Tax Issues

Fair Value of Donation

Scenario: A church has determined that additional space is needed for a satellite location. A warehouse has been located, however significant renovations will be needed. A private individual (taxpayer) is willing to purchase the land and building and the church will finance the renovations. The church will rent the facility for three years and the rent will be $1 per year. In three years the taxpayer would donate the property to the church and receive a charitable deduction.

Question: Does the donor receive a deduction for the appraised value of the donated property?

Record Keeping for Ministers (3 of 3)

Avoid the last minute crunch of trying to organize your personal records for tax time. Maintaining your information, (receipts and payments) will make it much easier to estimate the taxes and prepare the information for the tax professional.

Keep track of Cash Donations – Tithes, offerings, and contributions. The IRS requires proof so be sure and write a check or get a written receipt from the organization you contribute to.

Vehicles Contributed to a Church – (1 of 4)

It’s been a while since we discussed contributions of autos and other vehicles to nonprofit organizations. In 2005 and 2006 significant changes were adopted requiring better substantiation of value and detailed recordkeeping. See our prior post on valuing donated vehicles posted by Sandy Siegfried on September 27, 2006.

Here is a summary of the current requirements in case you are considering accepting gifts such as cars, boats or aircraft.

IRS published notice on Form 990-N, e-Postcard

The IRS has published a list of frequently asked questions relating to the new electronic filing requirement for small tax-exempt organizations. We have discussed this form and the requirements in previous blogs, but the IRS Q&A will be helpful if your ministry needs to file a 990-N and you still have questions.

The last item on the IRS list provides a link to sign up for the IRS’s Exempt Organizations Update, an e-mail newsletter that highlights new information posted on the Charities pages of irs.gov. To subscribe, go to www.irs.gov/eo and click on EO Newsletter.

Record Keeping for Ministers (2 of 3)

Good record keeping enables individuals to easily take advantage of all the tax credits available under the IRS code. Properly maintaining receipt and payment information provides reliable information that should be used in substantiating the costs to maintain a minister's residence.

Record Keeping for Ministers

Good record keeping enables ministers to easily take advantage of all the tax credits available under the IRS code. To avoid the last minute crunch of getting all your records together at tax time, organizing and maintaining certain records are very important skills to develop. To get started I have listed a few important things that Ministers would want to keep track of during the year to make tax time easier.

Schedules K to N for the New Form 990 – (5 of 5)

Finally, below is a summary of the final four schedules that may need to be attached to the new Form 990.

New Schedule K was added for organizations with an outstanding tax-exempt bond issue greater than $100,000. The schedule covers information previously required on the balance sheet. In addition, the use and investment of proceeds and relationships with outside advisors will be reported.

Schedules J and R for the New Form 990 –(4 of 5)

The new Schedules J and R will cover compensation and related organizations in more detail than did the old Form 990.

IRS Issues Guidance for 501(c)3 Organizations and Politics

IRS Revenue Ruling 2007-41 issued June 1, 2007 examines prohibitions for political campaign intervention by churches, ministries and other charities. The ruling provides scenarios to illustrate considerations that should be made in determining whether a 501(c)3 organization has participated in a political campaign for a candidate running for public office.

Additional information for churches and other exempt organizations is included plus a copy of IRS Publication 1828. If you have any questions, please don't hesitate to contact us.

Nonprofit Organizations Defined

Churches are classified as a charitable organization under the IRS code. They are defined as a 501(c)(3) organization and they are not required to apply for an exemption, (Form 1023) with the IRS. However many churches voluntarily elect to apply for exemption.