-based accounting and advisory firm, has merged in Berger, Ghersi & LaDuke PLC (BGL) of Bloomfield Hills, Mich., effective July 1, 2024, extending Yeo & Yeo’s presence in the Southeast Michigan region.

“We are excited to welcome BGL’s professionals to the Yeo & Yeo team,” said David Youngstrom, Yeo & Yeo’s President & CEO. “Together, our firms have a combined 140 years of dedicated service, and we share a deep commitment to building strong relationships and providing close personal attention to our clients.”

For more than 40 years, BGL has built a solid reputation for delivering accounting, audit, tax, and consulting services to individuals and businesses. BGL has extensive expertise in services for the real estate industry, high-end tax planning and preparation, and retirement plan audits. The firm specializes in peer reviews, a service that will be new to Yeo & Yeo.

BGL partners Alan LaDuke, CPA, MST, David Berger, CPA, and James McAuliffe, CPA, MST, have joined Yeo & Yeo’s principal group. Alongside them, a skilled team of nine accounting and administrative professionals also joined Yeo & Yeo and will continue to provide exceptional value to clients and maintain the high standards both firms are known for.

“We are pleased to have found a partner in Yeo & Yeo that shares our values and commitment to helping clients succeed,” said Alan LaDuke, Principal at BGL. “As the accounting industry evolves and becomes more complex, this merger will allow us to stay at the forefront and present greater opportunities to enhance the experiences of our team and our clients.”

Looking ahead, Yeo & Yeo plans to establish a new, larger office location in Southeast Michigan to unite the talent of professionals from Yeo & Yeo’s current Auburn Hills office and the BGL firm.

“Combining our offices will allow us to leverage the strengths of both teams, creating a more dynamic environment that ultimately benefits our clients through improved efficiency and collaboration,” said Youngstrom.

Yeo & Yeo was founded more than 100 years ago and has since grown from a family-owned business with roots in Saginaw to more than 225 employees in nine locations across Michigan. With four companies and over 20 specialty teams, Yeo & Yeo remains dedicated to meeting clients’ unique needs and helping them thrive.

Getting divorced and dividing up assets is no easy matter. At least you can sell a house, a car or certain other possessions and distribute the proceeds to the two ex-spouses according to ownership rights under the law. But liquidating other types of property, such as assets in a qualified retirement plan, can be more complicated.

Using a qualified domestic relations order (QDRO) may provide for the transfer of assets in a qualified retirement plan to a nonparticipant spouse without incurring dire tax consequences. This can help you preserve more of your retirement account savings for your estate.

How a QDRO works

A QDRO provides a relatively straightforward means of accommodating a transfer of qualified retirement plan assets. A court with jurisdiction or another appropriate authority issues the QDRO. Essentially, the QDRO establishes that one spouse has a claim to some of the other spouse’s retirement plan accounts.

Typically, the QDRO will state either a dollar amount or a percentage of assets that belongs to the spouse of the participant, called the “alternate payee” in legal parlance. It also specifies the number of payments to be made (or the length of time for which the terms apply).

A QDRO may be used for qualified plans covered by the Employee Retirement Income Security Act (ERISA), including 401(k) plans, traditional pension plans and various other plans. In contrast, IRA funds, which aren’t covered by ERISA, generally are disbursed according to the terms of the divorce agreement.

With an approved QDRO in place, the alternate payee doesn’t owe any penalty tax on distributions. Thus, you can arrange a lump-sum distribution or series of periodic payments penalty-free according to the order, regardless of your age.

A QDRO must provide certain information. This includes the names and addresses of both the plan participant and the alternate payee; the dollar amount or percentage of assets being transferred to the alternate payee; and other vital details such as the amount, form and frequency of payments. If required information is omitted, a judge won’t sign off on the order. Rely on your legal and financial advisors to ensure that all formalities are met.

After a QDRO is approved by the judge, there’s still more work to do. The alternate payee must submit it to the administrator of the retirement plan. Every plan governed by ERISA must follow the authorized process for QDRO filings.

Available payment options

Assuming QDROs are allowed by the plan, the alternate payee will have payment options to consider. For starters, he or she can take a lump-sum distribution of the full amount. However, this may result in a higher overall tax liability than if the payments were spread out. Or, the alternate payee can arrange to receive regular payments just like the plan participant, thereby reducing the total tax hit.

