Tax Issues

Contributions/Event - #4

As we have discussed in our three previous posts, donors may receive something in exchange for a contribution. Whether it is a meal, a book, a video, all of these items are treated similarly. Remember the criteria for financial reporting?

What has been communicated to the donor and what is the donor’s intention in responding to the solicitation?

As we discussed in post #3, the direct donor benefits can be treated similar to cost of sales OR as a program or supporting service. Showing the expense as gross or disclosing the components of the value is the preferred reporting,

#3 of 3 Filing for Exempt Status

In our previous posts we have discussed the criteria or the "14 point test" for churches. Churches are not required to file a Form 1023, however religious organizations with annual gross receipts greater than $5,000 must file.

In order for an organization to be tax-exempt, IRC 501(c)(3) requires the entity meet the following requirements:

1. organized and operated exclusively for religious, educational, scientific or other charitable purposes
2. net earnings may not inur to the benefit of any private individuals or shareholders

Phase-in filing of new Form 990

To allow organizations time to adjust to the redesigned 990 series returns, the IRS is phasing in the new returns during a three-year transition period. Many more non-profits will be allowed to file Form 990-EZ during the phase-in period, according to

Changes to the Draft Form 990

A redesigned Form 990, Return of Organization Exempt From Income Tax, will be filed beginning with 2008 tax years (2009 filing season). The IRS has completed its review of the public comments and made revisions to the draft instructions. The revised instructions should be posted at by August 15, 2008.

#4 Basis of Accounting for Non-Profit Entities

Financial Statement Notations…OCBOA Differences

If “cash basis” financial statements are modified, the preparer should make the notation in the financial statement title that these are presented on a “modified cash basis.” For example, non-profit financial statements using the GAAP basis would say Statement of Net Assets and Statement of Activities, but under the modified cash basis would say Statement of Assets, Liabilities and Net Assets—Modified Cash Basis and Statement of Revenues and Expenses—Modified Cash Basis.

Definition of a Church

Under the Internal Revenue Code section 501(c)(3), charitable organizations, including churches and religious organizations, are exempt from federal income taxes and are generally eligible to receive tax-deductible contributions.

What is a church? What are the characteristics of a church?

According to **, "church" can be a noun or a verb. As a noun, a church can be defined as:

1. a building for public Christian worship.
2. public worship of God or a religious service in such a building: to attend church regularly.

Integrated Auxiliary - Defined

Several religious organizations have created integrated auxiliaries. What are these entitites? How should the information be reported?

According to Publication 1828, Tax Guide for Churches and Religious Organizations an integrated auxiliary of a church refers to a class of organizations that are related to a church or convention or association of churches, but are not such organizations themselves.

In general, the IRS will treat an organization that meets the following three requirements as an integrated auxiliary of a church. The organization must:

End of Year Reporting - Spring Filing Requirements

In our two previous posts we have discussed several filing requirements for tax exempt organizations. Here are several filings due this Spring...

Why We Pay Taxes

As I filed my annual federal and state income tax returns last week, I remind myself "why" I pay taxes. Personally, I believe I pay more than my "fair share", but that is beside the point of this blog post today.

The Apostle Paul, as recorded in Romans 13, reminds us "WHY" we pay taxes. This scripture is a favorite of mine, especially in light of the political environment that we endure...

Ordinary and Necessary Expenses (2 of 2)

In our series of ordinary and necessary expenses, churches and ministries should document lodging and certain incidental expenses (such as cab fares) by receipt and/or other contemporaneous records that include the business purpose of the trip.