IRS Stays Away from Churches

Do you know the difference between a non-profit religious organization and a church?  Perhaps the biggest difference is their tax obligations.  While it is true that neither  is required to pay taxes, a pastor, televangelist, or broadcasting company that is registered as a religious organization must file information returns (Form 990) with the IRS that disclose how their money is spent.  However, churches, for the most part, do not have to answer to anyone.

John Burnett, reporting for National Public Radio, writes about a Christian television network called “Daystar” that operates much like a wealthy corporation, except without the transparency.  Yet they call themselves a church and the IRS has never questioned it so far as anyone knows.  There is a 14-point test that the IRS may use (in theory) to determine if an entity qualifies as a church under the law, but the IRS doesn’t enforce it. And if these churchy executives decide they want to drive Bentleys and live in sprawling chateus, they do it.  If they want to spend donation money on their own pet causes, then they do it.  According to IRS insiders, the government just doesn’t audit churches anymore, for at least the past five years anyway.

As part of America’s commitment to religious freedom, anyone can start a church, start preaching and passing the collection plate. They are presumed to be a church by the IRS — no questions asked.

Quoting former Daystar employees and tax attorneys, Burnett makes it pretty clear that Daystar would never meet the criteria for church status if the IRS were to enforce its own rules.  We all know how good the IRS is about enforcing its own rules…

Sandy & Obamacare

Just a couple random observations today:

1. Hurricane Sandy – Have you ever seen the looting that goes on when there are major storms and disasters?  Well, there is a distinct probability that we will see internet “looters” who don’t actually go and affirmatively steal things, but who lure victims to send them payments.  Beware of websites that purport to be charities raising money for victims of Hurricane Sandy — they could be a scam.  You can check on the tax-exempt status of the organization to determine how much you’re going to trust them.  Do this BEFORE you donate!  No need to run it by your tax attorney; just follow this link to the Exempt Organizations Select Check on the IRS website.

2. Obamacare Form – Americans for Tax Reform has prepared a “projected” tax form to assist taxpayers with their obligations under Obamacare.  This is so bizarre to me.  What a strange gimmick.  First of all, who has time to put together a complete form along with instructions based on what they think the IRS is going to require?  Second, who is really going to use this form when the individual mandate does not take effect until 2014?  Tax relief may be a top priority these days, but people just don’t plan that far in the future.  Props for style though;  it looks just like an actual IRS form.

Churches: Avoid Mentioning Romney or Obama

photo via flickr.com

It is common for some churches and religious leaders to integrate current events and circumstances into their sermons.  Currently the hottest topics around the nation happen to be political, as the Republicans and Democrats work around the clock to impress voters.  However, if they care to avoid tax problems, churches have to be very careful not to come out in support of one candidate over another.  Out of an abundance of caution, churches (and those who speak on their behalf) should not mention specific candidates this election year.  In fact, they should do little more than encourage their congregations to vote, and maybe provide non-partisan voter education information.

Under the Internal Revenue Code, all section 501(c)(3) organizations are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office. Contributions to political campaign funds or public statements of position (verbal or written) made on behalf of the organization in favor of or in opposition to any candidate for public office clearly violate the prohibition against political campaign activity.  Violating this prohibition may result in denial or revocation of tax-exempt status and the imposition of certain excise taxes.

~ www.irs.gov

Ordinary people are going to talk about politics at church; this is not the kind of activity that is prohibited by 501(c)(3).  But if you hear anything (or read anything) coming from those with authority to speak for your church that favors one candidate over another, or has the effect of favoring one of the candidates, you can be sure that this is a violation of the Internal Revenue Code.  Consult a tax attorney for more information.