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IRS Form 990-EZ

About three years ago Senator Charles Grassley (R-IA) opened an review of “media-based ministries” and their tax status and asked six prominent ministries for financial details. Last month he concluded his review and released a report. It’s 61 pages long and I’ve read about half of it; it’s some of the most fascinating stuff I’ve ever read.

The top page for the review  is here; the report I’m referring to is here.

One of the results most Baptists would have heard about is this: the Evangelical Council for Financial Accountability (ECFA) is forming a commission to respond to issues Grassley raised. Michael Foust/The Baptist Press covered it [link], interpreting it as potentially having “a major impact on the tax status of churches and pastors nationwide” and included quotes from among others Dan Busby, head of the ECFA. Here is one of the bullets, regarding IRS Form 990:

Whether churches should be required to file the highly detailed IRS Form 990 that other nonprofits must file. The ECFA historically has opposed forcing churches to file the form, arguing it would lead to an “excessive entanglement” between the church and state.

Busby said many small churches — if forced to complete the form — “would probably have to engage professional assistance and pay several thousands of dollars.”

I would encourage dispassionate readers to consider the fact that Busby is the head of an organization that helps ministries (broadly defined) present their financial results in ways other than through the Form 990, and so doing may have a vested interest in continuing the status quo rather than having churches file the Form 990.

Very broadly speaking Form 990 is the counterpart to the 1040 Form that individuals file each year with their income tax returns. The difference being that it is filed by nonprofits, so it is a disclosure form, required to maintain their tax-exempt status. Churches are explicitly exempt, not only from paying taxes, but also from filing Form 990.

Form 990, like the 1040, comes in several flavors, including a four-page “EZ” short form [PDF]. It describes money flowing in and out of a non-profit in a given year, along with net assets, balance sheet, executive compensation, and some status qualifying questions regarding things like political contributions. I would encourage readers to take a look at the EZ form I’ve linked above and make up their own minds regarding whether it is “highly detailed” as Mr Busby claims, and imagine for themselves whether their local small church would need to spend “several thousands of dollars” to fill in the information it requires.

The staff report is a godsend for a blogger like me, and I’m looking forward to digging into it. I’m surprised it hasn’t gotten more attention.

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