An unusual alliance of religious and secular groups has recently called for the IRS to clarify its rules regarding non-profit organizations and their political activity. Leaders from the Evangelical Council for Financial Accountability (ECFA), Alliance Defending Freedom (ADF), the Public Citizen, and the Center for American Progress (CAP) met in Washington to discuss what the IRS could do to lend some clarity to this issue. ECFA seeks to make Christian non-profit organizations accountable through adherence to its Seven Standards of Responsible Stewardship; ADF has long advocated more freedom for ministers in addressing political issues from the pulpit. The Public Citizen is a non-profit, consumer rights advocacy group and think tank while the Center for American Progress is a progressive public policy research and advocacy organization. According to CAP, the Read More

Despite the IRS ban on church political activity, there is a large and growing group of pastors and churches who are actively supporting the repeal of the Johnson Amendment banning church and non-profit political activity.

Each year in October, the Alliance Defending Freedom (ADF) sponsors Pulpit Freedom Sunday, in which pastors take to the pulpit and engage in banned political activity.  In 2014, over 1,800 pastors participated with the large majority of them preaching sermons presenting their view of the biblical perspectives on the positions of elected candidates and signed a statement agreeing that the IRS should not control the content of a pastor’s sermon.  Additional pastors signed the statement, but did not preach to that effect. Read More

We previously discussed the prohibition against a church or religious organization from participating in political campaign activities.  The specific prohibitions that are a part of the law were discussed.  However, a church or religious organization is not being placed in a situation where is cannot express opinions on the issues of the day, nor are they expected to “put its head in the sand” in regard to the political process.

Lobbying Activities

A church or religious organization is permitted to engage in lobbying activities.  These activities are limited, however, as the organization must maintain a focus on its exempt purpose.  If the IRS determines that the organization is devoting more than an “insubstantial” part of its total activities during the year to lobbying activities, its tax-exempt Read More

Our society is very much a political society.  Even though not everyone may vote for a number of reasons, citizens are aware of elections and often the issues that are matters of discussion.  Opinions are plentiful, some are not factually-based, but that does not deter the individual from expressing his or her opinions.  Political campaigns are pervasive – we see advertising on various media, our mailboxes are filled with flyers from competing candidates, our phone often rings with pitches from various candidates. With everyone seemingly getting in on the action, there may be a temptation for a church or non-profit organization to throw in their two cents worth.

At one level, it makes sense for an organization to take a stand in favor or opposition to a candidate.  For example, a church may be a strong supporter of the nation of Israel.  One Read More

We have probably all heard of fraudulent phone calls from groups posing as the IRS. The caller typically demands money or says you have a refund due and asks for private information. If you don’t cooperate, they threaten you with asset seizure, jail time, or other actions. These scams are very pervasive, as I have personally received three of them in the past week. Do not give these callers any personal information.

In a release regarding these calls the IRS, states that they will never:

1. Call to demand immediate payment, nor will we call about taxes owed without first having mailed you a bill.

2. Demand that you pay taxes without giving you the opportunity to question or appeal Read More

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

The IRS has long held that severance payments from an employer to an employee are wages. As such, they are subject to income, as well as payroll taxes that include social security and Medicare. In a 2014 case (U.S. vs. Quality Stores) a Michigan court ruled otherwise – that social security and Medicare taxes are not due and payable on severance payments. The Sixth Circuit Court of Appeals, surprisingly, upheld the lower court ruling.

This ruling put the IRS in a bind. If the ruling were to stand and be applied nationwide, hundreds of millions of dollars could be at stake. Indeed, in a matter of months, over 3,000 claims for payroll tax refunds were filed with the IRS. All of these claims were disallowed if not coming from the Sixth Circuit. The IRS then appealed to the United States Supreme Court. Read More

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

The IRS has released its long-awaited Directory of Federal Tax Return Preparers, available at However, you should understand what this directory is, and is not.

But first, let’s talk about accessing the directory. By clicking on the link above, you will be taken to a page where you can enter the zip code for the area you wish to search and choose a distance from that zip code to search. You may optionally enter the last name of a preparer that you are searching for. Alternatively, you can omit the zip code and get a list of all preparers with the same last name. You may also choose which credential you wish to search for – CPA, Enrolled Agent, Attorney, or other. Read More

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

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

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