Protecting What God Has Given You
By Priscilla Achulo
DISCLAIMER: In light of the recent real-life event in a news report, identities in the subsequent narrative have been altered to safeguard confidentiality and inspire imaginative analysis.
Non-compliance with tax-exemption requirements not only puts a Church at risk of losing its tax-exempt status, but it could also result in damage to its reputation and, in severe cases, the loss of its property, as seen with the Christian Ministry.
The News reported a distressing situation involving the Christian Ministry, a Church facing the threat of being sold due to unpaid property taxes. The church, which has been a registered nonprofit for decades, was unaware of the accumulating tax debt, as the bills were being sent to the home of a deceased former pastor. Now, unless the congregation pays $67,000 in tax debt, interest, and fees, the church faces the possibility of foreclosure by an asset finance company to which the County sold the tax debt. In speaking with the News, Pastor Jim admitted they “had no clue” that they “were even getting notifications.”
This unfortunate report is undoubtedly a recurring issue for numerous Churches across the United States!
Simple Housekeeping Rules
Whereas this is not an exhaustive and customized list, the following steps are intended to provide generic information on some basic ways to ensure that what God has given you is well-protected:
- Clean As You Go. The golden rule of housekeeping is simple: clean as you go. This means cleaning messes and spills immediately rather than letting them sit and making them harder to clean later. It is important to regularly update Church contact information, especially in State and applicable Federal reports. If the Christian Ministry had updated its mailing address back in 1996, upon the death of its first Pastor (since the mailing address was the home address of its first Pastor), it could have received important correspondence and potentially taken steps to avert the exacerbation of this situation.
- Know What To Keep And What To Toss. One key practice of housekeeping is knowing what to keep and what to toss. It is important to differentiate between items to keep and discard, including correspondence. Sorting through church communications can be overwhelming, but it's crucial to avoid mistakenly discarding important information while eliminating unwanted solicitations. Quickly assess the source and title of each piece of mail before deciding whether to keep or discard it.
- DIY Is Not Always The Best Option: The idea of DIY (Do-It-Yourself) has gained significant recognition in recent years. Nevertheless, professionals emphasize that despite some advantages, the major drawback that outweighs all its benefits is that "it could cost you more.” Therefore, it is important to entrust certain tasks to professionals when it comes to managing your organization's regulatory compliance.
In Conclusion
Many non-profit organizations, including churches, mistakenly base their tax-exempt status on the widely accepted Christian belief of "once saved, always saved.” This belief has led many Christians to interpret their Salvation as a reason not to strive for a righteous life on earth. Consequently, they lead carefree lives without dedicating time to prayer, maintaining a consistent relationship with the Lord, and living a righteous lifestyle, all of which are crucial for Salvation (“work out your salvation with fear and trembling,” Philippians 2:12).
How does this relate to maintaining tax-exempt status and staying compliant as an organization?
It is a well-known fact that tax exemption offers numerous benefits, such as the ability for individuals and corporations to deduct contributions made to charitable organizations under Code Section 170 (IRS, 2024), but maintaining the 501(3)(c) tax exemption also requires effort.
According to the IRS (2024), a 501(c)(3) organization (i) must absolutely refrain from participating in the political campaigns of candidates for local, state, or federal office; (ii) must restrict its lobbying activities to an insubstantial part of its total activities; (iii) must ensure that its earnings do not inure to the benefit of any private shareholder or individual must not operate for the benefit of private interests such as those of its founder, the founder's family, its shareholders or persons controlled by such interests; (iv) must not operate for the primary purpose of conducting a trade or business that is not related to its exempt purpose, such as a school's operation of a factory; (v) may not provide commercial-type insurance as a substantial part of its activities; (vi) may not have purposes or activities that are illegal or violate fundamental public policy; (vii) must satisfy annual filing requirements.
Additionally, engaging in activities that result in inurement could not only lead to the revocation of the organization's 501(c)(3) exempt status but also to imposing penalty excise taxes on individuals who receive excessive benefits from such transactions. If an organization fails to submit the required annual documentation for three years in a row, its tax-exempt status will be revoked. It should be noted that churches, certain church-related entities, and specific types of organizations are not subject to this requirement.
At StartCHURCH, we take great pride in helping you “protect what God has given you.” Our commitment goes beyond ensuring your compliance with IRS regulations for tax exemption. We also make every effort to equip you with valuable knowledge to prevent and address challenging circumstances, such as the situation faced by the Christian Ministry.
Call us at 770-638-3444 or schedule an appointment below to speak with one of our specialists on how we can help you stay up-to-date with important applicable State and Federal auxiliary/ compliance services.
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Reference
IRS. (2024). Life cycle of a public charity. https://www.irs.gov/charities-non-profits/charitable-organizations/life-cycle-of-a-public-charity
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