Faith-Based Accounting

Keep it Simple Stupid!

I think it surprised everyone at the Advance09 Conference (@Advance09) to hear Mark Driscoll (@MarsHill) recommending that churches should cut down, if not eliminate, all of their programming and para-church involvement save for two.  The first is what he calls the “Air War” which is the Sunday worship service and the second is the “Ground War” or small groups.

Now, for most, this seems a bit drastic.  But it does beg the question when we have so many irons in the fire, are we making the impact that we intended?  As we consult with churches all over the nation, we find that many church administrators get caught in the crossfire of conflicting schedules and tight budgets.  Then, unwittingly, these faithful workers lose sight of the passion that originally attracted them to their roles.  And just as passion is contagious, so is apathy.  So perhaps before we take on another heaping portion of responsibility we should ask ourselves, have I been a good steward of what I already have…?

“It’s NOT the economy, stupid!”

Sixteen years ago Bill Clinton rode into the White House on the strength of this slogan: “It’s the economy, stupid!”  What this meant to Clinton campaign workers was that if they focused on the “worsening” economy, the Presidency was theirs.  Because Americans can usually be counted on to vote their pocketbooks, the strategy worked perfectly.

It is not exactly breaking news, but in recent months many churches experiencing a significant decline in tithes and offerings are repeating the Clinton campaign mantra: “It’s the economy, stupid…”  (Most of them leave off the stupid part.)

While this is true in many cases, I recently read a book that indicates that a poor economy is not the only culprit behind declining giving. 

The premise of “Passing the Plate”, (Smith, Emerson, Snell; Oxford University Press) is that American Christians are rather stingy with their money.  The authors make their case with six facts uncovered during a survey taken of pastors and church members across the country:

1 – 20% of all Christians give NOTHING to their church.

2 – The vast majority of American Christians GIVE VERY LITTLE to their church

3 – A small minority of generous church members give most of the support churches receive.

4 – Higher income Christians give no more on a percentage basis than others.

5 – In spite of the increase in income over the 20^th century, giving has declined

6 – The vast majority of funds received are spent on local communities and not those in need.

Without question the economic downturn has hurt churches.  But it appears that maybe we already had a problem before the bottom fell out.  What do you think?

Exempt Organizations & Texas Taxes - Are you required to file?

State requirements for exempt organizations vary from state to state.  In Texas, a charitable organization can apply for exemption from sales tax paid on purchases and franchise tax.  The application can vary depending on the type of organization.  The exemption is granted based on the organization’s federal exemption. 

Click here for a link to the guidelines for exempt organizations published by the Texas Comptroller of Public Accounts.

It is important to note that exempt organizations must collect tax on most of their sales.  There are a variety of exceptions to this, so you really must research what you are selling.  The state has a publication to guide exempt organizations on this matter. 

One last piece of information I will leave with you is that you can search for exempt organizations registered with the state at the Comptroller’s website at this link.

Call us if you need help with your tax exempt organization’s state requirements.

Interest Rate Swaps

Many churches have long-term debts, such as a mortgage, that have variable interest rates associated with them.  There is much uncertainty that comes along with paying variable interest rates on large amounts of debt over 20 to 30 year periods.  Entering into an interest rate swap is an option available to churches that can help reduce this uncertainty.  Although the term "interest rate swap" may sound intimidating on the surface, they really work quite simply. 

For example, a church has a 20 year mortgage in the amount of $2 million.  The mortgage has an interest rate of prime plus 1%.  The church is uncomfortable paying a variable rate on $2 million so they enter into an interest rate swap agreement to effectively fix the rate at 6%.  Big picture, the church would continue to pay their mortgage payment at the variable rate.  The swap counter-party would reimburse the church for the amount of variable interest paid in exchange for the church paying the swap counter-party a fixed rate of 6%.  So, effectively, the church is able to pay a fixed rate of 6% throughout the life of the interest rate swap agreement.

There could be a price to pay for eliminating this uncertainty.  Using the example above, at times when the variable rate is less than 6%, the church would be paying more interest than they would had they not entered into a swap agreement.  On the flip side, then the variable rate rises above 6%, the church would be saving money.

