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Congress to consider creative solutions for maintaining funding.

2009 Social Security Trustees Report:Increase Taxes, Cut Benefits

Congress to consider creative solutions for maintaining funding.

by Richard R. Hammar

The 2009 Annual Report of the Board of Trustees of the Social Security Trust Funds was released recently. Here are some of the key findings:

  • At the end of 2008, almost 51 million people were receiving benefits: 35 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 9 million disabled workers and dependents of disabled workers.
  • During the year, an estimated 162 million people had earnings covered by Social Security and paid payroll taxes. Total benefits paid in 2008 were $615 billion. Total income was $805 billion.
  • Annual cost will begin to exceed tax income in 2016 for the Social Security trust funds, and the funds “will be exhausted and thus unable to pay scheduled benefits in full on a timely basis in 2037.”
  • “For the trust funds to remain solvent throughout the 75-year projection period, the combined payroll tax rate could be increased during the period in a manner equivalent to an immediate and permanent increase of 2.01 percentage points, benefits could be reduced during the period in a manner equivalent to an immediate and permanent reduction of 13.3 percent, general revenue transfers equivalent to $5.3 trillion in present value could be made during the period, or some combination of approaches could be adopted. Significantly larger changes would be required to maintain solvency beyond 75 years.”
  • “The projected trust fund deficits should be addressed in a timely way so that necessary changes can be phased in gradually and workers can be given time to plan for them. Implementing changes sooner will allow their effects to be spread over more generations …. With informed discussion, creative thinking, and timely legislative action, present and future Congresses and Presidents can ensure that Social Security continues to protect future generations.”

Nonprofits Turning to Noncash Donations

And creative ways to sell donated merchandise.

by Michael E. Batts, CPA

The current economic downturn has significantly and adversely affected contribution revenue for many nonprofit organizations. With cash contributions harder to come by, some nonprofits are seeing opportunity in an area not previously deemed attractive-the pursuit of donated merchandise.

Federal tax law provides a significant exemption from the tax on unrelated business income for nonprofit organizations-an exemption for sales of donated goods. Accordingly, a nonprofit organization can be quite creative about the manner in which it sells such goods. Nonprofits such as Goodwill Industries and The Salvation Army have operated thrift shops for decades to support their exempt activities-the classic manner in which organizations have taken advantage of the exemption.

With the advent of easy-to-use internet auction sites and other internet-based sales tools, many nonprofits are beginning to see the opportunity for new approaches to selling donated merchandise. In fact, eBay, the largest internet-based auction service, offers a dedicated program for facilitating online selling by charities ( ebaygivingworks. com). Goodwill Industries has its own dedicated auction site (

Nonprofit organizations that sell donated merchandise should remember that while they enjoy an exemption from federal tax, they need to heed state and local tax laws. For example, depending on state law, organizations regularly selling merchandise within their home state may be required to collect and remit sales taxes on such transactions.

Michael E. Batts, CPA, is the founder and managing shareholder of Batts, Morrison, Wales & Lee, P.A., a Florida based CPA firm exclusively serving nonprofit organizations and their affiliates, and also serves as board chairman for the Evangelical Council for Financial Accountability (ECFA).

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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