Nonprofit Law/Organization reimburses furniture
Appreciate your time very much. We are running a language school which is Non for Profit organization. We, as board members all work from home managing the daily activities. Can we buy office furniture for home office and reimburse from the organization? And if yes, is this amount reportable on our federal tax file? Thanks!
The IRS rule for what nonprofits may spend money on is similar to
the standard that the IRS uses when determining what is a valid
business expense for an ordinary business. For example, at:
the IRS refers
extensively to the regular business expense rules and applies them
to 501(c)(3) organizations. On page 32 we see "Reimbursements are
technically covered by Regs. 1.62-2. However, for administrative
purposes, all TE/GE [Tax Exempt & Government Entities Division]
administrative personnel will treat reimbursements of a business
expense the same as if the expense were paid directly by the
employer, as long as the employee complies with the substantiation
on page 3, under "What Can I Deduct":
--start of excerpt ---
To be deductible, a business expense must be
both ordinary and necessary. An ordinary ex-
pense is one that is common and accepted in
your industry. A necessary expense is one that
is helpful and appropriate for your trade or busi-
ness. An expense does not have to be indispen-
sable to be considered necessary.
--end of excerpt ---
See page 41 of IRS Publication 535 at
starting in the first
column under the heading "Accountable Plans" which the organization
must have. That section is written for employees but also applies
See the section under "Volunteer Officers/Workers" at
which is written specifically for Exempt Organizations and refers
to that Publication 535.
---Start of Excerpt--
A plan under which an employee or volunteer is reimbursed for
expenses or receives an allowance to cover expenses is an
accountable plan only if:
* There is a business connection for the expenses;
* The employee/volunteer adequately accounts for these
expenses within a reasonable period of time; and
* The employee/volunteer returns any amounts of excess
expenses within a reasonable period of time.
---End of Excerpt--
Details follow on from that page 41 of Publication 535.
Then the question is whether office furniture placed in the home of directors or officers is allowed as an ordinary business expense and not taxable to the officer as a fringe benefit.
The IRS Publication 15-B discusses fringe benefits and is available
The IRS explains at http://www.irs.gov/pub/irs-pdf/p5137.pdf
page 87. "A volunteer is an employee under common law if an entity
has the right to direct and control the volunteer's performance,
not only as to the results to be accomplished, but also as to the
methods by which the results are accomplished."
On page 12 we see:
--- Start of Excerpt ---
All of the following are considered employees for purposes of
working condition fringe benefits: Reg. §1.132-1(b)
• Current employees
• Board of directors of the employer
• Independent contractors
Although not employees for most employment tax purposes,
independent contractors are treated as employees for this purpose
and are therefore eligible to receive nontaxable reimbursements as
working condition fringe benefits.
---End of Excerpt---
Going back to that Publication 15B we do not see any exclusion for office furniture as there is for a provided cell phone that is used primary for business use. Therefore, the value of the office furniture is taxable to the officer. For example, on the right side of page 31 we see "you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work." In your situation, the organization may not reimburse you for the expense. If they do, then that is considered simply as taxable compensation to you. I am assuming that you are not using the office furniture exclusively when you are doing work for the organization. If that assumption is not correct, let me know and I will reply further.
Attorney at Law
P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.