These are some excerpts from an IRS warning. I wonder who is this directed against?

"The Internal Revenue Service (news - web sites) on Wednesday reminded charities to steer clear of prohibited political actions during their election-year activities. "

"Charities, churches, educational institutions and other nonprofit groups organized as tax-exempt organizations cannot participate in or intervene in any political campaign, nor can they advocate for or against any candidate for public office. "

"The IRS can strip tax-exempt status from an organization engaged in forbidden political activities, and the group can be forced to pay excise taxes on the money spent on that activity. "

Our local churches should make sure that they have thier individual 501C3 Status so that if the Non-Profit Status of the Denomination is lifted, it will not affect the local church.

-- Anonymous, April 28, 2004

Answers

An excellent heads up, Rev. Paris.....If any of you operate your own 501c3 corporations, take heed.

If you lose your status, people can still contribute money to you, but they do not get a tax write-off.

-- Anonymous, April 28, 2004

This has been the rule of the land for many occasions and something we should all keep in mind.

Something that WILL effect black churches regarding tax exemption status is the Sarbanes-Oxley Act.

This holds Boards of Directors and others legally responsible for the actions of 501(c)3 operations. We must remember that there is a seperation of church and state. Therefore the pastor of the church CAN NOT serve as the CEO or President of the Board for the non profit arm of the church.

The non profit arm should be composed of not only church members but non affiliated community representatives.

The non profit arm should be of community service and NOT a service of or special benefits to members of the church.

Too many times our churches (meaning black churches) unintentionally misuse non profit statuses and arms.

I encourage everyone to research Sarbanes-Oxley and institute those regulations within their non-profit arm immediately.

-- Anonymous, April 29, 2004

Carolyn opines -

"This holds Boards of Directors and others legally responsible for the actions of 501(c)3 operations. We must remember that there is a seperation of church and state. Therefore the pastor of the church CAN NOT serve as the CEO or President of the Board for the non profit arm of the church." Great observation!!! Do you have a link for the Sarbanes-Oakley Act which specifically addressed the issue about Board of Directors for non-profit organizations? Thanks. QED

-- Anonymous, April 29, 2004

I am somewhat confused by the reference to the "non-profit arm" of the church. At Macedonia, we are incorporated as a Corporation by the State of Texas and registered with the IRS as a Non-Profit Corporation. Are you saying that a church can have both a profit making and non- profit sections with the same corporation?

-- Anonymous, April 29, 2004

Pastor Paris,

A NPO cannot be "owned" by anyone. An example is the Boy Scouts of America and the Red Cross. - NPOs are formed for "public use".

The Sarbanes-Oaxley law is going to bring some ugliness to light. It will prevent groups like the "Sacreligious Left" and the "Immoral Minority" from stuffing money in the pockets of those running for office.

On another note, the IRS warning means that a number of political candidates will have to find a new way to curry the Black Vote this election year.

-- Anonymous, April 29, 2004

Reference to Sarbanes-Oxley

http://www.aicpa.org/info/sarbanes_oxley_summary.htm

-- Anonymous, May 02, 2004

Rev. Harper,

I'm still having some trouble with the Non-Profit Corporation, 501c3. I read the summary of the Sarbanes-Oxley reference in the post and could find nothing relating to 501c3 Organizations. As for public service, many Non-Profit Organizations, 501c3 that is, such as fraternities serve a select group of people. As a matter of fact, a church serves only its members.

Can you or someone help me see the link to Sarbanes-Oxley?

Be Blessed

-- Anonymous, May 02, 2004

Sarbanes-Oaxley link: http://www.sarbanes-oxley.com

The IRS warning and the Sarbanes-Oxley Act are apples and oranges, but make a nice fruit salad.

The Sarbanes-Oxley Act of 2002 says that corporate officers who willfully make false financial statements may receive a fine of $5,000,000, or a prison sentence of 20 years, or both.

Where this could impact the church with respect to the IRS warning about protracted involvement with political campaigns is this HYPOTHETICAL situation:

Presidential Candidate "A" needs the [fill in the minority] vote. In order to get that vote, they need the blessing of the HNIC (whoever he or she is).

