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apstndp
New Member

When should a church organization file an income tax return?

 
1 Best answer

Accepted Solutions
Opus 17
Level 15

When should a church organization file an income tax return?

Generally, churches do not have to file tax returns.  However, a church will have to file a return and may owe income tax if it has "unrelated business income."

https://www.irs.gov/charities-non-profits/churches-religious-organizations

https://www.irs.gov/charities-non-profits/churches-religious-organizations/filing-requirements

https://www.irs.gov/charities-non-profits/annual-exempt-organization-return-who-must-file

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

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7 Replies
Opus 17
Level 15

When should a church organization file an income tax return?

Generally, churches do not have to file tax returns.  However, a church will have to file a return and may owe income tax if it has "unrelated business income."

https://www.irs.gov/charities-non-profits/churches-religious-organizations

https://www.irs.gov/charities-non-profits/churches-religious-organizations/filing-requirements

https://www.irs.gov/charities-non-profits/annual-exempt-organization-return-who-must-file

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

View solution in original post

apstndp
New Member

When should a church organization file an income tax return?

Thank you Opus 17. Now, what will be considered "unrelated business income"? Anything not related to ties and offerings I guess right.
Opus 17
Level 15

When should a church organization file an income tax return?

It's actually quite difficult to define.  Unrelated business income is income that is not related to the core business of ministry.  Suppose you rent space in the church building to a zumba trainer to have classes.  That's probably unrelated business income.  But suppose you rent to AA; that's arguably a ministry, so not taxable.

Or suppose the pastor has his own house and you rent the parsonage—the rental income is probably unrelated business income, unless you are renting to a pastor from another church that does not have its own parsonage.

Or you have a web site where you sell CDs and podcasts of sermons, no problem.  You also sell t-shirts with religious slogans but which do not specifically reference your church; could be taxable.

You operate a homeless shelter and collect money from the city/county to offset costs, probably ok.  You run a youth hostel for tourists visiting your city and use the money to fund other ministries, probably UBI.

And of course, just because you have unrelated business income that must be reported, you might not owe tax if you have offsetting expenses.

<a rel="nofollow" target="_blank" href="https://www.irs.gov/charities-non-profits/unrelated-business-income-tax">https://www.irs.gov/chariti...>

<a rel="nofollow" target="_blank" href="http://www.umc.org/gcfa/tax-packet">http://www.umc.org/gcfa/tax-packet</a>

If your church is a member of ECFA they are a good source, or you can buy a personal membership (I think) <a rel="nofollow" target="_blank" href="http://www.ecfa.org">http://www.ecfa.org</a>
*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
apstndp
New Member

When should a church organization file an income tax return?

Thanks Opus 17
ScruffyCurmudgeon
Level 9

When should a church organization file an income tax return?

Here's the real rub, though -  If a church received Unrelated Business Taxable Income UBTI - the church does not file a normal income tax return, such as a 1065 or 1120, but instead must file a variant of the Form 990, specifically Form 990-T.
Scruffy Curmudgeon--PFFM/ IAFF, Locals 718/30, retired firefighter/medic; univ faculty NOT INTUIT EMPLOYEE
- Strategy & Quantitative Methods Med-M&M, Law discriminatory statistics, Med & PH - epidemiology statistics;
USAR 64-67 AIS/ASA MOS 9301 - O3
-------------------------------------------------------
-------------------------------------No Not an Intuit Employee - Just donating my time
apstndp
New Member

When should a church organization file an income tax return?

cool. thanks again
ScruffyCurmudgeon
Level 9

When should a church organization file an income tax return?

Example of UBTI - a church or other non-profit invests in a non-profit commingled managed fund.  The fund's portfolio one year just happens to invest in some variant of real estate development or the like [as opposed to dividend, interest, and traditional gain securities].  That year, the fund will pour out to the fund participants UBTI
Scruffy Curmudgeon--PFFM/ IAFF, Locals 718/30, retired firefighter/medic; univ faculty NOT INTUIT EMPLOYEE
- Strategy & Quantitative Methods Med-M&M, Law discriminatory statistics, Med & PH - epidemiology statistics;
USAR 64-67 AIS/ASA MOS 9301 - O3
-------------------------------------------------------
-------------------------------------No Not an Intuit Employee - Just donating my time
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