Of course there is no way to predict which direction that rates will go (unless you have a crystal ball!!).  However, from a budgeting standpoint, a fixed interest rate can be more attractive then a variable rate.  It could also protect against unexpected increases in mortgage payments if interest rates were to rise dramatically.

Are you filing a 990?

If not, should you be?  That is the question the IRS will spend a lot of time trying to answer in the next couple of years.  The IRS's overseer, the Treasury Inspector General for Tax Administration (TIGTA), recently audited the IRS.  The TIGTA said the IRS should take steps to identify tax-exempt organizations that are not filing the required returns.  Therefore, the IRS has been requested to take steps to address tax exempt non-filers. 

Who is required to file a form 990, 990-EZ, or 990-N?  As with anything that deals with the IRS, the question is who is not required to file?  Here is the answer from the IRS's website.  If you have any questions or need advice, please contact us for a discussion on your specific situation.

Click here to see the TIGTA's full report.

Making Work Pay Credit and Your Employees

The IRS has issued the 2009 version of IRS Publication 919, How Do I Adjust My Tax Withholding? as a result of the "Making Work Pay" credit in the American Recovery and Reinvestment Act of 2009 (ARRA).

Employees can use this publication to help them determine if their federal income tax withholding is sufficient, and, if necessary, prepare a new Form W-4 to adjust their withholding. The publication includes worksheets for projecting 2009 tax, withholding, and deductions. For 2009, a new worksheet (Worksheet 12) has been added on the "Making Work Pay" credit.The amount of the "Making Work Pay" credit is $400 (unless the person makes under $6,450; then it’s 6,2% of compensation).  Because the credit is refundable (people can get it even if they owe no tax), most low-income workers will also qualify for the full credit.  The credit is phased out for a married couple filing a joint return whose modified adjusted gross income (AGI) is between $150,000 and $190,000, and for other taxpayers whose modified AGI is between $75,000 and $95,000.

It is a good idea to look at Publication 15T and print out the employee notice (on page 73 of the publication) that you should provide to your employees explaining the changes.  Some employees are beginning to discover after filing their 2008 personal income tax returns that they didn't have enough money withheld from their paychecks.  Employees may really feel the shortfall in 2009 with the changes in the withholding rates.

IRS releases Dirty Dozen Tax Schemes

... and charitable organizations make the 2008 list.

The IRS listed the misuse of charitable organizations as one of the 12 most egregious tax scams by taxpayers.  Abuse by donors who try to maintain control over donated assets or income from donated assets is just one example.  Taxpayers are also claiming overvalued property donations for a larger deduction.  Finally, taxpayers are disguising private tuition payments as contributions to charitable or religious organizations.

This information is good to keep in mind.  We all like to think that our donors have the best intentions but the IRS is saying that these scams are happening on a large scale basis.  If you have someone who wants to control how their donation is used, you should know that the donation is considered a donor advised fund and is subject to strict rules. 

Noncash contributions also have certain requirements.  Individuals are required to file a form 8283 for noncash donations over $500.  A form 8282 is generally required to be completed by the charitable organization (aka you) to report dispositions of certain charitable property made within 3 years after the donor contributed the property.  Yes, I did say 3 years.  Certain charitable property is any donated property other than money and publicly traded securities over $5,000.

Remember there are usually exceptions to the rules but I have listed the general rules. 

Click here to see the entire list.

Botox

This article (http://www.msnbc.msn.com/id/30089614/) reminded me of a fraud prevention principle - Most church embezzlements are probably not committed by crooks. Sinister looking guys usually don’t hang around churches with cigarettes hanging out of their mouths looking for the right opportunity to jump. Instead, I think more financial attacks on churches are committed by people who are basically good but, for one reason or another, find themselves in bad circumstances such as addictions (gambling being the most frequent), business reversals, and health issues.

