Halau O Aulani Inc.

“Description;Amount^Business registration fees;25|Supplies;682|Telephone and web hosting;941|Bank fees;372|Insurance;1974|Travel;7734^Total;11728^”

“Taxpayer was incorporated as a non-profit corporation in 1996, started operating as a school in 1996, and was recognized by the Internal Revenue Service in a letter dated December 3, 1996 as a tax-exempt organization under Code section 501(c)(3) and as a school under Code section 170(b)(1)(A)(ii). From its inception until 2016, Taxpayer as a nonprofit organization did not reduce its capital assets for depreciation. In 2016, however, Taxpayer's Board of Directors determined that its financial statements as a nonprofit school should follow the depreciation requirements of the Financial Accounting Standards Board's Statement of Financial Accounting Standards #93. Taxpayer's review of the FASB standards was prompted by the Treasury Department adoption in March 2015 of final tangible property regulations. In explaining these regulations, the Service, in a publication entitled Tangible Personal Property - Frequently Asked Questions, states that although nonprofit entities need not take depreciation for tax-exempt operations, tax-exempt organizations should consider the advisability of implementing such an accounting change. Taxpayer consequently filed Form 3115 requesting an automatic accounting method change under Revenue Procedure 2015-20, Revenue Procedure 2015-14, and Revenue Procedure 2015-13. This accounting change to depreciate tangible personal property applies to property acquired as of January 1, 2016. In past years, Taxpayer reported its tangible personal property - library books, electronic equipment, musical equipment, computer software program, and furniture - acquired and utilized in school operations at their original purchase/acquisition cost totaling $10,548. These assets have since run past their useful class life under the Alternative Depreciation System - for example 5 years for computer and related equipment, 10 years for furniture and equipment, and 12 years for assets without specified class life. Because Taxpayer had not taken any depreciation deduction for these assets, their historic cost in no way reflect current value. To be consistent with the newly adopted FASB accounting practice, Taxpayer has reviewed these assets and reports them at their current value for purposes of financial reporting and likewise for the Form 990-EZ in line 20 on page 1.”