Employment

When is a “religious” organization religious enough for unemployment insurance tax exemption?

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Is your religious organization liable for unemployment insurance tax?  Certain religious nonprofits are indeed exempt from state unemployment insurance tax.  It is important, however, that such nonprofits understand their specific state requirements for exemption, which may be very different from IRS exemption..  Depending on your state’s requirements, even being determined to be a “church” by the IRS may not be enough for state unemployment exemption.

Intro: Exemption for religious groups?

Sixth Circuit Bucks Trend, Refuses to Overturn State Same-Sex Marriage Laws

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Against the recent trend in federal circuit courts, the Sixth Circuit has refused to hold state laws supporting the traditional definition of marriage unconstitutional, largely on states’ rights, non-religious grounds.  Last month, in a 2-1 decision, the Sixth Circuit reversed decisions of four district courts that struck down such state laws.  See DeBoer v. Snyder, No. 14-1341, 2014 WL 5748990 (6th Cir. Nov.

Multi-Site Nonprofit Employers and Unemployment Coverage (Part 2)

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As explained in our law firm’s prior blog article, nonprofit employers enjoy special privileges under unemployment laws.  For example, nonprofit employers are “covered” by such laws only if they have at least four employees during at least 20 weeks of a calendar year.  (Note that churches and other religious institutions are categorically exempt.)  But what happens if a nonprofit has at least four employees scattered among multiple states?   

For example, consider a nonprofit organization with two employees working at its office in Illinois, one employee working remotely from Seattle, and two employees working remotely from Mississippi.  Is the nonprofit “covered” for unemployment tax purposes?  Must it pay unemployment taxes into each state system?  Or is the nonprofit completely exempt, since it does not have at least four employees in any one state?  This is an increasingly common employment scenario, so a good understanding is important for effective legal compliance.

A.             Four Tests to Determine Jurisdiction

In situations where employers have employees performing in multiple states, such employers must pay unemployment tax to the state to which tax is owed.  States have generally agreed upon a four-step analysis to determine the state to which unemployment tax is owed.  With the exception of the third test, the tests refer to factors pertaining to the employee.  The below tests are to be performed consecutively, in the order specified, for each of the multi-state organization’s employees.   

Unemployment Taxes for Nonprofits

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Nonprofit organizations enjoy special privileges under unemployment laws. What are the privileges, and how can they benefit your organization?  For most nonprofits, the following rules apply: (a) only state law unemployment taxes are owed, not federal; (b) smaller may be better; and (c) self-insurance may provide cost savings (but not always!).  Additional tax considerations apply for covered nonprofits operating in multiple states.  Notably, churches and other religious institutions are entirely exempt from unemployment coverage.

Welcome Relief: Clergy Housing Allowance Upheld

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Welcome News

The clergy housing allowance is safe for now.  Last week, the Seventh Circuit Court of Appeals reversed a Wisconsin federal district court, which struck down the venerable clergy housing allowance.  As a result of the Seventh Circuit’s decision, clergypersons who serve churches, synagogues, mosques, and other worshipping groups, may continue to exempt certain parts of their compensation from federal income tax. 

Diverse Religious Groups Unite on Clergy Housing Allowance Appeal

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What will become of the clergy housing allowance?  We have been following the legal developments a 2013 Wisconsin federal district court case, which struck down the venerable income tax benefit as unconstitutional. The case is now on appeal before the Seventh Circuit Court of Appeals.  See Freedom from Religion Found., Inc. v. Lew, 983 F. Supp. 2d 1051 (W.D. Wis.

Nonprofit Payroll Tax Alert

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A recent federal government report shows that thousands of nonprofits are not meeting their payroll tax obligations.  Though it may be tempting for nonprofits to avoid payroll tax responsibilities, especially when facing cash flow challenges, such avoidance is extremely risky. 

Payroll Tax Primer

By Executive Order – No LGBT Discrimination

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President Obama recently signed an executive order prohibiting federal contractors and subcontractors from engaging in employment decisions based on sexual orientation and gender identity.  The President’s order amends previous executive orders regarding employment discrimination dating back to the 1960s, which were implemented to prevent racial discrimination in hiring and contracting decisions made by organizations receiving federal funding. Previously, the order prohibited employment decisions based on race, color, religion, sex, or national origin.  President Obama extended the order to

Volunteer Handbooks: Benefits and Best Practices

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Many nonprofit organizations rely on volunteers to serve vital operational needs.  From overseeing major fundraising events to filling daily administrative or other critical operational needs, volunteers often serve as the hands-and-feet of an organization. They significantly expand the organization’s capacity and mission-impact, beyond their paid-staff.  Yet, given their vital role, the expectations, guidelines, and management of volunteers are often overlooked. 

The Clergy Housing Allowance On Trial – New Developments

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Will the clergy housing allowance stand?  Members of the clergy continue to receive mixed signals.  Two federal district courts in Kentucky and Wisconsin have considered the question – with very different outcomes.  The Wisconsin case is now on appeal before the Seventh Circuit Court of Appeals.  The venerable housing allowance stands in the balance.  Hundreds of thousands of clergypersons could be impacted by outcome of the appeal. We therefore provide this update and some insight on how the divergent outcomes might impact the Seventh Circuit’s decision. 

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