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Nonprofit Law/Organization reimburses furniture

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Question
Hi Harvey,

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!

Answer
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:
http://www.irs.gov/pub/irs-tege/eotopich02.pdf 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
rules..."
See also:
http://www.irs.gov/pub/irs-pdf/p535.pdf "Business Expenses"
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
http://www.irs.gov/pub/irs-pdf/p535.pdf starting in the first
column under the heading "Accountable Plans" which the organization
must have.  That section is written for employees but also applies
to volunteers.
See the section under "Volunteer Officers/Workers" at
http://www.irs.gov/charities/article/0,,id=131083,00.html
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
at http://www.irs.gov/pub/irs-pdf/p15b.pdf

The IRS explains at http://www.irs.gov/pub/irs-pdf/p5137.pdf on
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
 Partners
 Board of directors of the employer
 Independent contractors
 Volunteers
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.

Harvey Mechanic
Attorney at Law
Harvey108@hotmail.com

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.  

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Harvey Mechanic

Expertise

I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at Harvey108@hotmail.com I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "site:allexperts.com/q/nonprofit" without the quotes and then add your search terms before hitting enter.

Experience

I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.

Education/Credentials

B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.


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