NFP Property Taxes and Recordkeeping Guidelines

by Heather Phillips, CPA and Amanda Meko, CPA | Team Members of the Not-for-Profit Services Group

With the start of March comes a change in time, warmer weather (hopefully!), and the time of year to do some spring cleaning. Annually in the state of Indiana, most business entities, including non-profits, are required to file personal property tax returns as of March 1^st. This is also a good time of year to make sure you have a handle on your organization’s property.

To exhibit good internal controls (an auditor’s favorite term) over property, your organization should at least have a capitalization policy in place, maintain a fixed asset listing (either yourself or with the help of your friendly CPA firm), ensure that fixed assets are depreciated consistently over reasonable useful lives, and assess impairment annually on any significant assets.

Capitalization policies can vary from organization to organization, and you should use what makes sense for your non-profit specifically (within reason, of course!). We typically see smaller non-profits capitalize any individual items with a cost of $500 – $1,000. Larger non-profits may wish to capitalize individual items with a cost of $1,500 – $2,000. With technology changing virtually on a daily basis, most computer equipment typically falls under an organization’s capitalization limit. Please be aware, however, that just because an item does not get capitalized and tracked on a fixed asset list doesn’t mean it shouldn’t be included in the personal property that you report on your personal property tax return.

An organization should consider doing an annual inventory of its fixed assets. Items no longer in service (i.e. the computer from 1995!) should be disposed accordingly. Maintaining an accurate fixed asset listing is not only important for financial purposes (accounting and tax), but it is also helpful for insurance purposes to identify assets lost to theft or casualty. As you start your spring cleaning, please remember that another organization may be able to use something that you cannot. Everyone has a tight budget these days!

Should the start of March find you with a need to update your fixed asset listing or to need a hand preparing your annual personal property tax return, please do not hesitate to give us a call. We look forward to warmer weather and to hearing from you soon! Happy Spring!

Contact:

Heather Phillips, CPA | Manager, Audit & Other Assurance Services and Team Member of the Not-for-Profit Services Group