Even a Home-based Church should have an Attorney
It is always sound advice that congregations seek the advice and guidance of a local attorney. When I suggest this to individuals, they often state that it costs too much money. I respond to them that they may not have a church in spirit, because there should be individuals who "believe" in the Beliefs and Practices statement, are united together for those religious purposes, and are willing to each pay a share of the expenses.
There is NO legal requirement for people to join together to pay the expenses of an attorney, however this is just an example where the new group can show evidence of a united spirit for the purposes for which the organization was created. This is one instance where the IRS can judge if there is unity or really just a piece of paper. A church does not have to be incorporated or have an attorney's services in its formation, but sincerely religiously motivated individuals should support the common cause and unite to help pay for the proper set-up of the organization. The initial small investment is invaluable when compared to the high costs that may arise from the inappropriate set-up of an organization.
Such a uniting spirit may evidence the spirit of another of the 14 Points: "a membership not associated with any other denomination or church." While individuals may belong to more than one church or religious organization, this point does not prohibit such membership by individuals at all. It is simply a point where the IRS can look to judge sincerity; people united by common beliefs may not be likely to be a member of more than one church at a time.
The IRS does not prohibit any individual from belonging to several churches if an individual so wishes. This point deals with the organization's membership and the common behaviors of individuals. Please consider that carefully. The point only expresses one aspect of an organization that is considered for the classification of "Church.” If the organization is classified as a religious organization, there is no such implied guideline of single church membership. Multiple memberships in religious or charitable organizations would be a positive aspect for ministry memberships. When the instance of "church" classification is considered, this point is more closely considered. There is no 100% accurate test of every member; only references to how most individuals are likely to behave as a group.
NO aspect of an organization has any absolute negative effect upon classification, but it may have a negative effect upon whether the organization itself is eligible for IRS exempt status regardless of classification as either a church or ministry.
There is a way to lessen the anxiety of this task for new church organizations, which is to file Form 1023, the Application for Recognition of Exemption - even though it is not required of churches. 1023 is the form that churches file so that the IRS recognizes their church tax-exempt status and classification and prints the name and address of the church entity in Publication 78, the Cumulative List of Exempt Organizations Published by the Treasury for the Service. Once an organization is listed in Publication 78, the IRS everywhere honors the tax-deductible receipts.
Home Church Provisions
• There is a new provision in the tax code to apply to "home churches," and this may not be an exact quote because it has been some time since I have reviewed it. Usually individuals may donate up to 50% of the adjusted gross income to the church of their choice or any other charitable organization. In the case of "home churches," that amount is limited to 20%, as I recall, to limit the possibility of abuses such as in the 80's. The definition of "home church" is varied, but it refers to an organization membership that is primarily comprised of family members. No law prevents families from having their own church, but the abuse of this practice has resulted in the current regulations to prohibit abuse for tax-saving purposes only rather than sincerely religious motivations.
My understanding is that the AGI limiting Revenue Ruling would not likely limit any organization that files Form 1023 and is recognized. The whole purpose of the reduction in the amount allowable to be donated with tax deduction privilege is to prevent abuse of the tax code. If an organization files, is evaluated and judged by the IRS as entitled to the classification of church and tax-exempt status, there would be no reason to impose any restriction upon anyone making donations of larger amounts.
• While the regulation does not prohibit home churches, it makes them less desirable as a tax vehicle for tax deductions. The IRS is working with religious groups to assist in maintaining the favorable tax treatment of churches and ministers because of the benefit to society that churches and ministers provide. The government, through the IRS and tax code, realizes that it is in the best interests of society to promote churches and ministerial activities. In the judgment of legislators, religious activities are to be encouraged, thus the favorable treatment of churches, constitutionally, and ministers, legislatively.
• You need to consult your tax advisor on individual tax matters and the set-up of a new religious organization. The Zondervan Ministers Tax and Financial Planning Guide is a must for ministers to understand and comply with the various tax provisions meant for their benefit. For each benefit there is an obligation of eligibility. Being a minister accords no favorable tax treatment. For actually ministering, however, there is.
For the issues that I am raising, I strongly recommend you consult and confirm with your tax advisor. I am not an attorney or tax advisor. I am speaking only on the religious issues that involve the tax code and how to work cooperatively with the IRS so as to bring the new organization into full compliance with the regulations which govern all tax-exempt organizations. I use the term “religious issues” because I maintain that finances are necessary for the promotion and continuation of any religious activity; religiously termed, it would be "stewardship."
Stewardship
Stewardship deals with the practice of managing money and resources, and not simply beliefs! Laws change, and new revenue rulings appear without notice, rendering a source of competent advice and education necessary. The Zondervan books are a primary source for education and understanding, but there are other such books by other publishers and authors. Zondervan books are clear and able to advise you as an individual, which requires one-on-one involvement with the books’ text that exceeds my ability to educate and advise from a distance.
There was a time when I advised individuals on the tax code, but I ceased that practice when I learned some put those understandings of the tax provisions to their personal benefit, and after being audited and prosecuted, blamed me for their activities. My texts here are just that - information designed to point you in the right direction - and requiring confirmation and appropriate legal advice to bring into practice.
