Benefits of Not-for-Profit Valuation

Despite different goals and management structures, non-profit organizations face many of the same challenges that for-profit companies contend with – especially regarding valuations of assets. Not-for-profit organizations, for instance, need to know their financial condition before making important decisions. This holds true in other areas, as an accurate, not-for-profit valuation can assist you and your organization in:

  • Avoiding Penalties: Receiving a not-for-profit valuation of your organization can not only help you as you prepare to make decisions, but it can also help avoid potential tax penalties. For example, overstating the adjusted basis or value of previous donations can result in monetary penalties based on the severity of the infraction. Conversely, understating asset values in determining the mandatory minimum distribution can subject an organization to unwanted consequences.
  • Converting to For-Profit Status: According to laws in many states, the value of not-for-profit organizations must be determined before legally becoming a for-profit business. Your state may also require you to donate the fair-market value of your organization’s assets to a charity or foundation before approving the conversion.
  • Asset Transfers: Not-for-profit valuation is critical when your organization is transferring assets, whether the transfer be across operational divisions or jurisdictional boundaries.
  • Merging with For-Profit Organizations: When your organization merges with a for-profit enterprise, many of the same considerations in the aforementioned ‘asset transfers’ section apply. Not-for-profit valuation helps to accurately record your organization’s assets so you can comply with Federal tax codes. This becomes increasing vital when there’s an asset sale between you and a related party.

At Appraisal Economics, we’re committed to providing our clients with not-for-profit valuations that satisfy all relevant accounting and tax requirements. Not only can valuing an organization ease organizational mergers and transitions, but it can also play an instrumental role in adhering to tax laws. To make sure the future of your foundation, academic institution, or other type of organization is safeguarded – contact the experts at Appraisal Economics for your non-profit valuation service needs.