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IRS Inches Closer to Church Inquiry Criteria

Agency also issues guidance on disregarded SMLLCs.

Federal tax law permits the IRS to initiate a church inquiry or examination so long as certain criteria are carefully met. The criteria for a church tax inquiry include a requirement that a "high-level Treasury official" must determine, based on written evidence, that the church is not exempt, that it has a liability for unrelated business income tax, or that it has otherwise engaged in taxable activities.

Subsequent to a national restructuring of its operations, the IRS designated a particular official as its "high-level Treasury official" with authority to make the required determination. However, in litigation several years ago, a federal court ruled that the official designated by the IRS did not meet the statutory definition of a high-level Treasury official. The IRS has not yet rectified the issue and reports indicate that the IRS has ceased inquiries and examinations ...

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Michael (Mike) E. Batts is a CPA and the managing partner of Batts Morrison Wales & Lee, P.A., an accounting firm dedicated exclusively to serving nonprofit organizations across the United States.

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Posted:
  • November 1, 2012

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