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 )

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.  

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.

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.

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)