Does income we generate from a program need to be used to reduce federal costs?

HHS regulations section 75.307 address how program income must be used.

The default for use of program income, earned during the period of performance, is to deduct it from total allowable cost to determine the net allowable costs. This reduces your Federal award.

Program income earned after the period of performance is not subject to federal requirements and may be used in any appropriate way (unless the HHS awarding agency regulations or the terms of the grant/award provide otherwise).

However, with the prior approval of your HHS awarding agency, program income may be added to the Federal award and used for similar purposes, allowing you to expand your program.

If you have any cost sharing or matching requirements, and you have prior approval of your HHS awarding agency, you may use program income to meet your cost-sharing or matching requirement.

The guidance for program income clarifies that the sale of property, equipment, or supplies purchased for the program are not considered program income. Agencies are required to obtain written approval from HHS about the proper procedure which may include retaining the property, selling the property, or transferring the property, and offsetting allowable costs.

And we had clients asking about the new contribution rules so I prepared this

Contribution Provisions of the CARES Act

The CARES Act added a few provisions to help charitable organizations including:

Individual Contributions

A personal deduction against income for up to a $300 monetary contribution to charitable organizations by individuals who do not itemize.  This does not apply to in-kind contributions.  It also does not apply to contributions to non-operating private foundations, supporting organizations, or donor advised funds. 

The regular contribution rules apply including the requirement to have written documentation for individual contributions of $250 or more.  Refer to IRS publication 1771.

Another benefit for individual donors is the ability to deduct 100% of their adjusted gross income in charitable contributions.  This applies for 2020 only.  Historically the limit was 50% and it was recently increased to 60%.  Now for a limited time only, it is increased to 100%.

Corporate Contributions

Before the CARES Act, corporate contributions were limited to 10% of pretax profits.  Charitable contributions of food were limited to 15%. 

For 2020 only, both of these limits have been increased to 25%.  As in the past, excess contributions can be carried forward to future years.

John F Heveron, Jr. Principal, Heveron and Company CPAs

Program Income and COVID-19

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