Another option is to roll over the assets into another plan or IRA. If the usual requirements are met — for example, the rollover is completed within 60 days — no current tax is owed for the year of the transfer.

Finally, the alternate payee may leave the money where it is. If permitted by the plan, additional contributions to the account may be made in the future.

Accurate financial statements are essential to making informed business decisions. So, managers and other stakeholders may express concern when a company restates its financial results. Before jumping to premature conclusions, however, it’s important to dig deeper to evaluate what happened.

Uptick in restatements

In June 2024, the Center for Audit Quality (CAQ) reported a recent uptick in financial restatements by public companies. The report, “Financial Restatement Trends in the United States: 2013–2022,” delves into a ten-year study by research firm Audit Analytics. It found that the number of restatements in 2022 had increased by 11% from the previous year.

More alarming is a trend toward more “Big R” restatements. Big Rs indicate that the company’s previously filed financial reports were deemed unreliable by the company or its auditors. Although most restatements are due to minor technical issues, the proportion of total restatements that were Big Rs rose to 38% in 2022, up from 25% in 2021. The 2022 figure is also up from 28% in 2013 (the peak year for restatements in the study) — and it’s the third consecutive year that the proportion of Big Rs has increased.

However, the CAQ report states, “It is too early to tell if the increase in restatements toward the end of the sample period is a true inflection point or simply a brief disruption of the previous downward trend.” Overall, financial restatements have decreased from 858 in 2013 to 402 in 2022.

Reasons for restatement

The Financial Accounting Standards Board defines a restatement as a revision of a previously issued financial statement to correct an error. Whether they’re publicly traded or privately held, businesses may reissue their financial statements for several “mundane” reasons. For instance, management might have misinterpreted the accounting standards, requiring the company’s external accountant to adjust the numbers. Or they simply may have made minor mistakes and need to correct them.

Common reasons for restatements include:

Recognition errors (for example, when accounting for leases or reporting compensation expense from backdated stock options),
Income statement and balance sheet misclassifications (for instance, a company may need to shift cash flows between investing, financing and operating on the statement of cash flows),
Mistakes reporting equity transactions (such as improper accounting for business combinations and convertible securities),
Valuation errors related to common stock issuances,
Preferred stock errors, and
The complex rules related to acquisitions, investments, revenue recognition and tax accounting.

Often, restatements happen when the company’s financial statements are subjected to a higher level of scrutiny. For example, restatements may occur when a private company converts from compiled financial statements to audited financial statements or decides to file for an initial public offering. They also may be needed when the owner brings in additional internal (or external) accounting expertise, such as a new controller or audit firm.

Material restatements often go hand-in-hand with material weakness in internal controls over financial reporting. In rare cases, a financial restatement also can be a sign of incompetence — or even fraud. Such restatements may signal problems that require corrective actions. However, the CAQ report found that only 3% of all restatements and 7% of Big Rs involved fraud over the 10-year period.

We can help

The restatement process can be time consuming and costly. Regular communication with interested parties — including lenders and shareholders — can help businesses overcome the negative stigma associated with restatements. Management also needs to reassure employees, customers and suppliers that the company is in sound financial shape to ensure their continued support.

Accounting and tax rules are continuously updated and revised. So, your in-house accounting team may need help understanding the evolving accounting and tax rules to minimize the risk of restatements, as well as help them effectively manage the restatement process. We can help you stay atop the latest rules, reinforce your internal controls and issue reports that conform to current Generally Accepted Accounting Principles.

Most businesses have websites today. Despite their widespread use, the IRS hasn’t issued formal guidance on when website costs can be deducted.

But there are established rules that generally apply to the deductibility of business expenses and provide business taxpayers launching a website with some guidance about proper treatment. In addition, businesses can turn to IRS guidance on software costs. Here are some answers to questions you may have.

What are the tax differences between hardware and software?

Let’s start with the hardware you may need to operate a website. The costs fall under the standard rules for depreciable equipment. Specifically, for 2024, once these assets are operating, you can deduct 60% of the cost in the first year they’re placed in service. This favorable treatment is allowed under the first-year bonus depreciation break.

