Background. Churches and other religious organizations that operate, supervise, or control a private school must file a certificate of racial nondiscrimination (Form 5578) each year with the IRS. The certificate is due by the 15th day of the fifth month following the end of the organization’s fiscal year. This is May 15th of the following year for organizations that operate on a calendar year basis. This means that the Form 5578 for 2008 is due May 15, 2009.
Private schools. A “private school” is defined as an educational organization that normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly conducted. The term includes primary, secondary, preparatory, or high schools, as well as colleges and universities, whether operated as a separate legal entity or an activity of a church.
KEY POINT. The term “school” also includes preschools, and this is what makes the reporting requirement relevant for many churches, since many churches operate a pre- school program. Private religious schools that are not affiliated with or controlled by a church also must file the form.
Form 5578. Form 5578 is easy to complete. A church official simply identifies the church and the school, and certifies that the school has “satisfied the applicable requirements of section 4.01 through 4.05 of Revenue Procedure 75-50.” These requirements are explained in the instructions to Form 5578, and relate to racially nondiscriminatory policies in the school’s charter, bylaws, catalogs, admissions, and programs. In some cases schools are required to publicize their racially nondiscriminatory policies in the local media.
Relevance to church leaders. Does your church operate a preschool? An elementary school? A secondary school? A college? If you answered “yes” to any of these questions, then you are required to submit Form 5578 to the IRS each year. Filing the certificate of racial nondiscrimination is one of most commonly ignored federal reporting requirements. Churches that operate a private school (including a preschool), and independent schools, may obtain a Form 5578 by calling the IRS forms number (1-800-829-3676) or by downloading a copy from the IRS website (www.irs.gov).
KEY POINT. Some independent religious schools that are not operated or controlled by a church or other religious organization are required to file Form 990 with the IRS each year. Form 990 is an annual information return. Churches and some other religious organizations are exempt from this filing requirement. Schools that are required to file Form 990 make their annual certification of racial nondiscrimination directly on Schedule A of Form 990, and not on Form 5578.
For more information on other federally required filings, download Richard Hammar’s new “Federal Reporting Requirements” at ChurchLawAndTaxStore.com.
This article first appeared in Church Finance Today, April 2009.