Archive for Religion

IRS: Church Audit Protection Act Applies to Payroll Tax Examinations


The IRS has taken a new official position on the applicability of the Church Audit Protection Act, and it is good news for churches.

The Church Audit Protection Act (Code Section 7611 of the Internal Revenue Code) specifies that the IRS cannot initiate a church tax inquiry or examination unless certain criteria are met. In brief, there must be a reasonable belief by an appropriate high-level Treasury official that the church either is not exempt by reason of its status as a church, Read more

Mistakes Religious Organizations Make When Filing a Tax Return

John Stancil

When it comes to the IRS and religious organizations, these organizations fall into two categories – churches and other religious organizations. Due to the First Amendment, the IRS is extremely reluctant to tread in the area of church organizations. This is not to say that churches have carte blanche to ignore the tax laws, but that the IRS grants them a great deal of leeway in regulating them. All religious organizations are subject to the law in regard to taxation. However, many operate as if the laws do not apply to them. Some of the most common mistakes made by religious organizations are the subject of this article.

At the outset, it should be noted that churches do not have to apply for 501(c)(3) status. They may choose to do so, and there are some very good reasons that they might wish to make such an application. All other religious organizations must apply for this status by completing and filing Form 1023 or Form 1023EZ. A church is automatically treated as though it has 501(c)(3) status.

Filing a return. Churches do not have to file a Form 990. However, some churches file these returns. This is unnecessary and may cause the IRS to take a closer look at the organization. If you don’t have to file, don’t file. Read more

Be Aware of Security Issues In Using Mobile Pay Devices

John Stancil

Many churches and other non-profit organizations now accept online and credit card contributions. Typically, the credit card transactions can be made through the organization’s website or through a kiosk located within the organization’s facilities.  In recent months the availability of mobile pay devices has become more widely available. These devices allow the organization to use smart phones, tablets, or other devices for accepting payments.  The most common providers of this technology are PayPal Here and Square.  Typically, after signing an agreement with the company, the appropriate hardware will be provided to the organization, giving them the ability to accept mobile payments. There may be a charge for the hardware. And, the organization does charge a fee based on the dollar amounts that are processed. Read more

Passionate Tax Experts Introduced To Business Leaders And Taxpayers – Through TaxConnections

7-29-2015 11-17-29 AM

“Passion is absolutely necessary to achieve any kind of long-lasting success.” In a minute, I will share with you who that quote belongs to but for this moment  remember that passionate people have very strong beliefs. As I was arranging speakers for the Internet Tax Summit, the passion these tax experts have in protecting taxpayers and businesses was prevalent. You know when you encounter people in life with purpose and passion for what they do; you know they get things done.  You can expect to encounter tax professionals who get things done at TaxConnections Internet Tax Summit. You are  invited to meet and interact with Tax Experts in this historical event where individual taxpayers and business leaders meet tax experts during an online event. It is free so all you need to do is register and we will send you a link to access the Internet Tax Summit. Read more

German Church Tax Update

Mainzer Dom cathedral in Mainz in Germany

Last fall we wrote about the increased enforcement of the German Church Tax (German Church Tax Causes Controversy), in particular the enforcement of this tax on capital gains. The tax is levied by the state at 8-9% of the regular income tax for members of certain mainline churches – primarily Catholic and Lutheran church members. This tax is then passed on to the churches for use in their operations and charitable activities. The tax is only levied against registered members of Catholic, Protestant, or Jewish churches. The system does not rely on self-reporting as some churches have gotten rather aggressive against those who are alleged members of the Church but do not report being a member of a church.

As enforcement of the tax has increased, more and more church members are Read more

[Don’t] Insert Money Here

TaxConnections Picture - Vatican City - 6-23-15 - square

It’s no coincidence that churches and banks are usually the two largest buildings in a community. “Filthy lucre,” as the King James so eloquently phrases it, has often reared its ugly head in Christian history. And if you think that the televangelist scandals of the 1980s were a recent development, think again.

When Pope Urban II proclaimed the First Crusade in 1095, the stated mission – freeing Jerusalem and other holy sites from the grip of infidels – was really only a smokescreen. Many historians agree that the Pope’s real mission was to prop up the decaying Byzantine Empire, and specifically regain the fertile regions of Anatolia, and restore the lucrative East-West trade routes through that area of the Middle East. Read more

Would A Supreme Court Ruling In Favor of Same Sex Marriage Threaten Religious Organizations’ Tax Exemptions?

