All posts from “June 2011”

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June 30, 2011

Setting the Record Straight on Group Exemptions

Despite some claims, IRS revocations aren't in store.

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The IRS Advisory Committee on Tax Exempt and Government Entities (“ACT”) issued a report in June that addresses a number of tax compliance issues, including group exemption rulings.

The report caught the attention of many church leaders, since thousands of churches have obtained recognition of tax-exempt status by being included in the group exemption ruling of a parent denomination. Unfortunately, the report has caused needless concern, in part because of the false claims of some seminar leaders that the IRS is going to “revoke the group exemptions of churches by the end of the year.”

The good news is that the IRS is not going to revoke group exemptions. A feature article in the September-October 2011 edition of Church Law & Tax Report explains the recent ACT report, and sets the record straight.

June 28, 2011

Are Churches an Easy Target for Vandalism and Burglary?

Vandalism and burglaries are a real threat—prepare your church.

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A church business manager told me that two times in the past couple years his church was vandalized. He was grateful the church’s insurance covered most of the cost, but for the most recent case, his church won’t be able to use the sanctuary for more than a month while it’s being repaired.

An Internet search revealed to me that other churches are facing similar problems. The search results showed several news stories of church vandalism, burglary, and robbery throughout the country within the last month. One was a news story of a county in Tennessee investigating at least 23 church burglaries.

One newspaper article in Alabama reported Sherriff Dave Sutton as saying that churches are targets for thieves due to their lack of visibility and their valuable sound systems. The article follows with advice to churches and their communities of how to protect churches:

“(Thieves) are getting a little bit brazen,” Sutton said. “What we ask is people check the churches near you (often), even if you don’t go to church there.”
Sutton said if county residents check on the churches and alert authorities about any suspicious activities, church burglaries could be curbed.
Wayne Russell [a church administrator of a rural church that recently experienced two burglaries] advised staff members at other churches to take even more precautions.

Continue reading Are Churches an Easy Target for Vandalism and Burglary?...

June 23, 2011

IRS Increases Mileage Rate

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The Internal Revenue Service announced this morning it has increased the optional standard mileage rate that employers can use to reimburse employees who drive personal vehicles for business purposes.

The IRS increased the rate to 55.5 cents per mile for travel occurring between July 1 and December 31.

The rate was 51 cents for January 1 to June 30.

Many pastors and staff members drive their personal vehicles for church-related business, such as visitations or special events. If properly tracked, those miles can be reimbursed by churches (or pastors and staff members may be able to calculate a deduction for their annual tax returns).

Chapter 7 of the 2011 Church & Clergy Tax Guide further explains reimbursements of transportation expenses.

June 23, 2011

IRS Revokes Tax-exempt Status of Church-run Agency

275,000 nonprofits lost their tax-exempt status—some may be church-run

If your church runs a nonprofit agency, you may want to check this state-by-state list of 275,000 organizations whose tax-exempt status was recently automatically revoked by the IRS. Most organizations on the list no longer exist but some still do.

One organization on the list that still exists is a community development agency run by St. James Chapel Church of God in Christ, according to a newspaper in Reading, PA.

A law in 2006 requires most tax-exempt organizations (excluding churches) bringing in $25,000 or less to start filing yearly IRS returns, specifically form 990-N. Before 2006, they were not required to file. Those that do not file for three consecutive years will find their tax-exempt status automatically revoked by the IRS.

Continue reading IRS Revokes Tax-exempt Status of Church-run Agency...

June 22, 2011

Group Drops Case Against Pastor Housing Allowances

But battles loom as more challenges are promised.

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A constitutional challenge to the tax-free housing allowances and parsonages provided to thousands of American pastors is over after the plaintiffs who filed the original lawsuit voluntarily requested its dismissal Friday in a California district court.

But the battle is far from over. More legal challenges from opponents of the provision are promised, while a federal commission reviewing the benefit has been asked to determine whether it needs additional protections.

A leader from the Freedom From Religion Foundation, the group that led the latest charge against the decades-old tax benefit for clergy, said her organization will continue its fight to bring an end to these allowances, which it believes violate the First Amendment's Establishment Clause and endorse religion.

Friday's request for dismissal was FFRF's "only option at this time" after a U.S. Supreme Court ruling in April on a separate Arizona taxpayer case undermined the grounds for its case in California, said Annie Laurie Gaylor, co-president of the Madison, Wisconsin-based organization.

The group is evaluating its next options to challenge the benefit. "We plan to pursue it in a slightly different manner," Gaylor said. "We're sorry about (the California case)—we think the Ninth Circuit already indicated that it believed the law was unconstitutional. We believe it's an unconstitutional law."

Continue reading Group Drops Case Against Pastor Housing Allowances...

June 21, 2011

Show Me the Money

The most important financial report your church needs each month.

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Church board members are charged with fiscal oversight of the church coffers. But not every board member or finance committee member is a CPA and schooled in finance. Many treasurers and bookkeepers make the mistake of providing too much information and detail to board members. This only muddies the waters and leaves your committee members feeling less equipped to make good decisions. In order to get an accurate picture of the church's financial standing and make good decisions based on this information, your church board and finance committee need the right information presented in the right way.

The single-most important report you can bring into a finance meeting is the cash availability report.

Continue reading Show Me the Money...

June 16, 2011

The Top Three Reasons Fraud Happens at Church

And what you can do to prevent it

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Embezzlement in churches is on the rise. Regardless of a church's size, three factors can make it more vulnerable to fraud.

