What is religious enough for the government to recognize a ministry’s tax exemption? Within the unemployment tax context, Illinois and other state laws exempt churches and “church-controlled” nonprofits “operated primarily for religious purposes.” If they meet either definition, then they are not “employers” for unemployment purposes and therefore need not participate in the state unemployment system. But how does the government determine whether the “primarily” religious element is met?
An Illinois court ruled recently that the state can’t tax a religious ministry to underprivileged children. The Illinois Department of Employment Security had attempted to assess unemployment compensation taxes to By the Hand Club For Kids, a ministry of The Moody Church, reversing the Department’s previous determinations that By the Hand was nontaxable since its creation in 2001.
When is a volunteer an "employee"? The question is a complicated one, but the Sixth Circuit recently rejected the Department of Labor's attempt to require a church-owned enterprise to pay all volunteers a minimum wage. A church run by controversial televangelist Ernest Angley owns a for-profit restaurant buffet. Angley would recruit church members to serve as volunteers for the restaurant. The Department of Labor sued alleging that the workers were "employees," arguing 1) that there was no such thing as a "volunteer" for a for-profit entity, and that 2) the workers were coerced by their pastor and thus were not truly volunteers. The District Court agreed. Facing a judgment of $388k, the restaurant closed during the litigation.