Skip to main content

Parachurch Ministries Under the Authority of a Church

Question:

A church has a member who, on his own, founded a ministry. The ministry has not pursued recognition by the Internal Revenue Service as a tax-exempt organization under section 501(c)(3) of the Internal Revenue Code. Also, it is not a formally sponsored outreach program of the church.

The member has asked whether the church would act as a clearing house for designated donations towards his ministry. Most of the donations would come from non-attendees of the church. Checks would be made out to the church designated for the ministry. The founder would then use the donations to pay for the expenses associated with it. The over arching goal of the ministry is in harmony with the church's mission. Can the church issue tax-deductible receipts for these designated donations?

Answer:

This is a good question that has been answered, in principle, in several other entries in this blog. Type "conduit" in the above search window for more.

My advice has always been to churches and other tax-exempt organizations to avoid becoming conduits for donor contributions that are directed elsewhere. As the recipient, the church may be held responsible by donors and others for the appropriate disbursement of the funds (e.g. if the founder errs in his use of funds, the church could possibly bear the consequences).

If the ministry is truly one that the church leadership and membership supports and the founder is willing to come under the authority and oversight of the church as one of its ministries, then, by all means, receive donations and expend funds for its ministry using the standard receipt and disbursement procedures of the church (e.g., deposits into the church account, documentation of disbursements maintained by the church, fully integrating the ministry into the budgeting procedures of the church).

If the church and founder are not interested in these type of measures, then, in my opinion, the founder should pursue his independent status as a IRC 501(c)(3) organization.

Comments

Popular posts from this blog

Qualified Small Employer HRAs

On December 13, 2016, President Obama signed the 21st Century Cures Act, allowing qualified small employers to offer Health Reimbursement Arrangements (HRA) that follow certain terms.

After the Affordable Care Act was passed, the IRS originally determined that an HRA was not a qualified group health plan. The Cures Act overrules this decision. HRAs are again an option for qualifying small employers.

To be eligible, the small employer must have fewer than 50 employees and must not offer a group health plan to any of its employees.

The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) must be subject to the following terms.
No salary reduction contributions may be made (i.e., 100% employer-funded).Employer must receive proof of employee’s minimum essential coverage.Reimbursements must be for qualifying medical expenses.Reimbursements for any year cannot exceed $4,950 (or $10,000 for family coverage), which will be adjusted annually for inflation.Employer must offer the …

Housing Allowance when Bartering for Rent Payments

Question:

If a minister rents his principal residence, but he performs services (mowing the lawn, repairing the roof, etc.) in lieu of rent, can he still qualify the rent amount for a housing allowance tax benefit?

Answer:

Of course, bartering income is taxable. The Internal Revenue Code interprets that above situation as follows: tenant/minister receives taxable income for the fair market value of the services he provides, andtenant/minster pays landlord for renal of residence. The minister in this case reports taxable income for services provided in lieu of rent. It is also likely subject to self-employment tax. He may then claim as qualifying housing allowance expense equal to the amount he "pays" for rent of his personal residence. Essentially, there is no difference than if the minister and his landlord simply traded checks.

See a past MinistryCPA post regarding this topic: http://ministrycpa.blogspot.com/2016/09/services-to-church-in-lieu-of-rent-of.html

Mission Trips Involving Both Charitable and Personal Time

Question:

A church group went on a two-week mission trip, and a few of the members stayed an additional two weeks for personal time. Will the members who stayed the two additional weeks be able to deduct expenses from the trip?

Answer:

IRS Pub 526 covers the topic of Charitable Contributions and, more specifically, travel expenses associated with charitable trips. The publication states that travel expenses will be deductible “if there is no significant element of personal pleasure, recreation, or vacation in the travel.” The publication also states, “The deduction for travel expenses won't be denied simply because you enjoy providing services to the charitable organization. Even if you enjoy the trip, you can take a charitable contribution deduction for your travel expenses if you are on duty in a genuine and substantial sense throughout the trip. However, if you have only nominal duties, or if for significant parts of the trip you don't have any duties, you can't deduct you…