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Church Support of Non-501(c)(3) Organization

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Question:

A church has supported a children's ministry for several years which has recently lost its 501(c)(3) exemption. The leaders of the ministry are not employees of the church, and the ministry provides no services directly to the church. Is there any reason why the church cannot continue to give financial support to the children's ministry?

Answer: 


This issue is tricky. A church may support other 501(c)(3) organizations; however, churches must be careful when they attempt to support non-501(c)(3) organizations. 

Since the organization has lost its exempt status, the disbursements are no longer from one 501(c)(3) to another 501(c)(3); disbursements of this type are not subject to Form 1099-MISC or other reporting. 

Now that the disbursements are made to a taxable entity, they will likely be viewed as payments for services rendered. The supporting church therefore may be required to issue Form 1099-MISC. The church should research whether filing Form 1099-MISC would be required. For example, payments to non-employee individuals for services rendered are subject to Form 1099-MISC reporting.

For more information read the following previous blog posting:
Church Worker Employee or Independent Contractor
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