1. Lack of segregation of duties. Churches often fall victim to embezzlement when they rely on one person to handle too many tasks related to handling the cash. For instance, even if Jane, the church bookkeeper, is able to sign checks, if she also has access to the check stock and the general ledger, she is in a prime position to steal money from the church. Her duties are not sufficiently segregated. A better practice would be to have Bill, the treasurer, sign the checks. By dividing the duties, there's a greater degree of accountability and oversight.

Continue reading The Top Three Reasons Fraud Happens at Church...

June 14, 2011

More Analysis on the Pastor Housing Allowance Challenge

Supreme Court ruling may hurt standing of FFRF's case.

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Last month, Richard Hammar wrote an article detailing new developments in the constitutional challenge to pastoral housing allowances under way in California.

In a separate case in Arizona, the Supreme Court ruled the plaintiffs there lacked standing for their case to proceed. The logic applied in that situation likely will apply to the plaintiffs challenging the pastoral housing allowance in California, Hammar says (Hammar further explains the ruling's meaning and how it may prevent the Freedom From Religion Foundation from successfully advancing its case to trial).

The defendants in the housing allowance case likely will file a motion for its dismissal. If the motion succeeds, it will thwart what had otherwise become a growing concern for religious communities, churches, and pastors across the country.

In the latest issue of Christianity Today, a new article also examines the development in the Arizona case, quoting Hammar as well as several other religious and First Amendment experts, including Notre Dame law professor Rick Garnett and University of Virginia law professor Douglas Laycock. Garnett reinforces Hammar's analysis; Laycock says the decision, though helpful for the defendants in Arizona (and likely California), may create a "squelching" affect for any future cases arguing violations of the Establishment Clause, according to the article.

June 9, 2011

How to Manage Risk at Church

Four steps to develop a risk management plan

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David Middlebrook, editorial advisor for ChurchLawAndTax.com and ChurchSafety.com’s “Ask the Expert,” has developed an easy way to understand and develop a risk management plan. Each letter of the word “risk” stands for a step in the process:

R – Rate Your Risk

Do you intentionally try to understand your church’s risk profile? Which of the following is most like your church?

  • A risk-friendly church engages in risky conduct to preach the gospel. Intercity ministry, working with homeless and hungry people, is a good example of this.
  • A risk-neutral church stays away from many risky activities but has not done any planning to understand its risk profile. This church would need to understand each of its activities to start risk management planning.
  • A merely risk-conscious church knows that it is engaging in risky activities yet has no policies or procedures to deal with these risks.

Continue reading How to Manage Risk at Church...

June 8, 2011

Fire Prep for Your Church

Create an evacuation plan as part of your church’s fire preparedness and response plan.

During the past week, the states of Texas and Arizona faced rapidly spreading wildfires. In Arizona, firefighters now battle the state’s third-largest wildfire ever after attempts to contain it this past weekend failed, according to the Associated Press.

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The unpredictability of a fire is what makes it so threatening, but there are ways to keep your church safe by creating procedures for both preventing and responding to a fire.

Continue reading Fire Prep for Your Church...

June 7, 2011

Churches Forced to Stop Building Use Over Zoning Issue

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At least five churches in a business park in Georgia are being prevented from holding services there after a fire marshal’s routine inspection found that each church did not have a certificate of occupancy, according to a local newspaper and channel. Further troubling for the congregations, the complex where the churches are located is not zoned for churches; therefore, the county will not issue the needed certificates.

The churches hope to convince the county to allow them back in, which may include asking the county to rezone the area. Until then, they will not be able to meet in these buildings.

Zoning cases like this are among the top five reasons churches go to court, according to Richard Hammar, who is an attorney and the senior editor of Church Law & Tax Report.

Hammar writes in detail about a similar case and the court’s ruling, as well as what churches should know about the Religious Land Use and Institutionalized Persons Act (RLUIPA), which may help churches who face similar zoning issues.

Continue reading Churches Forced to Stop Building Use Over Zoning Issue...

June 2, 2011

Bill Maher: Should Churches be Taxed?

It's time churches share their stories to local communities.

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A little more than a year ago, Bill Maher hosted actor Ashton Kutcher, author and editor Jon Meacham, and Florida Congresswoman Ileana Ros-Lehtinen on his HBO program, Real Time. A YouTube clip from the program circulated recently throughout social media circles.

Church leaders might find the clip particularly interesting—and not just because of Maher's well-documented skepticism of religious beliefs (for instance, in 2008, he released Religulous, a feature film with a title combining the words "religious" and "ridiculous.")

Rather, it's a question he raises to his guests.

At one point, Maher asks Meacham, Kutcher, and Ros-Lehtinen whether churches should be taxed. Without hesitation Meacham says yes, offering his own church—one located on valuable New York City property—as an example to support his position. After Maher quips about the "invisible" product churches "sell," Meacham adds they're only open one hour per week anyway.

Kutcher suggests churches should be judged based on their philanthropic worth before determining their tax status, a "luxury tax" of sorts. The congresswoman remains silent on the subject throughout the clip.

Conversations like this only underscore the growing chorus of opposition to the tax-exempt status of churches. One need only read the YouTube comments below Maher's clip to see how hostile that chorus has become.

It's time churches responded, joining the conversation in an active, productive way. Lest Maher or any of his guests think otherwise, churches already pay many types of taxes, despite their exempt status, whether it's payroll taxes for employees, fees for local services, or taxes on substantial amounts of unrelated business income.

Continue reading Bill Maher: Should Churches be Taxed? ...