Audit Threshold Increased for NJ Nonprofits

January 20, 2022

By: Eitan Balloul

Senior Manager, Tax

Many Exempt Organizations incur significant expenses associated with the requirement of providing audited financial statements on an annual basis. That expense could be diverted and used to further the charitable mission of the organization.

The burden of that expense may be relieved by increasing the threshold at which organizations must file audited financial statements and excluding certain non-monetary in-kind contributions from gross revenue.

On January 18, 2022, Governor Phil Murphy of New Jersey signed bill No. 844 and 2533. The bill revises financial reporting requirements for Exempt Organizations. It amends the New Jersey “Charitable Registration and Investigation Act” section 45:17A-24(d)(2) by revising the thresholds of gross revenue amounts received by Exempt Organizations that determine their annual financial reporting requirements with the Attorney General’s office and excluding certain non-monetary donations from gross revenue. The bill also extends certain annual reporting and filing required under N.J.S.15A:4-5.

Effective immediately, the signed bill raises the threshold at which a New Jersey nonprofit must undergo an audit from $500,000 to $1M. Now, an Exempt Organization that is operating or soliciting within the State of New Jersey which receives annual gross revenue in excess of $1,000,000 in monetary donations must file with its annual disclosure report a financial statement that has been audited by an independent certified public accountant.

In addition, the bill provides that in-kind donations directly related to the mission of nonprofits shall not be included towards the $1 million threshold. In-kind donations may include food for food pantries or food shelters, supplies for shelter, and any other in-kind contributions the Attorney General permits.

If you need more assistance or additional information, please contact Diana Miller, Partner, or Eitan Balloul, Tax Manager – Exempt Organizations.

More information on the new legislature can be found here.