Unfortunately, many churches operate under the belief that you have to be a crook to be a church embezzler, and convince themselves that since “We have no crooks here we have nothing to worry about.” What they forget is this: they do have hurting people. Probably more than they realize. In fact, every church has plenty of wounded members and employees with all sorts of “issues”. And unfortunately, many of their wounds can be eliminated, or at least, soothed with money.

I don’t know if the need for plastic surgery and Botox constitutes an “issue". But it did for this particular priest. And his church is $85,000 the poorer for it…

Meetings and Training Policy

Churches and schools often have annual meetings or retreats that employees must attend.  A source of irritation for employees can be the issue of pay -- or no pay -- for time spent attending meetings and training sessions.

Tell employees they have to attend a meeting or training program, and the employees may raise questions like these:

• Is attendance mandatory, or can we skip it?
  
  
• If we show up, do we get paid?
  
  
• If we don’t get paid for the time at the meeting or training, why do we have to attend?

Church leadership can lessen, and even end, the irritation employees experience, and avoid having to deal with questions like those above by adopting a clear policy on the topic.

Address the following in this policy:

1. How often do you have employee meetings?  For example: once a year...once a month...every other month.
   
   
2. Is employee attendance requested or mandatory?  This is especially important if meetings are held when all employees aren’t on-duty but are required to come into work to attend the meeting.
   
   Warning: Keep in mind that if you require off-duty employees to attend meetings... you must pay them for that time, if they are non-exempt employees.  Under the Fair Labor Standards Act, employers must pay employees for attending meetings: (1) if their attendance is mandatory and (2) the meeting serves to benefit the employer.  If meetings are strictly voluntary and outside of working hours, you may not be required to pay employees.  Get information on the Fair Labor Standards Act from the U.S. Department of Labor’s “ELAWS” website –
   http://www.dol.gov/elaws/flsa.htm
   
   
3. Be sure and mention where the meetings are usually held, what time they are held and what type of topics will be discussed.

Here’s some wording to consider in a meetings policy: "The Company holds monthly employee meetings.  These meetings are usually held at 4 p.m. in the staff lounge.  All employees are required to attend.  Off-duty personnel are required to punch-in at the start of the meeting and punch-out at the end of the meeting.  You will be paid your regular rate of pay for your attendance at these meetings."

NOTE: We’re not lawyers or spokespersons for the government!  We do try to provide accurate and helpful information.  But this is not intended to provide a legal service for your individual needs.  For legal guidance in your specific situations, always consult with an attorney who is familiar with employment law and labor issues.  Our friends at the Church Law Group would be happy to assist with legal guidance - www.churchlawgroup.com.  That having been said, we can offer you a sample policy on the meetings and training topic – www.pskcpa.com.

Nonprofit Board Members Personally Accountable

What’s the group in your church that has the real authority? Whatever you call them – Board of Deacons, Board of Elders, Pastoral Council, Leadership Team – you need to have them read this March 30th article from the Fort Worth Star Telegram -

http://www.star-telegram.com/804/story/1288144.html

Scary stuff! The IRS is starting to enforce rules regarding the responsibility that board members of nonprofit organizations have.

For some time, I've been telling people, who are on the boards/councils charged with the governance of their church, they really HAVE to be on top of what’s happening in their church. If you’re a member of the board of directors (or your church’s equivalent), you are held responsible for the actions and the “mis-actions” of your church. The rules have been in place for some time but most people aren’t aware of them and the IRS hasn’t enforced them. But they are on the books and the implications are very significant!

I rely on The Church Law Group for expert advice on such matters. Their website is -

http://www.churchlawgroup.com/

Of note, their book entitled Nonprofit Law for Religious Organizations, by Bruce Hopkins and David Middlebrook. I have a copy of it on my credenza, within arm’s reach!

Bottom line: don’t be scared off, just be informed (know what’s going on) and involved (make sure it’s done right).

Endowment Fund Disclosures

In the past year or two, Texas and many other states, have enacted a version of a new model institutional funds act (UPMIFA). In response, the Financial Accounting Standards Board issued a staff position paper (FAS 117-1) in August 2008. It applies to not-for-profit organizations (including churches) beginning with 2008 year-ends. Many are completely unaware of this new pronouncement which addresses net asset classification as well as enhanced (financial statement) disclosures. In addition to disclosure of more details about endowment activities, the organization must disclose in the notes to its financial statements information about:

1. its governing board's interpretation of the laws pertaining to the endowments,

2. investment policies, and

3. spending policies and how they relate to the organization's investment policies.