Note: The bonus depreciation rate was 100% for property placed in service in 2022 and was reduced to 80% in 2023, 60% in 2024 and it will continue to decrease until it’s fully phased out in 2027 (unless Congress acts to extend or increase it).

Alternatively, you may be able to deduct all or most of these costs in the year the assets are placed in service under the Section 179 first-year depreciation deduction privilege. However, Sec. 179 deductions are subject to several limitations.

For tax years beginning in 2024, the maximum Sec. 179 deduction is $1.22 million, subject to a phaseout rule. Under the rule, the deduction is phased out if more than a specified amount ($3.05 million in 2024) of qualified property is placed in service during the year.

There’s also a taxable income limit. Under it, your Sec. 179 deduction can’t exceed your business taxable income. In other words, Sec. 179 deductions can’t create or increase an overall tax loss. However, any Sec. 179 deduction amount that you can’t immediately deduct is carried forward and can be deducted in later years (to the extent permitted by the applicable limits).

Similar rules apply to purchased off-the-shelf software. However, software license fees are treated differently from purchased software costs for tax purposes. Payments for leased or licensed software used for your website are currently deductible as ordinary and necessary business expenses.

Was the software developed internally?

If, instead of being purchased, the website is designed in-house by the taxpayer launching it (or designed by a contractor who isn’t at risk if the software doesn’t perform), bonus depreciation applies to the extent described above. If bonus depreciation doesn’t apply, the taxpayer can either:

Deduct the development costs in the year paid or incurred, or
Choose one of several alternative amortization periods over which to deduct the costs.

Generally, the only allowable treatment will be to amortize the costs over the five-year period beginning with the midpoint of the tax year in which the expenditures are paid or incurred.

If your website is primarily for advertising, you can currently deduct internal website software development costs as ordinary and necessary business expenses.

What if you pay a third party?

Some companies hire third parties to set up and run their websites. In general, payments to third parties are currently deductible as ordinary and necessary business expenses.

What about expenses before business begins?

Start-up expenses can include website development costs. Up to $5,000 of otherwise deductible expenses that are incurred before your business commences can generally be deducted in the year business commences. However, if your start-up expenses exceed $50,000, the $5,000 current deduction limit starts to be chipped away. Above this amount, you must capitalize some, or all, of your start-up expenses and amortize them over 60 months, starting with the month that business commences.

We can help

We can determine the appropriate tax treatment of website costs. Contact us if you want more information.

The IRS has published new regulations relevant to taxpayers subject to the “10-year rule” for required minimum distributions (RMDs) from inherited IRAs or other defined contribution plans. The final regs, which take effect in 2025, require many beneficiaries to take annual RMDs in the 10 years following the deceased’s death.

SECURE Act ended stretch IRAs

The genesis of the new regs dates back to the 2019 enactment of the Setting Every Community Up for Retirement Enhancement (SECURE) Act. One of the many changes in that tax law was the elimination of so-called “stretch IRAs.”

Previously, all beneficiaries of inherited IRAs could stretch RMDs over their entire life expectancies. Younger heirs in particular benefited by taking smaller distributions for decades, deferring taxes while the accounts grew. These heirs also could pass on the IRAs to later generations, deferring the taxes even longer.

The SECURE Act created limitations on which heirs can stretch IRAs. These limits are intended to force beneficiaries to take distributions and expedite the collection of taxes. Specifically, for IRA owners or defined contribution plan participants who died in 2020 or later, only “eligible designated beneficiaries” (EDB) are permitted to stretch out payments over their life expectancies. The following heirs are considered eligible for this favorable treatment:

Surviving spouses,
Children younger than “the age of majority,”
Individuals with disabilities,
Chronically ill individuals, and
Individuals who are no more than 10 years younger than the account owner.

All other heirs (known as designated beneficiaries) are required to take the entire balance of the account within 10 years of the death, regardless of whether the deceased died before, on or after the required beginning date (RBD) of his or her RMDs.

Note: In 2023, under another law, the age at which account owners must begin taking RMDs increased from 72 to 73, pushing the RBD date to April 1 of the year after the account owner turns 73. The age is slated to jump to 75 in 2033.

