NonBelief Relief and Form 990

By Sam Brunson

Speaking of the Freedom From Religion Foundation, last Thursday it filed suit challenging the constitutionality of section 6033(a)(3)(A) of the Code.

What does that first sentence mean? Broken down roughly: the tax law requires most entities exempt under section 501 to file an annual information return. That information return—currently Form 990—is filed with the IRS, but must also be made available to the public. It allows both the IRS and the general public a window into the financial workings of tax-exempt organizations, and provides a basis for administrative and public oversight of tax-exempt organizations. (For purposes of this lawsuit, it’s also worth noting that if a tax-exempt organization that is required to file a Form 990 doesn’t for three consecutive years, it automatically loses its exemption.)

Section 6033(a)(3)(A) provides a mandatory exception to the filing requirement, though. Under the Code, churches, their integrated auxiliaries, and conventions of churches don’t have to file a Form 990. While the IRS can still get access to them through an audit (though note that the steps the IRS must take to audit a church are really stringent), the general public has no way to see financial information about a U.S. church unless the church voluntarily discloses that information (which some do). Continue reading “NonBelief Relief and Form 990” →

The Johnson Amendment Under GOP Plan

By: David Herzig

Back in May, I continued to track President Trump’s promise to end the Johnson Amendment. At that time he promised during a National Prayer Breakfast that he would “get rid of and totally destroy” the Johnson Amendment and promised to issue an executive order (which he signed May 4).

But, a significant problem with legislating via Executive Order is that executives change and with the change so goes the Executive Orders. What works much better is legislation. Enter, the Tax Cuts and Job Act, where there is a proposal to end the Johnson Amendment.

What is the Johnson Amendment? In 1954, without explanation, Lyndon Johnson Continue reading “The Johnson Amendment Under GOP Plan” →

House Appropriations Bill

By: David Herzig

With all the diversions this week, it was easy to miss that the House Committee on Appropriations posted on June 28th the Appropriations Bill for FY 2018. The bill seems to include a couple items that not many were expecting. So, I thought I would highlight some of the key provisions. Since it is Friday before a Holiday weekend, I’ll keep it short for now. There are four main provisions I will address: (1) IRS Targeting/Johnson Amendment; (2) ACA Penalties; (3) Conservation Easements; and (4) 2704 (Estate/Gift Tax).

I. IRS Targeting/Death of Johnson Amendment

First, is a clear response to the “targeting” of groups from the Lois Lerner Administration. In three separate sections (107, 108 and 116), the bill attempts to regulate the IRS, not Continue reading “House Appropriations Bill” →

Tying the IRS’s Hands. Even Tighter

By Sam Brunson

Yesterday, the House Committee on Appropriations reported H.R. 2995 to the House of Representatives. H.R. 2995, the Financial Services and General Government Oversight Appropriations Bill for FY 2017, if passed, would continue the trend of reducing the IRS’s budget, this time by $236 million.

It is undoubtedly worth looking at what exactly the bill does, but I’m interested in an amendment added yesterday by Rep. John Culberson (R-TX). Section 135 of the bill would make it even harder than it already is for the IRS to audit churches. Continue reading “Tying the IRS’s Hands. Even Tighter” →

Church or Family Business? Puerto Rico Wants to Know

By: Sam Brunson Hacienda

On Friday, Shu-Yi posted an overview of Puerto Rico’s financial problems, and described the centrality of the island’s tax regime to those problems. Today, I’m going to dig into one particular aspect of Puerto Rican taxation: tax-exempt churches.

Last year, the Puerto Rican Treasury department launched an ambitious pilot program[fn1] under which it planned on auditing more than 40 tax-exempt organizations. Juan Zaragoza, Puerto Rico’s Secretary of Treasury, announced that this month the program moves to Phase 3: auditing churches.

As in the U.S., the Puerto Rican tax law exempts some nonprofit organizations from tax. Puerto Rican tax law explicitly exempts

Churches, church conventions or associations, as well as religious and apostolic organizations, including corporations and any community chest, fund, or foundation, organized and operated exclusively for religious purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual.[fn2]

Some tax-exempt churches, Zaragoza asserted, aren’t really churches, but rather family businesses. They make annual profits, just like a shoe store (and yes, his example was a shoe store), but, because they claim to be tax-exempt churches, they don’t pay taxes on their profits. Continue reading “Church or Family Business? Puerto Rico Wants to Know” →