In light of the recent securities markets doldrums, many funds have deficiencies that require disclosure as well (not related to new pronouncement, but according to FAS 124.)

The FASB staff position paper is available on line: http://www.fasb.org/pdf/fsp_fas117-1.pdf 

Also, in Texas, UPMIFA is technically Chapter 163 of the Texas Property Code: http://tlo2.tlc.state.tx.us/statutes/docs/PR/content/pdf/pr.010.00.000163.00.pdf

Need to Terminate an Employee? Document!

Unfortunately, there are lots of good reasons for terminating an employee. But be aware! What may appear to be an ironclad reason for dismissal still needs to be approached and executed with good planning. And the keys to your plan are documentation and communication.

When an incident occurs, make your written record of the incident as soon as possible. Keep your documentation to an accurate accounting of the job-related facts. Be specific and clear about the reason for dismissal.

This documentation will serve two important purposes: It is a record for the employee’s file. And it will be a key source of any written communication to the employee about the reason for the termination.

Communicating the specific reasons for dismissal to the employee makes it more difficult for the employee to later allege other discriminatory causes for the termination. (Example: If the discharged employee is a member of a legally protected group, you will need to be concerned that the employee may later claim discrimination as your real reason for discharge. Leaving the grounds for discharge vague and general runs the risk that a court will fail to see evidence that your decisions and actions were fair.)

Human resource professionals generally agree that proper documentation is essential and will work for you in defense of an unjust claim.

Now, to get even more specific. An employer’s specific documentation needs to begin long before the moment of termination, in most instances of a firing. The employer who wants the strongest possible defense against a potential charge of illegal discrimination or wrongful discharge will have written documentation of each significant incident and action leading up to a termination.

Especially helpful to an employer’s defense are written documents--such as warnings to the employee and performance reviews--that show the employer informed the employee of specific unacceptable behavior or performance... informed the employee of the required behavior or performance... and informed the employee of the consequences if the employee’s behavior does not change or performance does not improve.

Remember - these blog thoughts are meant to be accurate and helpful.  BUT, I am not an attorney!  For legal guidance regarding your specific situation, always consult with an attorney who is familiar with employment law and labor issues.  Don't know one?  Give us a call at PSK!

Coffee Shops

Does your church have a coffee shop?  Many churches have found that coffee shops are a great way to increase fellowship at their churches.  Often times, PSK is asked about the tax and accounting issues that come along with coffee shops.  These are great questions!  Nonprofit organizations can be taxed on dollars that are earned from activities that are not related to their tax-exempt purpose.  So, is selling coffee supportive of the church's tax-exempt status?

The IRS has some specific rules regarding coffee shops run by churches.  If the shop is run by volunteers and the purpose of the shop is to provide a format for church members to congregate and have religious discussions, then the shop supports the exempt purpose of the church and income would not be taxable.  If the church's coffee shop is attempting to compete with Starbucks, then there could be some tax ramifications.  Whether or not that income is taxable, it is a good idea to code all coffee shop activity separate general ledger accounts, one account for income and another account for expenses.

Contact PSK if you have specific questions about your church's coffee shop!

Maryville

I would imagine most people reading this blog are aware of the tragedy that took place yesterday at First Baptist Church of Maryville, Illinois. However, for those who have not read or heard the news, a gunman shot and killed the church’s pastor during the Sunday worship service. This particularly caught my attention because my family is originally from Southern Illinois and I still have cousins living in the area. In fact many, many years ago my father planted churches in the area with one of his church plants being in Maryville. I am emotionally connected to the area where this took place.

When things like this happen one often wonders what can be done. Here are two things:

First, we need to pray. We need to pray for the pastor’s family and for the church congregation.

