May 15 is tax day for tax-exempt organizations that operate on a calendar year tax period. Don’t forget to file the Form 990, Form 990-EZ, or Form 990-N or an Extension before that date (unless you are exempt from the Form 990 filing requirement, such as a Church or integrated auxiliary of a Church).
Under the Patient Protection and Affordable Care Act (“ACA”), employers with group health plans must provide preventive health services without charging a co-pay, coinsurance payment, or a deductible. On August 1, 2011, the Department of Health & Human Services (HHS) adopted guidelines outlining the required preventive health care for women. That guidance requires coverage for all FDA-approved contraceptive services, including the “morning after” pill and the “week after” pill. When this HHS guidance was initially issued, many religious organizations objected to the contraceptive coverage requirement on the ground that this coverage was in direct conflict with their religious beliefs. HHS subsequently amended the regulations to exempt entirely organizations described in Internal Revenue Code sections 6033(a)(1) and 6033(a)(3)(A)(i) or (iii). These sections include organizations that may be classified for tax code purposes as churches, conventions or associations of churches, integrated auxiliaries or religious orders. For those objecting nonprofit religious organizations that do not qualify for the church employer exemption, HHS has recently finalized the rules for an “accommodation.”
For more information please view the Bryan Cave Alert
Organizations that are exempt under Section 501(c)(3) of the Internal Revenue Code may not participate or intervene in “any political campaign on behalf of (or in opposition to) any candidate for public office.” IRC 501(c)(3). This rule applies to all 501(c)(3) organizations—including 501(c)(3) churches. Yet, just about every election there are accusations that this or that church has violated the rule by its minister preaching support for a candidate from the pulpit.
Congress and the IRS have made it clear that 501(c)(3) organizations may not participate or intervene in “any political campaign on behalf of (or in opposition to) any candidate for public office.” IRC 501(c)(3). (Note that the rule does not prohibit all support or opposition to legislation; that is permitted as long as it is insubstantial. This rules prohibits all support or opposition to a candidate.) This prohibition includes churches exempt under Section 501(c)(3). Yet, just about every election there are accusations that this or that church has violated the rule by preaching support for a candidate from the pulpit.
A recent news story reports that several churches, rather than covertly violating this rule, are planning to openly do so. According to the story, the position of the churches is that the IRS rule violates their First Amendment right to free speech. Their plan is to record and send their rule-breaking sermons to the IRS and, when the IRS revokes their exempt status, seek court relief on the grounds that the rule is unconstitutional.
If I were advising these churches, I would point out that their position has already been litigated several times. See, for example, Branch Ministries v. Rossotti (D.C. Ct. App. 2000). The basic position of courts and the IRS is that tax exemption is a privilege–a conditional privilege. And it is not a violation of the First Amendment for Congress to refuse to subsidize first Amendment activities. If you really want to promote a candidate, you may do so–just not as a 501(c)(3). So, in my mind, the legal result here is not in doubt; but it will be interesting to see how this plays out for the churches.
In a prior post, I discussed the case of an organization that was denied church status because, among other things, there was no opportunity for congregants to ”interact and associate with each other in worship” where the sermon was broadcast over the radio and internet. In a recent ruling, PLR 201232034, the IRS again denied church status to a similar organization, stating that: “A website on the Internet does not qualify as a place of worship, nor do individuals accessing that website constitute a congregation assembled to worship.” The IRS is sticking to its guns on this point, it seems. Nonetheless below are my top 10 reasons to replace your live church with an on-line church:
- No need to get dressed or brush your teeth
- No one notices if you are late
- You can mute it when they’re talking about sins you don’t plan to quit
- No one can ask you to teach Sunday School
- No one can gossip about you regarding your donation (or lack thereof) in the offering plate
- No public embarrassment if you fall asleep
- Save on gas money
- When you run for President, it’s a lot easier to distance yourself from an online church
- Chips and soda for communion
- No need to choose between going to church and watching football
The United States Court of appeals for the Eleventh Circuit Court recently ruled that the parsonage allowance exclusion from gross income contained in section 107 of the Code is limited to the rental value of providing a single home. Commissioner v. Driscoll, 2012 U.S. App. LEXIS 2403 (11th Cir. 2012). The case involved a minister who claimed the parsonage allowance for both his principle residence and his lake house. In addition to turning back a minister’s expansive use of the parsonage allowance, the Eleventh Circuit’s decision addressed important issues related to the interpretation of ambiguous provisions of the Code. (more…)