Proposed regs muddied the waters

In February 2022, the IRS issued proposed regs addressing the 10-year rule — and they brought some bad news for many affected heirs. The proposed regs provided that, if the deceased dies on or after the RBD, designated beneficiaries must take their taxable RMDs in years one through nine after death (based on their life expectancies), receiving the balance in the tenth year. A lump-sum distribution at the end of 10 years wouldn’t be allowed.

The IRS soon heard from confused taxpayers who had recently inherited IRAs or defined contribution plans and didn’t know when they were required to start taking RMDs. Beneficiaries could have been hit with a penalty based on the amounts that should have been distributed but weren’t. This penalty was 50% before 2023 but was lowered to 25% starting in 2023 (or 10% if a corrective distribution was made in a timely manner). The plans themselves could have been disqualified for failing to make RMDs.

As a result, the IRS issued a series of waivers on enforcement of the 10-year rule. With the release of the final regulations, the waivers will come to an end after 2024.

Final regs settle the matter

The IRS reviewed comments on the proposed regs suggesting that if the deceased began taking RMDs before death, the designated beneficiaries shouldn’t be required to continue the annual distributions as long as the remaining account balance is fully distributed within 10 years of death. The final regs instead require these beneficiaries to continue receiving annual distributions.

If the deceased hadn’t begun taking his or her RMDs, though, the 10-year rule is somewhat different. While the account has to be fully liquidated under the same timeline, no annual distributions are required. That gives beneficiaries more opportunity for tax planning.

To illustrate, let’s say that a designated beneficiary inherited an IRA in 2021 from a family member who had begun to take RMDs. Under the waivers, the beneficiary needn’t take RMDs for 2022 through 2024. The beneficiary must, however, take annual RMDs for 2025 through 2030, with the account fully distributed by the end of 2031. Had the deceased not started taking RMDs however, the beneficiary would have the flexibility to not take any distributions in 2025 through 2030. So long as the account was fully liquidated by the end of 2031, the beneficiary would be in compliance.

Additional proposed regs

The IRS released another set of proposed regs regarding other RMD-related changes made by SECURE 2.0, including the age when individuals born in 1959 must begin taking RMDs. Under the proposed regs, the “applicable age” for them would be 73 years.

They also include rules addressing:

The purchase of an annuity with part of an employee’s defined contribution plan account,
Distributions from designated Roth accounts,
Corrective distributions,
Spousal elections after a participant’s death,
Divorce after the purchase of a qualifying longevity annuity contract, and
Outright distributions to a trust beneficiary.

The proposed regs would take effect in 2025.

Timing matters

It’s important to realize that even though RMDs from an inherited IRA aren’t yet required, that doesn’t mean a beneficiary shouldn’t take distributions. If you’ve inherited an IRA or a defined contribution plan and are unsure of whether you should be taking RMDs, contact us. We’d be pleased to help you determine the best course of action for your tax situation.

Starting a nonprofit organization can be a daunting prospect. You see a need in your community and want to do what you can to help. You know it’s possible to start a nonprofit, but the unfamiliar territory may hold you back. Let’s take a closer look at the steps that will allow you to get on your way to fulfilling your mission.

Choose your name

The first step in starting an organization is choosing your entity name. In Michigan, you can search for a business entity by name to see if your desired name is available.

SS-4

Once you have chosen an available name, you’re ready to file Form SS-4, Application for Employer Identification Number with the IRS. You may or may not have employees, but this is the number that the IRS will use to identify you going forward. It is possible to file the SS-4 online and get your EIN in a matter of minutes. Find out more here.

When filing the SS-4, it is important to choose Corporation, Church or church-controlled organization, or Other nonprofit organization (and specify trust or association) as the type of entity because the IRS requires that an organization be one of these types to qualify for exempt status.

Articles of Incorporation

At this point, you’re ready to file your Articles of Incorporation with the State of Michigan Department of Licensing and Regulatory Affairs. This is a critical step in the process of becoming a nonprofit. It’s imperative that you include the proper wording required by the IRS:

The articles must limit your organization’s purposes to those described in IRS Section 501(c)(3).

Charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children and animals.
The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.
Example: High School Scholarship Endowment is a nonprofit corporation and shall be operated exclusively for educational and charitable purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code or the corresponding section of any future federal tax code. Specifically, the purpose of the organization is to assist the school district for outstanding graduates to offset costs of higher education.

The articles must not specifically authorize activities, other than as an insubstantial part of your activities, that do not further your exempt purpose. In other words, the articles prohibit the organization from engaging in unrelated activities. In the following example, we have taken that a step further by prohibiting the earnings of the corporation from being used to benefit the individuals, restricting the organization from engaging in political campaign activities, and restricting the undertakings to those that further the exempt purpose.

Example: Notwithstanding any other provision of these Articles, no director, officer, employee, member, or representative of this corporation shall take any action or carry on any activity by or on behalf of the corporation not permitted to be taken or carried on by an organization exempt under Section 501(c)(3) of the Internal Revenue Code as it now exists or may be amended, or by any organization contributions to which are deductible under Section 170(c)(2) of such Code and Regulations as it now exists or may be amended. No part of the net earnings of the corporation shall inure to the benefit or be distributable to any director, officer, member, or other private person, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in these Articles of Incorporation. No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office.

Finally, the articles must permanently dedicate organization assets to the exempt purpose.

Example: Upon termination or dissolution of the corporation, any assets lawfully available for distribution shall be distributed for one or more qualifying exempt purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to state or local government, for a public purpose.

Board, Bylaws, and Conflict of Interest

After filing the articles of incorporation with the State of Michigan, your next step is to choose a board of directors who then adopt bylaws and a conflict of interest policy. While the IRS does not require that your organization have bylaws and a conflict of interest policy, adopting them is a best practice. If you have them, you’ll be required to attach them to Form 1023 when you file it. If you don’t have them, you’ll have to explain how your officers, directors, or trustees are selected and how you will manage conflicts of interest. The Form 1023 instructions provide an example of a conflict of interest policy that can be your starting point. We recommend consulting an attorney to assist you in preparing your bylaws.

Apply for exemption

Now it is time to prepare and file your application with the IRS to obtain tax-exempt status. You may qualify to file 1023-EZ, which will save you time and money in the application process. To find out if you’re eligible, read the instructions and answer the questions in the Eligibility Worksheet found at the end of the instructions https://www.irs.gov/pub/irs-pdf/i1023ez.pdf. If you’re able to file the 1023-EZ, you’ll have to register at https://www.pay.gov/ to file and pay online.

To prepare the full Form 1023, you will also have to register at https://www.pay.gov to file and pay online. Be sure to include all required additional documentation and answer all applicable questions. We suggest you consult a professional at this point to review your prepared Form 1023 and answer any further questions you have. Be sure to include the user fee with your application. Once the Form 1023, supporting documentation, and user fee are submitted, you can start operating as if your application is already approved. Donations made to you during this time will be tax deductible as long as your application is approved. If it’s not approved, then they won’t be. If your year end occurs during this time, you are required to file a Form 990 series return or file for an extension, by the due date.

There are certain organizations that are not required to file Form 1023. Contributions to the following organizations are tax deductible. Although these organizations don’t have to apply for exemption, they may choose to. If they do, they are required to file annual information returns, as discussed later.

Churches, including synagogues, temples and mosques
Integrated auxiliaries of churches and conventions or associations of churches
Any organization that has annual gross receipts that are normally not more than $5,000

Sales tax

Although nonprofit organizations are exempt from income tax on activities related to their exempt purpose, they may still be liable for sales tax. We suggest you consult a professional to help determine the requirements for your organization’s specific activities. In general, nonprofit organizations are exempt from paying sales tax on their purchases if the purchase of tangible personal property is used or consumed primarily in carrying out their exempt purpose. They are not exempt if it is unrelated. One important aspect here is regarding fundraising. Fundraising is not a charitable activity, even though the organization uses the income generated to accomplish their exempt purpose. Because fundraising is not a charitable activity, transactions that would normally be taxable for sales tax are still taxable. So, a gala fundraising event will still have to pay sales tax to the facility where it’s held. If the organization conducts a silent or live auction at the gala, they are required to collect and remit sales tax on the tangible personal property sold.