Second, if you are involved in church administration I would recommend you review your church’s security measures. If you have never implemented security plans you might consider consulting with professionals knowledgeable about such things. Here is one: www.gatekeepersalliance.com.

But most of all, I think we need to pray.

Crisis Management

At our most recent monthly breakfast for church business administrators, Lawrence Swicegood offered great info on Crisis Management.  He runs Clarion Call Marketing - www.clarioncallmarketing.com.  Very insightful!  Everything from how to be prepared even before a crisis erupts, how to handle and how to do a "post mortem."  Topics, in outline form:

• Everyone is Affected by a Crisis
• Characteristics of a Crisis
• Planning for a Crisis
• Potential Crises for a Church
• Developing a Response Plan
• Internal & External Communications

• Post Crisis Analysis

For more info, contact Lawrence (lswicegood@msn.com) or give us a call at PSK.

Picking up speed...

Because of our involvement in fraud prevention we make it a point to keep up with the latest news by periodically searching the web for news stories.  It seems like the pace of fraud occurrence is quickening.  Take a look here, (LINK) and here, (LINK) and here. (LINK)  PSK is not involved in any of these situations so I have no idea about anyone’s guilt, innocence or the ultimate outcome of the cases.  But, I am sure of one thing; no church or ministry wants to make these types of headlines.

To avoid this kind of publicity we have been urging, almost pleading with churches to take this situation seriously.  A "clear and present danger" exists and every church should immediately perform an analysis of their current management structures to determine their vulnerabilities to fraud.

This does not have to be complicated.  For example, a great start would be to simply hold a brainstorming session with key employees and volunteers. The meeting agenda could be organized around a few key questions.  For example you could start with the revenue streams of your church:

What are our church's different sources of revenues? (Offerings, counseling fees, tuition, fund-raising events, etc.)

Do we have processes in place to effectively and safely account for ALL sources of revenues?

Who is involved in the money collecting, counting, recording, and depositing processes?

Reason for Benevolence Policy - Don't Fall for Scam

So a chaplain at the University of Dallas wanted to be kind and reach out to someone who seemed needy.  And now the Chapel at the University is $100,000 poorer!  See the article in the Dallas Morning News -http://www.dallasnews.com/sharedcontent/dws/dn/education/stories/021709dnmetchaplain.36f29b2.html

Your church needs to have a clearly written benevolence policy - AND it needs to be followed!  The policy should address questions like -

• To whom will your church offer assistance?
• For what reasons?
• How much?
• How many times?

By the way, you cannot offer assistance to anyone on staff or their relatives.  By law, that is taxable income that MUST be reported to the IRS!

So take care!  If you don't have a formal benevolence policy, give us a call - we'll provide help and a policy template.

Your Mission Trips and Homeland Security

Last week, we had a presentation here at PSK on this topic!  Homeland Security and the Patriot Act are musts when thinking about your church's Mission Trips.

Steve Tiemann was our speaker.  He is an attorney who has lots of experience both as a lawyer and as a church member in this area. www.swtlaw.net.

Main points -

• Know the guidelines.  The US Treasury has issued Anti-Terrorist Financing Guidelines.  Boring but an essential 16 page document to be aware of.  Check out http://www.ustreas.gov/press/releases/0929%20finalrevised.pdf. 
• Know who you're dealing with.  In the foreign country, have intimate knowledge about the organizations and/or individuals you're sending money to.  You can check out the Terrorist Exclusion List (TEL) at the US Dept of State's website - http://www.state.gov/s/ct/rls/fs/2004/32678.htm.
• Know that the US Gov't is serious.  Federal law doesn't allow you to use the excuse: I didn't know!  If your church or organization inadvertently supports terrorists or terrorist organizations, you're guilty! 

Out-of-Pocket Expenses as Contributions!

Are you looking for additional charitable contributions for your tax return?  You - and so many other church members - very well might find a small bonanza here!

According to federal law, any un-reimbursed out-of-pocket expenses incurred while performing donated services may constitute a charitable contribution. The value of your donated labor or services is not deductible, BUT any un-reimbursed out-of-pocket expenses incurred while performing such donated services may constitute a charitable contribution for federal income tax purposes!

