Governance Issues

Donations to Church Prior to Filing Bankruptcy

In a test of the Religious Liberty and Charitable Donation Protection Act of 1998 (RLCDPA), a federal court in California ruled that contributions to a church made in the year preceding bankruptcy filing cannot be recovered by the bankruptcy trustee. The church was allowed to keep the donations. The RLCDPA prohibits bankruptcy courts from recovering contributions to religious organizations when the amount does not exceed 15% of the debtor’s gross income; or if more than 15%, the contributions were consistent with prior practice. The bankruptcy trustee tried to argue that the 15% applied to income after expenses (disposable income). The court disagreed and affirmed the 15% applied to gross income. In re Lewis 401 B.R. 431 (C.D. Cal. 2009)

IRS Announces 2010 Standard Mileage Rates

The 2010 standard mileage rates for business purposes, and medical and moving purposes are reduced from 2009 levels, as anticipated.

Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be: 50 cents per mile for business miles driven, 16.5 cents per mile driven for medical or moving purposes, and 14 cents per mile driven in service of charitable organizations.

In 2009, the standard mileage rates were: 55 cents per mile for business purposes, 24 cents per mile for medical or moving purposes, and 14 cents per mile driven in service of charitable organizations.

See the IRS news release at http://www.irs.gov/newsroom/article/0,,id=216048,00.html

Cutting Salary Better than Cutting Benefits

According to a new survey published by Christianity Today International, average compensation for ministers decreased about 2.4% in 2009, reflecting the budgeting decisions made by churches in the wake of the nation’s economic recession. One of the problems of cutting non-taxable fringe benefits is that the employee is then forced to replace those benefits with after-tax dollars from their already reduced paycheck. This has a compounded negative impact on the employee’s take home pay. If at all possible, churches (or any employer for that matter) who are considering a reduction of payroll costs should strive to maintain non-taxable fringe benefits and first reduce taxable compensation. (Christianity Today International publishes an annual Compensation Handbook for churches).

IRS Issues Proposed Regulations Clarifying Church Tax Inquiries

The IRS and Department of Treasury have issued proposed regulations under IRC Section 7611 to clarify the procedures for authorizing church tax inquiries and examinations. The proposed regulations name the Director, Exempt Organizations as the “appropriate high-level Treasury official” who has the authority to initiate a church inquiry. These proposed regulations replace references to positions that were abolished under the IRS Restructuring and Reform Act with references that are consistent with the statute and IRS's current organizational structure. To see the proposed regulations, see http://www.irs.gov/pub/irs-tege/7611pregs080509.pdf. Written or electronic comments and requests for a public hearing must be received by November 3, 2009.

Warning! Churches and Scams

Click here for the latest message from the Federal Trade Commission regarding scams that are targeting churches:
http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt138.shtm

New Technologies and What the IRS Thinks

According to a field directive issued in July 2008, the IRS considers nonprofit organizations responsible for information contained on linked sites in the same manner the nonprofit organization is responsible for its own printed or published materials. This field directive (see at http://www.irs.gov/pub/irs-tege/internetfielddirective072808.pdf) relates directly to political campaign activities. This is based largely on Rev. Rul. 2007-41 (see at http://www.irs.gov/pub/irs-drop/rr-07-41.pdf) which states that a Web page is the same as printed material, and the organization has control over which links are placed on the Web page. Therefore, the organization is responsible for the content of the linked material.

Manage Your GuideStar© Profile

A great way for nonprofit organizations to promote their organization at no cost (did I mention it’s free?) is to update their profile on www.guidestar.org. GuideStar provides information about nonprofit organizations from a database of publicly available sources, including the tax returns (Form 990) filed by nonprofit organizations. Churches who do not file Form 990 are NOT included.

Charity IRA Rollovers

Congress extended to 2008 and 2009 the provision that allows up to $100,000 tax free rollovers to charities from IRAs by those 70 ½ or older. The individual does not have to report the IRA distributions as taxable income; correspondingly, there is no further tax deduction available for the rollover. The charity must be a public charity, such as a church, and does not extend to donor-advised funds and supporting organizations.

Cracks in the Wall of Separation

In this political season, pastors and leaders on nonprofit organizations are constantly reminded to refrain from engaging in political activities or endorsing political candidates. This reminder is given with the threat of losing tax exempt status. Have you ever wondered how it came to be that churches in the United States of America have been prohibited from engaging in political activities? After all, in a nation founded on the principle of religious liberty, doesn’t the idea of separation of church and state protect the church from control or intrusion by the government?

IRS Raises Travel Per Diem Rates

IRS Raises Travel Per Diem Rates Effective October 1, 2008