Recent Developments in Indiana Regarding Church Reportig Obligations

• Key point. The first amendment guaranty of religious freedom does not permit churches to avoid their federal payroll tax obligations, including the withholding and payment of income taxes and social security taxes, even if compliance interferes with a church's religious beliefs.

A federal court in Indiana ruled that an independent church was not exempt from paying more than $5 million in unpaid payroll taxes. The church in question describes itself as a "New Testament Church." One of its principal tenets is that Jesus Christ is the sole and exclusive head of the church. The church was founded in 1950, and was incorporated as a nonprofit corporation the same year. It later obtained a federal employer identification number. In 1983, the church's membership decided to operate the church as an unincorporated religious society rather than as a corporation. As part of the transition, the ...