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Primer on the Meeting, the IRS, and the State of New Mexico

Like it or not, the Santa Fe Monthly Meeting is involved with the IRS and the State of New Mexico.

Although the Meeting has chosen not to apply to the IRS for tax exempt status (commonly referred to as "501(c)(3) status"), the Meeting still has an automatic tax exemption as a church.

The IRS has a handy 28 page pamphlet "Tax Guide for Churches and Religious Organizations" (IRS Publication 1828), which states: "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."

The requirements to be considered a church by the IRS are pretty straightforward: The organization must "be organized and operated exclusively for religious or other charitable purposes," "no substantial part of its activity may be attempting to influence legislation," and it "may not intervene in political campaigns." (The "no substantial activity" test is not specifically defined. The financial director for FCNL says "courts have generally ruled that less than 15%... is not substantial," but he has "not heard of any churches ever being examined by the IRS about their lobbying activities.")

So, we can be a church and acknowledge deductible contributions without being formally recognized by the IRS. The meeting has chosen not to apply to the IRS for a “determination letter” formally recognizing it as a 501c3 charitable organization, partly because of the cost (currently $800), partly because it wouldn't provide significant additional benefit (although the state will not accord a Gross Receipts Tax exemption without an IRS determination letter), and perhaps because of lingering reluctance to involve the meeting directly with the IRS.

Normally the Meeting is not required to file a tax return. However, we must submit a tax return if we have "unrelated business income" greater than $1,000. Fortunately, the Meeting doesn't have any income of that kind (for example, income from advertising, gaming, or sale of merchandise), and our income from the guest apartment is not considered "unrelated business income."

We must file Form 1099-MISC because the Meeting pays "an unincorporated individual or an entity $600 or more in any calendar year" to clean the Meetinghouse once a month. The Meeting has had an IRS Employer Identification Number since the early 90s, and each year our bank submits a Form 1099-INT to the IRS showing the interest they've paid.

The "Tax Guide for Churches" can be downloaded from www.irs.gov. It answers most general questions about a church's tax-exempt status, charitable deductions, and lobbying or political activity. It also lists IRS publications which answer more detailed questions on charitable deductions and other topics of interest to churches. And there is a handy table that shows the forms that churches may be required to submit.

The Meeting chose in January 2010 to seek formal recognition by the State of New Mexico by filing Articles of Association and becoming a NM nonprofit corporation. Until then, we were simply an "unincorporated association," which, as the lawyer who prepared the documents for the 2009 donation of land advised, was "not sufficiently defined to hold title to real property." That's why the Meeting first agreed to create a "land-holding trust" to receive the donated land and later agreed to become a NM nonprofit.

And of course the Meeting has requested exemption from property taxes from the County Tax Assessor for the Canyon Road Meetinghouse. So, even if you hadn't noticed, we have lots of involvement with government entities.

Bob Gaines, Finance Committee

August 2015

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