Filing Form 5578

One of the most neglected federal reporting requirements.

Church Finance Today

Filing Form 5578

One of the most neglected federal reporting requirements.

Key point. If your church operates a private school or preschool, you must be familiar with IRS Form 5578.

Churches and other religious organizations that operate, supervise, or control a private school (or schools) 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.

For purposes of this requirement, 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, and colleges and universities, whether operated as a separate legal entity or an activity of a church. The term also includes preschools, and this is what makes the reporting requirement relevant for many churches. As many as 25 percent of all churches operate a preschool program. Private religious schools that are not affiliated with or controlled by a church also must file the form.

The form is very simple 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.” This reference is to the following requirements:

  • The school has a statement in its charter, bylaws, or other governing instrument, or in a resolution of its governing body, that it has a racially nondiscriminatory policy toward students.
  • The school has a statement of its racially nondiscriminatory policy toward students in all its brochures and catalogs dealing with student admissions, programs, and scholarships.
  • The school makes its racially nondiscriminatory policy known to all segments of the general community served by the school through the publication of a notice of its racially nondiscriminatory policy at least annually in a newspaper of general circulation or through utilization of the broadcast media. However, such notice is not required if one or more exceptions apply. These include: (1) During the preceding three years the enrollment consists of students at least 75 percent of whom are members of the sponsoring church or religious denomination and the school publicizes its nondiscriminatory policy in religious periodicals distributed in the community; (2) the school draws its students from local communities and follows a racially nondiscriminatory policy toward students and demonstrates that it follows a racially nondiscriminatory policy by showing that it currently enrolls students of racial minority groups in meaningful numbers.
  • The school can demonstrate that all scholarships or other comparable benefits are offered on a racially nondiscriminatory basis.

Filing the certificate of racial nondiscrimination is one of most commonly ignored federal reporting requirements. Churches that operate a private school (including a preschool), as well as independent schools, may obtain copies of Form 5578 by calling the IRS forms number (1-800-829-3676).

This article originally appeared in Church Treasurer Alert, May 1994.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

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