• Nonprofit Online News Here.
• Are Premiums for D&O Insurance 'Compensation'?
• New report from the IRS on growth in the Nonprofit Sector.

On the lower half of your screen, you'll see the newest addition to the Internet Nonprofit Center -- the latest postings from Michael Gilbert's Nonprofit Online News. Nonprofit Online News is updated frequently. Those updates will be reflected here as soon as they occur.

Michael Gilbert has been publishing Nonprofit Online News for almost two years. Recent postings and, in fact, the full archive of every item since the inception of the service can be found by following the link at the end of the Online News window.

D&O Insurance

Recently in the CharityLaw email discussions there was a lively exchange on the question of whether the premiums for Directors and Officers Insurance (D&O) constitute reportable compensation for the directors. After reading all the posts and thinking the question over, here is how this question should be answered...or at least how it seems to me. Further clarification welcomed.

The Intermediate Sanctions Regulations provide for penalty taxes to be imposed on managers of nonprofits when excess benefits have been paid. Excess benefits could arise out of compensation to directors and officers. When the IRS calculates the amount of penalty due as a result of excess benefits paid as compensation to directors or officers, it will use an expansive definition of compensation which would encompass such payments as D&O premiums.

But this 'compensation' is not the same as the payments to individuals which must be reported as income using either Form W-2 (for wages and salary) or Form 1099 (for purchased services). D&O premiums paid in the ordinary course of business on behalf of volunteers or people whose compensation is not excessive are incidental fringe benefits and not reportable at all (except, of course, as a business expense in the appropriate locations in the financial statements).

CharityLaw is a service of the CharityChannel. See http://www.charitychannel.com/ for full details of its various mailing lists and other services.

Statistics of Income Report

Speaking of the IRS, the Statistics of Income Division recently published a detailed study of exempt organizations over the period from 1975 to 1995. During these twenty years, the Gross Domestic Product of the United States rose by 74% adjusted for inflation, while the assets and revenues of reporting exempt organizations more than tripled! By 1995 the recorded assets of the nonprofit sector totaled $1.9 trillion and the revenues of the sector in that year amounted to $899 billion. (These numbers include nonprofit organizations that are not charities -- 501(c)(3)s -- of course. And there are literally thousands of nonprofits whose assets and revenues are not included in these totals because they fall below the filing threshold and do not report to the IRS at all.

To put the point another way, the revenues of exempt organizations amounted to about one eighth (12.4%) of the nation's gross domestic product in the year 1995.

The report describes the kinds of information that are collected by the IRS about exempt organizations, details the changes in assets and revenues for various types of nonprofis, and examines trends in unrelated business income over the period.

The full text of the report is available from the IRS website in "portable document format" suitable for reading with the Adobe Acrobat Reader (which can be downloaded without charge from many sources including the IRS site itself). There are several figures provided as separate Microsoft Excel files. The procedure for accessing the report is a little complicated. Using the web address provided below, access the IRS service. Download the file to a specific folder on your computer. Then open that folder and run the program 95np20yr.exe. It will create six other files in the same folder. The one called 20yreo.pdf is the report; the others are the figures.

To download this report, use the URL http://ftp.fedworld.gov/pub/irs-soi/95np20yr.exe. Statistic of Income is also available as a printed publication in many public libraries. "A 20-Year Review of the Nonprofit Sector: 1975-1995" by Alicia Meckstroth and Paul Arnsberger appeared in the January 1999 issue.

Notification

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The Internet Nonprofit Center is operated as a public service by The Evergreen State Society of Seattle, Washington. If you would like to volunteer to help with the maintenance of this resource for the nonprofit sector, please let us know by writing volunteer@tess.org. If you would like to make a donation to support this service, please visit http://www.nonprofits.org/misc/donate.html or send a check to the Society at 1122 East Pike Street, #444, Seattle, WA 98122. Your interest and support is greatly appreciated.

We have recently added links to Amazon.com's for many of the books mentioned in the Nonprofit FAQ. Purchasing books through these links generates royalties that are used to help maintain this site.

Putnam Barber, February 3, 1999