Is your church required to file a tax return?

Due to the recent tax law change, the answer is probably yes. We are just now starting to hear about how the recent tax law change impacts churches. As the law is written, churches and other nonprofits are now required to pay a 21% tax on certain employee benefits, including parking, transportation and on-premise athletic facilities (Section 512(a)(7). Many tax professionals are claiming that it even applies to churches who allow employees to park in the church parking lot (whether or not the employee is charged a fee).

This requirement will also trigger the need to file a state tax return, with possible additional taxes due.

The tax went into effect on January 1, 2018, and is supposed to be paid quarterly. There is still much confusion regarding this provision, including how it is calculated. Unfortunately, the IRS has yet to calculate and provide guidance on the value of a parking space.

There is already an effort to delay and/or to rescind the tax. The Evangelical Council for Financial Accountability (ECFA) is circulating a petition for the repeal of the provision.

We will continue to follow up on this issue and provide further guidance as it becomes available.

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