Treasurer’s Update

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January 2012

Great Commission Fund (GCF) Update for December 31, 2011

Great Commission Fund (GCF) income was $4.1 million or 95.0 percent of budget in December. Year-to-date revenues now total $17.5 million or 95.2 percent of our $18.4 million budget, a small pull back from 95.3 percent of budget through November. This represents a 0.6 percent increase in total revenues compared to the same period in fiscal 2010–2011. 

Ministry expenses were held to 95.7 percent of budget for the month, with year-to-date spending increasing to 95.3 percent of budget. The change in net assets of ($343,000) is favorable to budget by $2,000. We began the fiscal year July 1, 2011, with $306,000 of non-appropriated net assets, which helps to cushion against this planned decline in net assets through six months.

The bottom line through six months is that expenses align with revenues. January revenues are trending at approximately 95 percent of budget which would hold YTD revenues at 95.2 percent of budget if these trends continue.

Read the December 31 financial update now»

ECFA Tax Booklets

For many years, ECFA has published two 48-page tax booklets. Reporting Procedures for Congregations provides information about all the various forms that must be completed by a church just after year-end, including Forms W-2 and the various Forms 1099. The other booklet is Preparing Tax Returns for Clergy—a publication that includes sample tax returns and basic information for clergy tax return filings.

The 2012 editions of these booklets are available in electronic form and attached in a PDF format for use by C&MA ministers and congregations to whom you relate, as a benefit for accredited ECFA members. The booklets have been updated for the 2012 business mileage rate and the two month extension of the payroll tax “holiday.”

Download Reporting Procedures for Congregations»
Download Preparing Tax Returns for Clergy»

Repeal of Expanded 1099 Requirements

In 2011, Congress repealed the expanded 1099 requirements included in the 2010 Health Care Act. The requirement for churches to report payments to companies for merchandise purchased of $600 or more and the requirement to report payments for services and merchandise to corporations (other than attorneys and certain health care providers) of $600 or more (originally effective for 2012).

In summary, the requirements for 2012 remain consistent with 2011. Churches must report payments to service providers and payments to attorneys and certain health care providers of $600 or more.

IRS Form 941 Reporting for Churches

Most churches are required to file IRS Form 941 on a quarterly basis (April 30, July 31, October 31, and January 31). Federal income and FICA taxes should be withheld and remitted for church employees who do not qualify as clergy. FICA withholding rates for non-clergy employees is reduced to 5.65 percent for the year ending 2011 with the combined FICA employer match remaining at 7.65 percent. Pastors considered clergy by the IRS are subject to self-employment tax and are exempt from federal income tax withholding. Churches that withhold federal income tax along with any self-employment tax as a convenience for their pastors, should report these wages on Line 2 of Form 941 and any federal income tax withholding on Line 3 of Form 941. Churches should not report clergy wages or withholding on Line 5a and Line 5c with non-clergy employees.

The FICA withholding rate for non-clergy employees remains 5.65 percent for wages paid through February 29, 2012. It is anticipated that Congress will extend this reduction through December 31, 2012.

Standard Mileage Rates for 2012

Effective January 1, 2012, the IRS standard mileage rate is 55.5 cents per mile, a continuation of the July 2011 rate. This rate may be used for a tax-free reimbursement for mileage driven in personal automobiles for 2012. This rate also may be used to value personal mileage in church-provided vehicles for inclusion on employees' W-2 as taxable income. The standard mileage rate for medical or moving purposes is 23.0 cents per mile for 2012, a decrease from 23.5 cents per mile in 2011. The standard mileage rate for providing services for charitable organizations remains at 14 cents a mile.

Housing/Parsonage Allowance

Your church board should approve, in writing, a 2012 housing/parsonage allowance for your pastor(s) before payment of compensation in 2012. The excludable amount of housing allowance for pastors who own their own homes may not exceed the fair rental value of the home, including furnishings and appurtenances such as a garage, plus the cost of utilities. We recommend that this housing allowance be approved as a continuing resolution so it will not expire if the board does not consider it the following year. An example follows:

The following resolution was duly adopted by the governance authority of [church name] at a regularly scheduled meeting held on [date], a quorum being present: It is hereby resolved that a housing (or parsonage) allowance be designated for Rev. [pastor's name] in the amount of $[amount] for the year 2012 and for all future years unless changed by specific action of the governance authority.

We recommend that this housing allowance be reported in Box 14 on your pastors(s)' W-2 to provide a permanent record of the amount and to provide support for the resolution adopted by your church.

Honoraria, Speaking Fees, and Love Offerings

Churches cannot use their tax exempt funds for what is termed private inurement. This means that individuals cannot be given church funds unless there is an exempt ministry purpose for providing them to an individual. These purposes normally relate to payment for services provided by an employee or independent contractor or reimbursement of ministry expenses. One exception is the use of benevolence funds to meet the basic needs of an individual on a limited basis.  A love offering taken up by the church and provided to a missionary, guest speaker, or pastor is always compensation in some form. For an employee, it is reportable income on a W-2. For a missionary, it is reportable income on Form 1099.

Gifts of Securities—Stock and Mutual Funds

The Orchard Foundation, the financial stewardship arm of the C&MA, is ready and able to serve you by facilitating gifts of securities (stock, mutual funds, or bonds) on behalf of your church. Orchard will coordinate the gift directly with your donors, liquidate the assets, receipt the gift, and forward the proceeds (less a nominal processing fee) to your church. Gifts of securities are a great way for your donors to avoid capital gain taxes and receive their tax-deductible contribution. Gifts of securities have never been easier to process for you or your donors! For more information contact The Orchard Foundation toll free at 888-689-6300 or by email at steward@theorchard.org.

Employer-Provided Cell Phones

Many churches provide their pastors with cell phones primarily for business reasons. The value of the business use of a church-provided cell phone is now excludable from an employee’s income as a working condition fringe for the use of an employer-provided cell phone occurring after December 31, 2009.

Small Employer Health Insurance Tax Credit

Beginning in 2010, Eligible Small Employers can receive a tax credit for nonelective contributions to purchase health insurance for employees. This credit is available to exempt organizations including churches. For tax years beginning in 2010 – 2013, exempt organizations may have up to a 25 percent tax credit.

To qualify as an Eligible Small Employer, a church must satisfy the following three requirements:

1. no more than 25 full-time equivalent employees,
2. average annual wages that do not exceed $50,000 for tax years beginning in 2010 through 2013, and
3. contributes at least 50 percent of the premiums.

For tax-exempt organizations, the maximum credit is 25 percent of the employer’s premium expenses that count toward the credit. The amount of the credit, however, cannot exceed the total of required amount of income tax, FICA, and Medicare withholding, plus the employer’s share of FICA and Medicare tax on employees’ wages for the calendar year in which the employer’s tax year begins.

Churches should use IRS Form 8941 to demonstrate eligibility and calculate the credit. This form is filed with Form 990T, even if the church does not have unrelated business income.

FDIC Insurance

FDIC insurance coverage on most bank deposit accounts will remain at $250,000 through December 31, 2013. With the potential for additional bank failures, it is wise for our churches to ensure that bank balances do not exceed these levels.

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