Qtr 3 - Newsletter 2019
From the President
My pastor is currently preaching a series on the Parables from the Gospel of Luke. This past Sunday as he was closing he reminded us that "...we are citizens of heaven and not of this earth (Philippians 3:20) ...as such remember where your first loyalty lies...to heaven and not the things of this earth." 
What a great reminder! It can be so easy to get caught up in the everyday issues of life and lose sight of who we are in Christ and what it means to be His. The more we learn to see the realities of our lives through eyes of faith and study the implications of heavenly citizenship, the more our spiritual vision improves. And with it a greater understanding of how our heavenly citizenship should motivate us to rise above our earthly ties and connections-as important as they are, to live in this world in a manner consistent with what God has called us to do.
For those of us laboring in the "business" aspects of ministry this is doubly important to remember. While we serve to ensure our ministry's business and operational needs remain compliant with the rules and regulations governing nonprofits, we must never let this stand in the way of legitimate ministry. Yes, sometimes we need to stand our ground when asked to do certain things we know are not appropriate and could put the ministry at risk. But over the years I have learned that with a bit of ingenuity one c an often assist the needs of the ministry and send staff away happy and grateful for our assistance, while protecting the church from serious harm.
At CMA we are here to help you find those creative ways to assist your staff to further your ministries goals while keeping the organization safe. Our e-consulting program is one excellent way to get quick answers to thorny questions. But if you need more personal assistance with an issue, we encourage you to contact us directly.

Yours in His Service,

Steve Boersma, Ph.D.
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Digital Giving 2019 Trends 

