Tax Issues

403(b) Plan Phone Forum

Certain 501(c)(3) organizations, including churches, may establish section 403(b) tax-sheltered annuity (TSA) plans for their employees. Under the final 403(b) regulations, plan sponsors were required to have a written plan in place by January 1, 2009. Under Notice 2009-3, published on December 11, 2008, sponsoring organizations were granted relief from the written plan requirement for the 2009 calendar year. The IRS is sponsoring a phone forum to discuss the new written plan requirements and the postponed effective date.

IRS Announces 2009 "insubstantial benefit" amounts for token goods or services given by charities

The IRS announced their official computation of inflation-based tax figures for tax years beginning in 2009 in Rev-Proc 2008-66. For 2009, a token gift value may be $9.50 (up from $9.10 in 2008) for contributions of $47.00 or more (up from $45.50), or not more than the lesser of 2% of the contribution or $95 (up from $91.00).

Yearend Tax Traps: Fringe Benefit Reporting and 1099’s

Fringe Benefits: The IRS requires reporting of certain fringe benefits as income to employees on their W-2. These include 1) personal use of company vehicles; 2) group life insurance in excess of $50,000; 3) expense allowances for which employee has not provided supporting documentation; 4) country club dues; etc. Most of are well aware that these type items represent taxable compensation to the employee; however, there is another danger in failing to report these items. The “excess benefit” rules include a safe harbor for items contemporaneously reported as compensation to the employee.

IRS Offers Relief From Immediate Compliance With 403(b) Written Plan Requirement

The IRS issued 2009-3, providing relief during 2009 for sponsors of 403(b) plans on having a written plan in place by January 1, 2009.

In general, sponsors of 403(b) plans are required to have a written plan in place as of January 1, 2009, that satisfy the requirements of the final 403(b) regulations that were published July 26, 2007.

Under Notice 2009-3, however, they are granting relief from the requirement that the written document be in place on January 1, 2009, provided the following:

1. The plan sponsor has adopted the written plan on or before December 31, 2009.

Minnesota Mega Church Gets Small Victory in IRS Proceeding

Reverend James Hammond and his Church, Living Word Christian Center of Brooklyn Park, MN appears to have won a small victory in their most recent round with the Internal Revenue Service.

Earlier this year, the IRS asked Church to provide detailed financial information, focusing on compensation of the founder and senior pastor of the church James Hammond. The Church refused to comply, arguing that they did not have to because the request was not made by a “high ranking” IRS official, which is required by law.

IRS Issues New Mileage Rates

Effective January 1, 2009 the standard mileage rates will be:

55 cents/mile for business miles
24 cents/mile for medical miles driven
14 cents/mile driven in services of charitable organizations

Medical mileage and mileage connected with charitable organizations can be taken as itemized deductions on Federal Schedule A for taxpayers who elect to itemize.

See IRS Revenue Procedure 2008-72 for more details at http://www.irs.gov/pub/irs-drop/rp-08-72.pdf

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.

IRS Offers 5 Mini-Courses on Redesigned 990

The IRS has recently posted five online video presentations explaining the newly designed Form 990. They range in length from 14 – 37 minutes. If your organization meets the requirements for filing the new 990, these mini-courses could provide helpful information on the new requirements. Check them out at http://www.stayexempt.org/home_mini_courses.html.

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