The candidate's party donates $1,000,000 to HNIC's church. Said church then allows that candidate and ONLY that candidate to speak from the pulpit. In turn, the governing board awards the HNIC a "token of their affection", that happens to be the amount donated by the candidate.

If the church covered this up, and were later discovered, the church would lose their 501c3 under the IRS warning AND be liable under Sarbanes-Oaxley.

Does this make sense? Think of Sarbanes-Oaxley as the antidote for future Enrons, WorldComs, and Southern California Edisons.

-- Anonymous, May 02, 2004

Rev. Harper, excellent explanation!

-- Anonymous, May 03, 2004

The IRS warning is also applicable for churches who engage in deliberate candidate endorsement WITHOUT campaign contributions or other forms of filthy lucre. Many of our black pulpits are nothing more than sounding boards to encourage congregants not just to vote but who to vote for and why. This is what many churches routinely violate. QED

-- Anonymous, May 03, 2004

"This holds Boards of Directors and others legally responsible for the actions of 501(c)3 operations. We must remember that there is a seperation of church and state. Therefore the pastor of the church CAN NOT serve as the CEO or President of the Board for the non profit arm of the church."

I was given different info. I just had this discussion with the IRS a few months ago since my church is in the process of setting up a separate non-profit.

1) There is no non-profit "arm" of a church - if there is a non- profit corporation that has a seperate EIN number from the church, it is a free-standing entity and ANYONE can be the CEO or Board Chair, regardless of other affiliations, as long as it does not violate the corporation's by-laws.

2) If the non-profit is using the church's EIN, then the non-profit really doesn't exist and the controlling entity is the church, which of course is headed by the Pastor. Using the church's EIN is, of course, a horrible and dangerous thing to do.

WHERE WE GET INTO PROBLEMS: is when churches start looking at their non-profit corporations as "subsidiaries" or "divisions." Legally, they are not, but we like to run them as auxilliaries of the church. That usually works until the non-profits generate significant revenue, then the problems surface.

A big issue related to the original post is churches using their non- profits to do things like endorse candidates or other activities that could cause them to lose their non-profit status, not realizing that if the non-profit has the same CEO and Board of Directors as the church, the IRS can declare that THEY ARE NOT REALLY SEPERATE ENTITIES and strip the church of its non-profit status, too.

-- Anonymous, May 03, 2004

If bishop makes disparaging remarks about a candidate in one of his meetigs, does that place the 501c3 status of the local churches in jeopardy or does it apply only to the denomination's 501c3 status? If the denomination loses its Non-Profit status will that affect the local church? And if your local church loses its Non-Profit status, will you continue to tithe there?

-- Anonymous, May 04, 2004

This is the fruit that comes from organizing and operating a church as a "tax-exempt nonprofit religious corporation." We're told to sit down, shut up, and don't say anything the government doesn't like. How are we supposed to "preach the whole counsel of God" with those kinds of restrictions?

At law, all corporations are "creatures of the State." That which the government creates the government can meddle with. A corporation has no constitutionally-protected rights, only government "privileges and benefits." That means that an incorporated church doesn't even have any guaranteed First Amendment rights of free speech.

To add insult to injury, when we take the IRS "privilege" of 501c3 status, we agree by contract to not only not support or oppose any political candidate, but we also agree to not "influence legislation."

As I've discovered, this is the biggest con job that has ever been perpetrated upon the church. Even the IRS admits that "churches are automatically tax exempt and tax deductible" without ever having to apply for 501c3 status.

There's some excellent reference material on this vital issue available at http://501c3.hushmoney.org

-- Anonymous, May 31, 2004

Kirk,

You should remember that you don't have to accept Non-Profit status. You can simply incorporate your church as a profit making entity and file the appropriate tax returns, as many churches currently are doing. IN Texas, an organization must be incorporated in order to do business as an organization: sign contracts, have a bank account, etc. But we have the option of not accepting non-profit status and if there are no profits, the filing requirements are very simple.

-- Anonymous, June 01, 2004