Discussion:Non-profit free rent- unrestricted income?
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Discussion Forum Index --> Accounting Questions --> Non-profit free rent- unrestricted income?
| 14 May 2008 | |
| My employer, a 501 (c)3, got a free months rent in January. (Moved into new rental suite).
Do I need to accrue a month of "rent expense" and send a donation receipt to our landlord? Our contract doesn't speak specificly to this point. It doesn't impute a portion to be allocated to future months, etc. (although we all know they bumped up the other 35 months of rent a little bit). Did we receive income in the form of free rent? I really don't want to write 35 JE's adjustments to reverse the January accrual. It's immaterial. $1,301/36months= $36.14 My research hasn't provided much help. FASB doesn't speak to the point. | |
| 14 May 2008 | |
| 1) If it's immaterial, move on.
2) GAAP would say recognize rent expense on a straight line basis over the life of the lease (unless it increases due to CPI adjustments etc) but it's immaterial so move on. 3) No, you didn't receive income in the form of free rent, it was an inducement to sign the lease. | |
| 14 May 2008 | |
| I'm in the process of completing the 990PF right now.
Would the IRS look at it differently? I don't want to under-report income. | |
| May 15, 2008 | |
| I agree with Rkr. Technically it is supposed to be straight-lined (FASB 13?). No, there is no additional reporting required on the 990PF unless the lessor is related to the organization. | |
| 15 May 2008 | |
| Many non-profits require matching donations to qualify for some of the grant monies received. If matching donations are not received, the non-profit may forfeit some of the grant monies. These donations may come in the guise of in-kind donations. goods and/or services that the non-profit does not pay for.
There are specific regulations for reporting these kinds of transactions and the type of item/service donated determines how it is handled. The rent can be recorded as both an income and an expense. My non-profits usually call it in-kind income and then in-kind rent expense. Some report it in both income and expense and some make reference to it in their footnotes. As for the IRS, there should be no issue as it is an in and out transaction. think of it as the landlord giving them money and then taking it back to pay the rent. Hope this helps. | |
| 15 May 2008 | |
| In-Kind rent is not shown as either income or expense on Form 990 or 990 PF. See instructions to 990PF, page 11, Analysis of Revenue and Expenses. | |
| May 15, 2008 | |
| Fred, I understand what you are saying, but in this case I agree that it is an incentive to sign the lease. I had a property manager as a client a while ago. They leased warehouse space, and in most cases the first one to three months was free. (And what a hassle that was to straight-line the rent.)
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| 15 May 2008 | |
| I thought he was talking about F/S. And yuo are correct, it goes on the reconciley thing. | |
