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Yes a church would be required to file a tax return when they unrelated business income of 1000 or more in a year.

Churches and religious organizations, like many other charitable organizations, qualify for exemption from federal income tax under IRC section 501(c)(3) and are generally eligible to receive tax-deductible contributions. To qualify for tax-exempt status, such an organization must meet the following requirements (covered in greater detail throughout this publication):

■ the organization must be organized and operated exclusively for religious, educational, scientific, or other charitable purposes,

■ net earnings may not inure to the benefit of any private individual or shareholder,

■ no substantial part of its activity may be attempting to influence legislation,

■ the organization may not intervene in political campaigns, and

■ the organization's purposes and activities may not be illegal or violate fundamental public policy.

Recognition of Tax-Exempt Status Automatic Exemption for Churches

Churches that meet the requirements of IRC section 501(c)(3) are automatically considered tax exempt and are not required to apply for and obtain recognition of

tax-exempt status from the IRS. Although there is no requirement to do so, many

churches seek recognition of tax-exempt status from the IRS because such recognition assures church leaders, members, and contributors that the church is recognized

as exempt and qualifies for related tax benefits. For example, contributors to a church that has been recognized as tax exempt would know that their contributions

generally are tax-deductible.

Tax on Income-Producing Activities

If a church, or other exempt organization, has gross income of $1,000 or more for any taxable year from the conduct of any unrelated trade or business, it is required

to file IRS Form 990-T, Exempt Organization BusinessIncome Tax Return, for that year. If the church is part of a larger entity (such as a diocese), it must file a separate

Form 990-T if it has a separate EIN. Form 990-T is due the l5th day of the 5th month following the end of the church's tax year. (IRC section 512(b)(12) provides a

special rule for parishes and similar local units of a church. A specific deduction is provided, which is equal to the lower of $1,000 or the gross income derived from

any unrelated trade or business regularly carried on by such parish or local unit of a church.) See Filing Requirements on page 22.

Go to the IRS gov web site and use the search box for Tax Guide for Churches and Religious Organizations

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15y ago

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