Tax Reform

Churches and Nonprofits are in for a surprise come tax time.

Churches and Nonprofits are in for a surprise come tax time.

Tax reform was a chaotic time with many winners and losers. One group that did not expect to be hit with new tax compliance issues were nonprofits, churches, and other tax-exempt organizations. In 2018, these organizations are now required to pay 21 percent on some types of fringe benefits provided to their employees. This includes common freebies for travel, shuttles, and parking to name a few.

Many ministries and church organizations are ill-prepared to comply with the new reporting requirements. These tax-exempt organizations and even some lawmakers may not have been aware how the changes to the tax code affected them until now.

The pushback is coming from many nonprofit organizations. Galen Carey was interviewed by Politico and shared “there's going to be huge headaches. The cost of compliance, especially for churches that have small staffs or maybe volunteer accountants and bookkeepers — we don't need this kind of hassle.” According to Newsweek, the National Council for Nonprofits has called on the IRS and the Treasury to delay the tax on fringe benefits. In a letter written to Steven Mnuchin, the group mentions IRS Publication 15-B. "This publication does not mention tax-exempt organizations or UBIT. Nor does it provide any guidance for our nation's more than 1.8 million nonprofits, employing approximately 10 percent of America's workforce on how to comply with new Section 512(a)(7).”

To say there is some confusion is an understatement. By taxing nonprofit fringe benefits, they are now being treated like any other for-profit entity.

The question is where does tax compliance stand?

As more organizations become aware of the new tax reporting requirements, the pushback intensifies. Republican lawmaker Michael Conway introduced the Nonprofits Support Act that tried to repeal this requirement. At this date, no action has been taken.

It is best for churches and other nonprofits to seek professional help from a tax accountant who specializes in ministry and nonprofit tax issues. Stay tuned; there is talk of tax reform 2.

Bret Willoughby writes for TaxBuzz, a tax news and advice website. Reach him at [email protected].

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Bret Willoughby

Bret Willoughby

Bret Willoughby is a practicing tax preparer for expats throughout the world. He created Providence Payroll to meet the needs of Churches, not-for-profit organizations and businesses with remote workers. His web-based payroll processing service benefits both employers and remote workers with an easy way to access payroll information. Clergy have unique payroll and tax-related issues, one that Providence Payroll is qualified to manage.

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