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?
The Tax Cuts and Jobs Act significantly altered our Tax Code, affecting individuals, for-profit organizations, and nonprofit organizations alike. This article discusses particular changes under the Act specific to unrelated business taxable income (“UBTI”). The new legislation provides that UBTI from each unrelated business must now be calculated separately, a requirement which is increasingly known as “siloing”.
Are churches and other houses of worship immune from IRS scrutiny against them and their ministry staff? The current bar is exceedingly high for the IRS to pursue religious institutions (collectively “churches”). But the bar is not insurmountable, particularly when it comes to clergy members’ individual tax liability. The recently decided case of Rowe v. United States demonstrates that churches may be subject to IRS scrutiny, through audits against their clergy members despite special procedural safeguards for such religious institutions.