The following are just some of the many highlights from day two of the 2025 Western Conference on Tax Exempt Organizations (WCTEO), not including the breakout sessions. Day one highlights can be found here. As with all of our posts capturing highlights of events, my interpretations, opinions, and suggestions of additional resources may be sprinkled in with the general information provided by the presenters.
Accounting Updates: What all EO Practitioners Need to Know
Tonetta Conner, Harrington Group CPA, LLP; Nanaz Benyamini, SingerLewak LLP; Yulia Murzaeva, GHJ Advisors; Moderator: Debi Heiskala, Ernst & Young LLP
- Accounting for Contributions Received
- Continuing challenges with implementation of ASU 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and Accounting Guidance for Contributions Received andContributions Made
- Distinction between exchange (each party receives commensurate value, which would not include benefits to the general public, including most government grants, and incidental benefits) and contribution transactions
- Distinctions between conditional and unconditional restricted contributions (conditional requires both (1) donor-imposed conditions and (2) a right of return/release – recognize when conditions are met (does not include requirement to submit progress or financial reports or terms that cannot be objectively measured; cannot use probability or likelihood to claim conditions have been met))
- Contributions from donor advised funds (DAFs) – revenue is recognized by grantee once the gift is approved by the DAF sponsoring organization, not by the donor or donor advisor
- Current Expected Credit Losses (CECL)
- Newish standard (effective to 2023 financial statements for most nonprofits) is based on expected losses rather than incurred losses
- Allows lenders to use historical data/experience, current economic conditions, and reasonable and supportable forecasts to determine an allowance for credit losses
- Proposed accounting standards update (not yet finalized or enacted) would be applicable to most nonprofits – offers two benefits:
- Would provide a practical expedient for assessing credit losses on current accounts receivable and contract assets to assume that current conditions would remain consistent throughout the forecast period
- Would allow the organization to elect an accounting policy to consider collection activity after the year-end when estimating credit losses
- Fire Relief: Accounting and Tax Considerations
- Fed and CA income tax payments and filings with deadlines from 1/7/25 through10/15/25 deferred until Oct. 15th, 2025; calendar AND fiscal year filers
- Automatic deferral for taxpayers residing or having a business in Los Angeles County; taxpayers located outside of disaster area but records are inside disaster area can request relief (contact the IRS disaster hotline at 866-562-5227 to request the extension)
- “If you are not in a covered disaster area but your tax records necessary to meet a filing or payment tax deadline are located in Los Angeles County (for example with your tax practitioner), you still qualify for the disaster relief. It is recommended taxpayers and tax practitioners retain records to substantiate they qualify for disaster relief (e.g. utility bill, bank statement, etc.).” – FTB
- Section 139(b) “qualified disaster relief payments” for employees of costs resulting from qualified disaster (nontaxable to employee)
- Deferral of next property tax installment for damaged property
- Application for temporary reduction of tax on damaged property based on market value (if lossestimate is at least $10k)
- Capital gain on insurance proceeds received in excess of tax basis of property (consider impact of depreciation)
The Ethics of AI
Gerry Griffith, Jones Day; Robert Homchick, Davis Wright Tremaine LLP; Moderator: LaVerne Woods, Davis Wright Tremaine LLP
- Two Types of AI (for a deeper dive, see The Difference Between Generative AI And Traditional AI: An Easy Explanation For Anyone (Forbes))
- Traditional AI: performs specifics tasks using predetermined rules and patterns
- Generative AI: learns underlying patterns from large datasets and creates output in response to prompts
- GenAI in the Legal Profession (for a deeper dive, see The legal profession in 2024: AI (Harvard Law Today))
- Legal Research (e.g., Westlaw Precision, Bloomberg Innovation Studio)
- Document drafting, summaries and analysis (e.g., Harvey, Kira)
- Contract review and analysis as a part of due diligence for transactions or contract management Discovery (e.g., Relativity, DISCO)
- Analyzing court orders, dockets, opinions and jury verdicts to predict outcomes and develop strategy
- Marketing and PR materials (e.g., ChatGPT, DALL-E)
- GenAI Risks (for a deeper dive, see What Are the Risks of AI in Law Firms? (Bloomberg Law))
- Inaccurate outputs (legal hallucinations)
- Privacy, privilege, and data security
- Discriminatory or biased outputs
- Intellectual property
- Dangerous violent/hateful comments
- Societal dangers
- Information integrity
- Employee misuse
- ABA Model Rules of Professional Conduct
- 1.1 & 1.3 – Competence; Diligence
- 1.4 – Communications (including the requirement that a lawyer shall reasonably consult with the client about the means by which the client’s objectives are to be accomplished
- 1.5 – Fees
- 1.6 – Confidentiality of Information
- 2.1 – Advisor (“In representing a client, a lawyer shall exercise independent professionaljudgment and render candid advice. In rendering advice, a lawyer may refer not only to law but to other considerations such as moral, economic, social and political factors, that may be relevant to the client’s situation.”)
- 3.1 – Meritorious Claims and Contentions (“A lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis in law and fact for doing so that is not frivolous, which includes a good faith argument for an extension, modification or reversal of existing law.”)
- 3.3 – Candor Toward a Tribunal (“A lawyer shall not knowingly … make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made tothe tribunal by the lawyer; … or offer evidence that the lawyer knows to be false.”)
- 4.1 – Truthfulness in Statements to Others
- 4.7 – Communication concerning Legal Services (“A lawyer shall not make a false or misleading communication about the lawyer or the lawyer’s services. A communication is false or misleading if it contains a material misrepresentation of fact or law, or omits a fact necessary to make the statement considered as a whole not materially misleading.”)
- 5.1 – Responsibilities of Partners, Managers, and Supervisory Lawyers
- 5.3 – Responsibilities Regarding Nonlawyer Assistance
- 5.7 – Responsibilities Regarding Law-Related Services
- 8.4 – Misconduct
- ABA Formal Opinion 512 – Generative Artificial Intelligence Tools
- State Bar of California Standing Committee of Professional Responsibility and Conduct – Practical Guidance for the Use of Generative Artificial Intelligence in the Practice of Law
Additional Breakout Sessions
Private Foundation Hot Topics
Emily Fan, The David and Lucille Packard Foundation; Rosemary Fei, Adler & Colvin; Lizbeth Nevarez, Green Hasson & Janks; Moderator: Michael Berry, Michael Berry, CPA
Advocacy in a Post-Election Year
Nona Randois, Alliance for Justice; Eric Gorovitz, Adler & Colvin; Moderator: Gene Takagi, NEO Law Group
Executive Compensation Hot Topics
Nanci Hibschman, SullivanCotter; Erin Bradrick, NEO Law Group; Moderator: Helen Cheng, Withersworldwide
Thanks to UCLA School of Law Lowell Milken Center for Philanthropy and Nonprofits and Loyola Law School for hosting the 28th WCTEO; Rose, Jill, Ellen, and all of the staff and volunteers who make it a great event; and The California Endowment for providing use of their facilities. As has been the case for as long as I’ve practiced in the area of nonprofit and exempt organizations law, I look forward to next year’s WCTEO!