Examples of un-reimbursed out-of-pocket expenses that would relate to members who provide ministry services at your church are: 

• Purchase of literature for religious education classes 
• Building materials for repairing church facilities 
• Transportation and travel expenses for mission trips, youth activities, chaperoning retreats, etc.

If un-reimbursed out-of-pocket expenses amount to more than $250, the church must issue an acknowledgement letter to the volunteer.

Also, Tax regulations stipulate that you “can claim a charitable deduction for travel expenses, necessarily incurred while away from home, performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in such travel. This applies whether the service provider pays the expenses directly or indirectly (i.e. through the church).”  The purpose of this more restrictive rule is to deny a tax deduction to persons who perform only nominal services for the benefit of the church while traveling or who are not required to render services for significant portions of a trip.

Email PSK if you want more info, or if you have other questions along this line.

1099s to Employees

Oh no!  Two people came up with the same new way to ask an old question - besides the W-2 that I issue to an employee, can I give him/her a 1099 also, for special work done?

The answer is always the same - NO!

The new twist was this - Our minister sometimes receives stipends for services offered a church member (e.g., a wedding, funeral, baptism, etc.), but the check is written to the church.  Can I issue a 1099 for these funds, since it's not a part of the budgeted salary?  The answer is still NO!

Now if a member gives a stipend directly to a minister, that should be considered self-employment income and not reported on a W-2.  If you have it, see Richard Hammer’s book, Church and Clergy Tax Guide: 2007.  He’s a lawyer and CPA who’s an expert on church and clergy tax issues.  Talking specifically about fees received for marriages, funerals, etc., he says “such fees ordinarily will be self-employment earnings for the minister if received directly from the members, and not employee wages.” Page 181.

But if the church accepts a check from a member that's supposed to be directed to the pastor, and then transfers it on to that pastor, those funds need to be shown on the pastor's W-2.

End-of-Year Contributions

Just got a call that most every church bookkeeper receives most every year.  At issue: how do I figure out in which period to post contributions received at year-end?

Answer: charitable contributions must be applied to the year in which they are delivered.  One exception is when the check is mailed: it is applied to the year the check is mailed (and postmarked!), even if received early the next year.

Remember, this is an issue because the donor wants to claim the contribution as a charitable deduction for income tax purposes.  The donor must relinquish control of the funds before it is technically a contribution.  So if the donor has not mailed it by year-end, no matter what date is on the check, he/she hasn't really given up control.  Or so the IRS says.  AND, the IRS also states that a mailed contribution must have been postmarked on or before December 31st - that proves that control is given up by the end of the year.

See the exact wording of the Dept of Treasury's official interpretation of the Internal Revenue Code on this subject:

http.//edocket.access.gpo.gov/cfr_2007/aprqtr/pdf/26cfr1.170A-1.pdf

Cash Contributions in Excess of $250

In order for a Church member to claim a tax deduction for a cash donation in excess of $250, they must obtain written documentation from the Church acknowledging the gift. The acknowledgment from the Church must include a statement that the Church member didn't receive anything in exchange for this gift except for intangible spiritual benefits.  Canceled checks or bank statements do not constitute sufficient documentation for cash gifts exceeding $250.

The Church member must also be in possession of this documentation before the due date of the tax return that the deduction is being taken on.

These rules do not apply for cash donations that are less than $250 individually but exceed $250 in aggregate.  Canceled checks or bank statements would be adequate for these types of cash donations.  However, PSK recommends giving all members a written receipt for their donations whether or not any single donations exceed $250.

For example, Church Member A donates $100 per month for an entire year.  Although their total donations amount to $1,200, they could take a tax deduction for the donations as long as they have canceled checks or bank statements to substantiate the donations. 

Church Member B makes two $600 donations during the year.  Their donations also amount to $1,200 however Church Member B must have a written receipt from the Church in order to take a tax deduction for their donations.  Again, the receipt must include a statement that no goods or services were received in return for the donation except for intangible spiritual benefits.  Church Member B must also be in possession of the receipt prior to the due date of the tax return in which the deduction is included.