Our world is changing quickly, and the financial tools people use are no exception. Simply put, our culture expects a seamless online shopping and bill pay experience. And they expect the same from their giving experience at your church.  
2020 Inflation Adjustments for Health Savings Accounts Released
The IRS has released the 2020 inflation-adjusted amounts for health savings accounts under Code Sec. 223 . For calendar year 2020, the annual limitation on deductions under Code Sec. 223(b)(2) for an individual with self-only coverage under a high-deductible plan is $3,550 ($7,100 for an individual with family coverage)
A "high-deductible health plan" is defined in Code Sec. 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,400 for self-only coverage or $2,800 for family coverage and annual out-of-pocket expense limits (deductibles, copayments and other amounts, but not premiums) that do not exceed $6,900 for self-only coverage or $13,800 for family coverage.
Did You Know...
 Although the U.S. Constitution protects the rights of religious institutions, it confers no general immunity from liability upon them for their contracts and or actions. Case law shows that claims may be stated against religious institutions if those institutions had the corporate power or ecclesiastical responsibility for the specific matter in dispute, or had themselves taken action in the matter.  
Church's Exempt Status Revoked
A church registered as a domestic nonprofit corporation, had its exempt status revoked under Code Sec. 501(c)(3). The IRS determined that the church was operating for the benefit of its members and a part of its net earnings inured to their personal benefit. Hence, the organization failed to establish that it operated exclusively for an exempt purpose. Further, the organization failed to qualify as a church within the meaning of Code Secs. 509 (a)(1) and 170(b)(1)(A)(i). (read more )
Individual Personally Liable for Company's Unpaid Sale and Use Taxes
An individual was personally liable for a company's unpaid sales and use tax liabilities because he was listed as president, secretary and treasurer of the company on its application for a seller's permit and had electronically filed its sales tax returns.
In this matter, after the company terminated its operations, the California Department of Tax and Fee Administration (CDFTA) issued notices of deficiency and passed through some amount of the company's tax liabilities to the taxpayer. The taxpayer unsuccessfully sought redetermination of the deficiency assessment. On appeal, the taxpayer asserted that he was not an active member of the company during the tax years at issue, but he failed to provide substantive documentation to establish his claim. Further, the taxpayer had actual knowledge that the company's sales were underreported and that taxes were not paid despite him having had the authority and ability to pay them. Accordingly, the taxpayer's protest was denied. Shafazand, California Office of Tax Appeals, No. 18011844, May 9, 2019, released July 2019 
This case illustrates just how important it is for business and nonprofits to stay current with California sales and use tax rules and filing. Failure to meet your obligations under the law could expose individual corporate officers and board members to personal financial obligations on behalf of the organization.
CMA recommends you work with your local CPA or tax advisor to determine if your activities and/or purchases are generating any sales or use tax obligations so that you can file and pay the taxes in a timely manner.  
Expect More Church Audits Regarding
ACA Compliance
According to an article recently written by Frank Sommerville and published by Church Law & Tax, the IRS has begun initiating church exams to test for compliance with the Affordable Care Act (ACA).
Though the total number of audits promised is likely to only affect a small percentage of churches, the news should prompt all church leaders to double check whether their organization is compliant with the regulations.
The IRS has indicated that examination notices are currently going out and that they expect to continue selecting churches and send notices through the rest of this year.
A free copy of Mr. Sommerville's article is currently available and can be accessed by clicking HERE.
As always, CMA is available to answer your questions and assist you should there be a need for assistance. Simply contact our office via email or phone.
California Enacts Healthcare Mandate with Shared Responsibility Penalty
Beginning in 2020, California will impose an individual healthcare mandate on all residents. Residents will now be required to obtain qualifying healthcare coverage, unless they qualify for an exemption. Individuals and families who fail to obtain coverage will face financial penalties which will be collected on their California income tax returns. (read more)  
IRS Updates Policy Regarding Racial Non-Discrimination Policy Notices
The Internal Revenue Service (IRS), via new guidance issued in May of 2019, has added an additional way for private schools to publicize their racially nondiscriminatory policy to the general public. The agency now says a website statement is considered to be a suitable method for providing notice.
This development should be carefully considered by all privately run schools and preschools, including ones operated, supervised, or controlled by churches
and other religious organizations.
Current law requires a private school to file an annual certificate of racial nondiscrimination (IRS Form 5578) with the IRS, and maintain supporting records documenting compliance with the policy, if they wish to retain their tax-exempt status. The certificate is due by the fifteenth day of the fifth month following the end of the organization's fiscal year. For organizations operating on a calendar year this would be May 15 of the following year.
A private school is defined as an educational organization that normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly conducted. The term includes primary, secondary, preparatory, or high schools, as well as colleges and universities, whether operated as a separate legal entity or an activity of a church.
Source: IRS Revenue Procedure 2019-22 (2019)
Freedom from Religion Foundation Decides not to Appeal Housing Allowance Ruling
The Freedom from Religion Foundation (FFRF) has decided not to ask the U.S. Supreme Court to review the 7th Circuit decision in Gaylor v. Mnuchin (7th Cir., March 15, 2019) upholding a clergy-specific tax-free housing allowance provision in the IRS code. FFRF has consistently argued that Internal Revenue Code Sec. 107(2), which permits a local church to set aside a portion of a minister's salary for housing expenses on a tax-free basis, violates the Establishment Clause of the Constitution.
Although the FFRF was successful in challenging the allowance at the trial level, the 7th Circuit found that the primary purpose of the exclusion was secular and that the exclusion fell somewhere between the Free Exercise Clause and the Establishment Clause, with neither commanding the other. As such they concluded Sec. 107(2) of the tax code to be constitutional. (read more)
Employment Corner
IRS Unveils New Draft 2020 Form W-4
The IRS on May 31, 2019, unveiled a revised, new draft of the 2020 Form W-4, Employee's Withholding Allowance Certificate. An earlier version of the new Form W-4 was released in June of 2018.
New Draft 2020 Form W-4
The new, revised 2020 Form W-4, still very much in draft stages, becomes effective on January 1, 2020. The IRS has emphasized that employees who have already submitted a Form W-4 prior to 2020 would not be required to complete a new form merely because of the redesign.
Key comments announced by the IRS in Notice IR-2019-98 include:
  • The new draft 2020 Form W-4 implements major changes made to withholding under the Tax Cuts and Jobs Act (TCJA) (P.L. 115-97);
  • The redesigned Form W-4 will no longer use the concept of withholding allowances;
  • The IRS expects to release the final version of the new 2020 Form W-4 in November;
  • The IRS anticipates the related instructions for employers will be released at approximately the same time.
  • For 2019, taxpayers should continue using the current Form W-4.
The proposed new Form W-4 is expected to provide taxpayers with a more accurate withholding system that is easier for employees to understand and use
Source: IR-2019-98