Another consideration regarding sales tax: The State of Michigan has a special rule for 501(c)(3), 501(c)(4), schools, churches, hospitals, parent cooperative preschools, and nonprofit organizations with an exemption ruling letter. Those entities with total sales at retail of $25,000 or less can claim exemption from sales tax on the first $10,000 of sales. The exemption does not apply if the nonprofit already specifically collected the sales tax; all sales tax collected must be remitted. But if the nonprofit was going to do algebra to determine what amount of the gross price was sales tax versus sales price, they do not need to remit taxes on the first $10,000 as long as they keep total sales at retail below $25,000. Once $25,000 is met, all retail sales are taxable (subject to standard sales tax rules).So, for example, your organization sells t-shirts and you charge $10 for the t-shirt, plus tax, so the customer pays you $10.60. Regardless of whether your total sales are less than $25,000, you are required to remit the $0.60 to the state because you collected it. If, instead, you charge $10 for the t-shirt and the customer pays you only $10, and your total sales for the year are less than $25,000, then you do not have to pay any sales tax on the first $10,000. If you charge the $10 and get paid the $10 and your sales do end up being more than $25,000, you will have to back into how much sales tax was included in the $10 and pay it to the state.

Nonprofit organizations must register for Michigan Taxes before selling tangible personal property, regardless of whether or not an exemption will apply. Register online at https://www.michigan.gov/uia. You can also register for Michigan Treasury Online, which will allow you to file and pay the required monthly, quarterly, and annual sales, use and withholding tax forms: https://mto.treasury.michigan.gov/.

License to solicit

Michigan law requires organizations to register with the Department of Attorney General if they solicit and receive charitable contributions in Michigan. To register, an Initial Solicitation Form, with attachments, must be filed. There is no fee to register. For faster processing, the Charitable Trust Section accepts registrations by email or e-filing. Your license expires seven months after the end of your fiscal year, and the Renewal Solicitation Form is due 30 days before that expiration. So if you are a calendar year end, that means that your renewal is due July 1, and your previous license expires July 31.

The financial information included in your form will also determine if you are required to have audited or reviewed financial statements. If contributions, plus net fundraising and gaming activity, less governmental grants, is between $300,000 and $550,000, then reviewed financial statements are required. If over $550,000, then audited financial statements are required.

Annual filings

To maintain their exempt status, organizations must stay current on filing a 990-Series return annually. If gross receipts are normally $50,000 or less, the organization is eligible to file Form 990-N e-Postcard. This filing requires only a few pieces of information. If gross receipts are less than $200,000 and total assets are less than $500,000, an organization would be eligible to file Form 990-EZ. Gross receipts or assets equal to or above those thresholds must file Form 990. Returns are due on the 15th day of the 5th month following the end of your fiscal year. This means May 15 for calendar year filers and November 15 for June fiscal year filers. Organizations that choose to file an annual information return above what they’re required to file, must file a complete return; they cannot fill it out partially.

Conclusion

Though it may seem daunting at first, the steps provided here will help you start your nonprofit organization. They will also ensure that your nonprofit starts out in conformity with the rules that are most important for compliance with federal and Michigan authorities.

Employers tend to spend a lot of time strategizing ways to improve their products or services, or perhaps innovate new ones. Meanwhile, strategies for the human resources (HR) department may get devised and rolled out in a more haphazard or reactionary fashion.

Given the importance of strong hiring, onboarding and performance management practices in today’s employment environment, carefully planning your organization’s HR moves is highly advisable. One way to increase the likelihood that they’ll pay off is by first performing a strengths, weaknesses, opportunities and threats (SWOT) analysis.

Strengths and weaknesses

Generally, in the context of a SWOT analysis, strengths are competitive advantages or core competencies that generate value, such as a strong sales force or exceptional quality of products or services.

Conversely, weaknesses are factors that limit an organization’s performance. These are often revealed in comparison with competitors. Examples include a negative brand image because of a recent controversy or an inferior reputation for customer service.

However, you can apply a SWOT analysis to more specific aspects of your operations — including HR. Think about your HR department’s core competencies, such as:

Filling open positions,
Administering benefits, and
Supporting employees with specific needs or those in crisis.

What does it do well and in what areas could it improve?

