WILLIAM T. CONKLIN
3296 RALEIGH STREET
DENVER, COLORADO 80212
October 25, 1999
Thank you for your questions about setting up Church organizations.
In 1977, I set up a home church and took a donation to it. The IRS
audited me because I was so vocal about the situation and after six
published wins in the Tenth Circuit, they settled with me and I got
over $15,000 back in a refund suit. The IRS did not want to go to
trial because they were afraid I would win hands down and really
make them look bad. Although I am not an attorney, I have had a lot
of experience as a paralegal in this field. I suggest that you
double-check my opinion with an attorney if you would like
professional verification. Also, you might enjoy looking up my cases
in your local law library. They are published on my business card,
which I have sent you under cover of this letter.
The church issue is actually quite simple. Anyone can start a
church. Churches are automatically exempt from the payment of
federal income tax on their contributions and passive investment
income. (See Internal Revenue Code
Sections 501(c)(3) and 508(a)).
church does not have to be incorporated but you should have at
least three members.
Once your church is organized,
it can ordain and hire a pastor. The pastor can receive
compensation, which is specifically excludable from gross income
under Internal Revenue Code Section 107. Furthermore, the
pastor can receive paid professional expenses.
Anyone can donate up to 50 percent of their adjusted gross
income and take a corresponding deduction on their tax return.
The Internal Revenue Service does not require a church to
register with it, but a church must get an Employer ID Number if
it wishes to maintain a domestic bank account.
Your church should have regular board of director meetings and
the board must approve all expenditures. It is also recommended
that you have a monthly newsletter and that you advertise your
meetings locally. The minister you ordain can perform the
sacraments of your church such as weddings, etc.
Your church can own property and vehicles for the furtherance of
its religious purpose. For example, many churches not only own
buildings for religious worship but they also own religious
retreat centers. Most of this property is also exempt from
property tax under state law. Most states also allow sales tax
exemption to churches.
Revenue Code Section 7611, the IRS is required to follow special
audit procedures when they audit a church. It has been my experience
that they make a great deal of mistakes in their procedures.
The IRS has a
14-point plan that they use to determine if a church really is a
church. We can discuss that
issue in subsequent conversations, but generally, your church would
have to be involved in religious activity and could not be set up
for inurement. That means
that you could not give money to private individuals except as
compensation for their services.
Ministers can also receive love offerings, and the Tax Court
has ruled that love offerings are not taxable to ministers.
I hope you find
this information interesting.
If you have any questions, please call.
I have seen literally thousands of people in the last fifteen
years set up small churches and it is my desire to see the United
States become so religious that everyone in America will someday
become a minister in his church and enjoy the same spiritual
benefits as Billy Graham and the Pope.
Thanks for writing.