The compliance complexities beyond the attractive returns.
While often lucrative from an investment standpoint, alternatives present a compliance challenge to nonprofits: income earned may be subject to unrelated business tax liabilities for an otherwise tax-exempt entity. There are often specific state
filing requirements, passive activity rules and at-risk limitations, income tax calculated based on trust or corporate rates, and Nexus requirements in various states. Alternative investments may include partnerships, and therefore Schedule K-1’s, which add further challenges to meeting proper reporting and tax treatment guidelines.
BDO offers the depth of experience needed to determine taxable income, adhere to proper filing requirements, and support all of it. We analyze each K-1 individually to establish whether there is unrelated business income, and how that income should be categorized. At all times, our approach is highly collaborative, both with clients and with professionals throughout the BDO network, ensuring that we understand the unique issues of every alternative investment class, and its implications for each nonprofit entity. BDO works with a wide range of nonprofit organizations, both large and small.