Opportunities and threats

The third and fourth factors in a SWOT analysis are opportunities and threats. Opportunities are favorable external conditions that could generate a worthwhile return if the organization acts on them. Threats are external factors that could inhibit operational performance or undermine strategic goals.

When differentiating strengths from opportunities, or weaknesses from threats, ask yourself whether something would be an issue if your organization didn’t exist. If the answer is yes, the issue is external and, therefore, an opportunity or threat. Examples include changes in demographics or government regulations.

Putting it to use

Your organization can benefit from applying a SWOT analysis to its HR initiatives in various ways. It all depends on the specific factors you identify.

Let’s say you determine, by benchmarking yourself against similar organizations, that “time to hire” is a strength. This typically means that your HR staff is skilled at placing targeted, effectively worded ads; working well with recruiters; and interacting in a timely, efficient and positive manner with applicants.

A strong hiring process is undoubtedly a competitive advantage. If hiring is a weakness, however, you could be headed toward an employment crisis if you lose too many employees — particularly coupled with the skilled labor shortages in some industries.

Opportunities and threats are important from an HR perspective as well. For example, if your organization decides to strengthen employee retention through expanded benefits, you’ll need to discuss the opportunities and challenges this will pose to your HR staff. By investing in their training and upskilling, you can strengthen HR competencies while providing a better benefits package to employees.

And, unfortunately, there’s no shortage of external threats. An aggressive competitor may begin poaching your employees, which will put added stress on your HR department. Evolving tax regulations and compliance requirements for health and retirement benefits can also catch HR staffs off-guard and put an employer in a precarious position. Watch out for regulatory changes in your industry, too.

Strategize carefully

Your HR department may seem to exist on an island with a somewhat different mission from your organization as a whole. But how it interacts with job candidates, helps manage employees’ performance and communicates about benefits — just to name a few things — has a huge impact on your success. Be sure to strategize carefully.

When the leadership teams of many companies engage in strategic planning, they may be inclined to play it safe. And that’s understandable; sticking to strengths and slow, measured growth are often safe pathways to success.

But substantial growth — and, in some industries, just staying competitive — calls for innovation. That’s why, as your business looks to the future, be sure you’re creating an environment where you and your employees can innovate in ways big or small.

Encourage ideas

It’s sometimes assumed that innovation requires limitless resources or is solely the province of those in technical or research roles. But every department, from accounting to human resources, can come up with ways to work more efficiently or even devise a game-changing product or service concept.

Developing an innovative business culture typically calls for actively encouraging employees to come up with ideas and explore their feasibility without fear of making mistakes. As part of your strategic plan every year, challenge staff to identify problems, ask questions, and seek out solutions and answers. In addition, build and maintain a strong structure for innovation. Doing so includes:

Establishing policies that promote research and development,
Incorporating discussions about innovation into performance reviews,
Allowing some or all employees to occasionally shift from their usual responsibilities to focus on innovative processes or new product or service ideas, and
Allocating funds to innovation in the company budget.

Ideas can come from other sources, too. For example, what do your customers complain about or ask for? Customer feedback can be an excellent source of innovative concepts. Encourage employees to engage in conversations with customers about what new products or services they may be looking for, as well as about ways to improve your current ones.

Hold brainstorming sessions

Innovation is rarely a straight shot. Outrageous, seemingly unworkable ideas may be the genesis of concepts that ultimately prove both viable and profitable. Employees need to be confident they can propose ideas without fear of ridicule or adverse employment actions. One way to make this happen is through regularly scheduled strategic innovation brainstorming sessions. The goal of these meetings is to help staff get comfortable suggesting bold ideas without censoring themselves or harshly criticizing others. Make it clear to participants that there are no bad ideas.

Be sure to include employees from throughout the business. People tend to feel comfortable with co-workers they know well and work with regularly, but “echo chambers” may develop that limit the feasibility of ideas. Staff members from other departments are often able to provide different perspectives. They can help employees with ideas question their assumptions and view concepts from different angles. In other words, when pursuing prospective innovations, it’s helpful to assemble cross-functional teams that can cover more ground.

Find your next breakthrough

Waiting around for the next big breakthrough in your business or industry to fall in your lap is a huge gamble. By making room for innovation in your strategic planning, you’ll increase the likelihood that you’ll find it.