TaxConnections Picture - Same-Sex Marriage 5-20-15 - square

The United States Supreme Court has heard arguments in the Obergefell v. Hodges case which basically seeks to legalize same-sex marriage in the United States.  While the court has not yet announced its verdict, there is concern that, if it is legalized, the action could threaten the tax-exempt status of churches and other religious organizations.  Albert Mohler, President of Southern Baptist Theological Seminary has stated that this issue “may well be the greatest threat to religious liberty of our lifetime.

During discussions before the Court, three religious liberty issues were raised.  First, Justice Scalia asked counsel arguing for same-sex marriage if clergy would be required to perform same-sex marriages. The response was that a constitutional right for such unions would not require clergy of any faith to perform these ceremonies. Read more

Endowments – Good Or Bad For Churches?

TaxConnections Picture - Church 3 - square

An endowment is a donation of money or property to a non-profit organization for the ongoing support of the organization. It may be structured that the organization leaves the principal amount intact and is only permitted to spend the income from the investments in the endowment funds. Less commonly, the gift may be structured allowing the organization to spend the principal amount. If this is the case, there may be restrictions placed upon the amount of principal that may be spent annually. Many non-profit organizations, most notably colleges and universities may have endowments of millions of dollars. It is less common for a church to have endowment funds, although it is not unheard of.

Not everyone favors a church having endowment funds. Some feel that any funds in Read more

Beware of Clawbacks

TaxConnections Picture - Dollar Handoff  - 1 - square

Your 501(c)(3) organization or church is in the midst of a large building campaign. Someone approaches you about making a large gift to the campaign. You don’t know the person, but he says that his grandparents were long-time members and supporters of your organization and he would like to honor them with a donation in their names. Sound too good to be true? Well, rein in your enthusiasm. That may just be the case. Before accepting any large gift, particularly one from someone you don’t know, you should exercise some due diligence.

Fraudulent Transfer may Result in a Clawback

A gift that is given to an organization or to individuals may be required to be returned if it can be shown that the transfer to your organization could be termed a fraudulent transfer Read more

Help! Someone Just Contributed Bitcoin To My Church


Bitcoin is a virtual currency also known as a cryptocurrency. It got that name because it uses cryptography to secure transactions. The good news is you don’t have to understand everything about it in order to use it. The bad news is you need to know how to receive and spend any bitcoin that you receive as a church, other organization, or individually. For purposes of this article, we will not go into the details of Bitcoin. The primary feature of it is that it is a decentralized “currency,” not controlled by any one central authority. It can’t tinker with monetary policy and cause a meltdown, nor can it be appropriated by a central authority – it is independent of any government.

In order to use Bitcoin, you must set up an account. There are miniscule fees involved and it is instant. If you want to spend it, you can spend it in Bitcoins or it can be redeemed. Read more

Church Wins Round In Court Over Property Tax Exemption

TaxConnections Picture - Church 2 - square

In a recent court case, a New York court ruled that two churches closed by a Catholic Diocese remained exempt from property taxes. In this situation, the diocese had announced plans to permanently close the churches and issued canonical “decrees of suppression.” This action has the effect of terminating the diocese. The property was transferred to other parishes. The local tax assessor informed the diocese that the churches were being placed on the tax rolls, removing the property tax exemption from the two churches.

The diocese asked the court to reinstate the tax-exempt status of both churches, citing the fact that the properties were being used on occasion for religious purposes including monthly religious services. In addition, the diocese stated that the churches were not used for any other purpose. The assessor countered that the properties were not Read more

Business Expenses For A Minister


In the course carrying out ministerial duties, a minister will incur various expenses that are related to his or her occupation. Some of these may be reimbursed by the employer, while others may be the expense of the minister. What is the criteria for reimbursing or deducting legitimate business-related expenses?

Whether an expense is reimbursed by the employer or if it falls on the minister to pay, the same IRS guidelines apply. An expense must be “ordinary” and “necessary under IRS rules. Business expenses do not include capital expenses such as a computer or other equipment. However, these may be depreciated in most cases. Personal expenses are not deductible business expenses. Read more