There is another set of rules for non-cash donations.

W-2's for Ministers

As part of your year-end payroll processing tasks, you might have a question or two about reporting minister's earnings and allowances on Form W-2.  Maybe, you just need a refresher.  Here are the general topics that we receive questions about.

Salary - Salary paid to minister is reported in Box 1.

Federal Withholding - May or may not be zero.  Ministers are exempt from withholding requirements but may elect to have withholding.   Enter the amount withheld.

Social Security, Social Security Withheld, Medicare, and Medicare Withheld - Ministers are considered self-employed for purposes of Social Security and Medicare taxes so these boxes are blank.

Housing & Utility Allowances - Should be reported in Box 14.  Remember that housing and utility allowances should be officially designated by the church in advance. 

All other boxes on the W-2 are generally the same for ministers and non-minister employees.

The IRS has an example of a Minister's Form W-2 in its Publication for Clergy and Religious Workers.  See it at ...

http://www.irs.gov/pub/irs-pdf/p517.pdf

Also, there is a good IRS Publication for Churches and Religious Organizations that cover a variety of tax issues.  Check it out at ...

http://www.irs.gov/pub/irs-pdf/p1828.pdf

Your Church and Terrorists; Something Else to Worry About

Our clients keep us on our toes! Because we encourage them to call us when they have a problem and we generally don’t charge for phone calls, we get a steady stream of questions posed to us by our clients and friends.

Most of the questions are quite routine, dealing with things common to all churches: whether or not a particular employee qualifies for a housing allowance or if a designated gift should be treated as a deductible contribution. But occasionally something new comes along.

PSK hosts a monthly breakfast for church business administrators where in addition to a delicious meal the attendees are treated to a discussion of a topic relevant to church business administration. In May our breakfast was billed, “Know Before You Go” and we discussed things that must be considered when planning a short term mission trip. For example what do you do if a member asks for contribution credit for paying for a specific individual to go on the trip? We also covered trip organization (passports, visas, shots etc.), paymaster responsibility and record keeping and insurance.

But, something I was asked recently made me aware we had left something out. “We are sending money to a mission group in Africa. Can we get in trouble with Homeland Security?” Turns out they and other churches funding ministries like schools, hospitals and orphanages, should be concerned.

Now, I don’t want you to get overly concerned. The reality is that it is unlikely that a church will have its assets frozen or exempt status threatened by funding an orphanage. Provided, of course, it takes minimum precautions. Here’s just a few:

• First become familiar with Executive Order 13224 and The USA Patriot Act the legislation requiring that certain things be done. Helpful resources are The US Treasury’s Anti-terrorist guidelines (http://www.ustreas.gov/press/releases/docs/tocc.pdf) and The Principles of International Charity. (http://www.usig.org/PDFs/Principles_Final.pdf)
• Educate your church, both staff and laity, of the implications of the anti-terrorist rules.
• Do background checks on the groups you are helping, particularly referring to several government lists that identify terrorists.
• Keep good records of all of your activities and insist on accountability.

There you go; something new to worry about over your Christmas holidays. If you have any questions, don’t hesitate to call!

Merry Christmas!

IRA Rollover Charitable Contribution Provision Extended thru 2009!

The recently signed $700 billion economic bailout bill (H.R. 1424, The Financial Rescue Package), includes a two-year extension of the IRA Rollover provision.

The provision will be made retroactive to January 1, 2008, and will apply to gifts made from that date through December 31, 2009.

The special legislation allows you to make charitable gifts directly ("rolled over") from a traditional or Roth Individual Retirement Account (IRA) without incurring federal income taxes. The following limitations apply:

    - The donor must be age 70 1/2 or older.

    - The cap on annual IRA rollovers is $100,000. 

    - The contribution must be a direct gift to a charity (no planned gifts.)

The exclusion from income applies only to a distribution that is otherwise includible in income. The account the owner is not allowed a deduction for the contribution.

The IRA Rollover was originally included in the Pension Protection Act of 2006.