Nonprofits pay taxes, too
Money Matters by Keith Sessions, Chief Financial Officer
keithksessions@hotmail.com
I realize that you are reading this in September 2016, but I now have the 2015 audit results. Overall, we had another good audit, but I wanted to spend some time discussing some of the items in the report.
Some of you might wonder why a 2015 audit is not done in the first quarter of the year. We chose to change the audit timing last year to after April 15. This means it is done in May with results communicated to the Executive Council at the July meeting. By doing this, we save a few thousand dollars in fees from our auditor.
During my tenure, I have looked at many ways to reduce expenses. A few were large savings, but most are small. It works the same as building a lightweight airplane—a little here, a little there, and in the end, you have saved a lot.
In 2015, we had a roughly $43,000 expense that we had never had before: taxes. The AMA is a nonprofit organization. One common misconception is that nonprofit means no taxes. This is not true.
Although much of what we do does qualify as tax exempt, some revenue is taxable. The largest such category is advertising revenue. We have known this was coming and have worked to take every deduction possible.
When I first took the role of chief financial officer nearly three years ago, the audit report stated that we would need to pay taxes in four to five years. Success was above expectations and the result is the tax bill. Although no one likes to pay taxes, I would rather pay taxes on a dollar than to not have the dollar.
Our revenue from dues, which is tax exempt, was significantly higher in 2015. As I am sure many of you remember, we increased dues last year, but we offered the opportunity to prepay dues at the then-current rate for 2016 and 2017.
This resulted in an audit item of dues revenue that is significantly inflated. For the 2016 financial report, we will see a significant reduction in this category.
The other news I would like to share this month is good news from the FAA. Procrastination is a bad habit and I do a lot of things in my life to avoid procrastinating.
Unfortunately, this article is one that I consistently find myself putting off. Let’s face it. Financial spreadsheets are boring to most people. I try to find topics that are interesting. This month, procrastination paid off!
On July 7, 2016, the FAA sent a letter to AMA detailing the allowance for model airplanes to fly above 400 feet. This was a concern of mine.
We had requested clarification in writing at our meeting with the FAA in January. Contained in the letter was also a reference to the AMA as a community-based organization. This is significant because this is the first reference to recognizing AMA as a community-based organization that we have received in writing from the FAA.
I hope to see many of you at fall flying events.
