Our church held its annual Sacrificial Offering. One of the goals was for a new stove and for the purchase of a van. There is about $4,000 remaining in the fund after the two purchases.  A business meeting was scheduled to vote to re-designate the funds for roof repair.  We have a member who objects to the re-designation of funds who claims that we would be in violation of PA state law. We would appreciate your advice on this.

Answer:

Questions surrounding designated gifts and offerings may be the #1 topic of all the questions we receive. Here is my response:

IRS Increases Mileage Rate to 55.5 Cents per Mile

New Rates starts July 1, 2011

The Internal Revenue Service announced on June 23, 2011 (Announcement 2011-40) that they will increase the optional standard mileage rates for the final six months of 2011 effective July 1, 2011. The current mileage rate of 51 cents per mile will increase to 55.5 cents per mile.

Answer:

Yes indeed, 275,000 non-profits lost their tax exemptions last week (See Article: Non Profits Lose Tax Exemption). I would say that you should NOT voluntarily file a Form 990.

In fact, IRS prefers that organizations and individuals don’t file reports or returns unless they are required to do so. It is possible that some type of reporting could be mandated in the future for churches and church-related ministries (See Article: Senate Oversight of Churches, but since there is no current requirement, I recommend that you not voluntarily file a Form 990.

On 6/8/11, the IRS released a listing of 275,000 Tax Exempt Organizations that have automatically lost their tax-exempt status because they have not filed annual reports as required for the past three years (2007, 2008 and 2009).

The Pension Protection Act (PPA) of 2006 required most Tax Exempt Organizations to file an annual information return with the IRS. In the past many of these smaller Organizations were not required to file any reports with the IRS. Depending on the size (Gross Revenue) of the Organization, a Form 990, Form 990-EZ or usually Form 990-N (called a postcard and filed online) was required. Failure to fie the appropriate form for three consecutive years results in automatic revocation of their Tax Exempt status.

Written Acknowledgment is Affirmed by the IRS

The IRS has issued e-mail advice dated 5/20/11 that affirms that a taxpayer who makes a charitable gift and fails to obtain a contemporaneous written acknowledgment from the charitable organization cannot claim an income tax charitable deduction.

In Schrimsher v. Commissioner, T.C. Memo 2011-71 (March 28, 2011), the Tax Court recently held that taxpayers' failure to obtain a contemporaneous written acknowledgment resulted in disallowance of a charitable contribution deduction. The law is well settled that no deduction is allowed unless the taxpayer substantiates the deduction with a contemporaneous written acknowledgment.

IRS Tax Tip 2011-57, March 22, 2011

Charitable contributions made to qualified organizations may help lower your tax bill. The IRS has put together the following eight tips to help ensure your contributions pay off on your tax return.

1. If your goal is a legitimate tax deduction, then you must be giving to a qualified organization. Also, you cannot deduct contributions made to specific individuals, political organizations and candidates. See IRS Publication 526, Charitable Contributions, for rules on what constitutes a qualified organization.

2. To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A.

Not an IRS requirement--but highly suggested for all Non-Profits

There is no legal requirement to have a conflict of interest policy.  But having such a Policy is clearly best practices for any Non-profit organization including ministries.

As is well known, churches and church related ministries are NOT subject to the filing of the Form 990 Annual Report that other Non-Profits are required to file. For those Non-profits that are required to File Form 990, the Form 990 itself asks if a Conflict of Interest Policy exists and specifically asks whether officers, directors and key employees are required to disclose annually.

In November 2007, Senator Chuck Grassley (R-Iowa), member of the U.S. Senate Finance Committee instituted inquiries into 6 Media ministries including Benny Hinn,  Joyce Meyer, Kenneth & Gloria Copeland, Randy & Paula White,  Eddie Long and Creflo & Taffi Dollar.

Preliminary research conducted by his staff indicated that there are almost 100 entities related to the six churches as well as the ministers. The potential concerns & issues included Inurement (personal use of non-profit assets), Housing allowances, whistleblower intimidation, overseas activities, unreported income and accountability. 3^rd party information has been secured by the Senate Finance Committee on all parties involved in the Inquiries.

On December 17, 2010 President Obama signed a bi-partisan tax bill which, among other things, extended the Bush tax cuts which were about to expire.

Millions of workers will see their take-home pay rise during 2011 because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 provides a 2% payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2% to 4.2% of wages paid.

Answer:

You are correct that non-profits including ministries and churches may qualify for a tax credit if they pay at least 50% of the cost of health insurance premiums for their employees. This is a tax benefit available from the federal  government to non-profit organizations even though nonprofits pay no income tax.