Tag Archives: finances

Did You Know: Taxable Income

by Conrad Martin, Director of Finance

As tax season is upon us, it is important to be aware of two things a church does that may affect the taxable income for congregational employees/pastors — one taxable and one a pre-tax deduction.

  1.  Love Gifts/ Offerings

Some churches give their pastor(s) a “love gift” or “love offering” in special appreciation for the many things they do for their congregation.  These gifts come from either the pastor’s employing church or from individual members of the church.  Sometimes these gifts come from a special offering taken by the congregation for their pastor.  Sometimes an individual member will feel the need to show their appreciation personally in a financial way, sometimes even unbeknownst to the congregation.  In almost every case, the IRS will view “love gifts” as compensation for services rendered and therefore taxable.  If coming from the church as the employer, the church needs to either include the love gift in the calculation of the W-2 or issue a 1099-MISC to the pastor.  If coming from an individual, the pastor needs to include the gift in their taxable income.  If you need further clarification, consult your tax accountant.

  1. Section 125 Flex Plan

If your congregation offers a medical insurance plan to their employees and also charges them a portion of the cost for the premium, those employee premium costs may be deductible from the employees’ taxable income.  If your congregation offers as part of their medical insurance plan a Health Savings Account (HSA), the employees may contribute personally into their HSA through payroll deductions and those payroll deductions may be deductible from the employees’ taxable income.  The key is, the church needs to have a Section 125 Flexible Benefits Plan documented.  Sometimes this is called a Cafeteria Plan.  Whatever it is called, it must be documented.  There are many companies that can write such a plan for your church, one of which is Everence.  Contact your local Everence Stewardship Consultant for more information.

Any time you have questions about your church finances, contact Conrad Martin at the conference office and he will help direct you to the answer.

 

Did You Know … About the New Labor Law for Overtime?

UPDATE: November 29, 2016

A federal judge in Texas issued an injunction last week blocking the December 1 implementation of a new salary threshold that would have made millions of more workers, including nonministerial church employees who meet certain criteria, eligible for overtime pay.

The injunction puts the threshold change on hold until its legality can be determined by the judge. Some speculate the new threshold likely won’t survive, but the outcome remains uncertain. The current threshold for the “white-collar exemption” of $455 per week, or $23,660 per year, remains in effect in the meantime.

wall_clockThere is a new law regarding overtime pay which will take effect December 1, 2016.  Are you aware of how it affects your congregation?  Here is the latest information we have on that new ruling.

Non-credentialed employees: All employees (see exceptions below) who work over 40 hours a week are to be paid overtime.  Previously, this did not include executive, administrative or professional persons paid by a salary and those who were making over a certain threshold.  The new ruling now includes all of these categories and significantly raises the threshold to $47,476, including bonuses and commissions.  What this means is that every employee paid less than $47,476, regardless of whether they are hourly or salaried, are eligible for overtime.

Congregations have three options with regard to this law:

  1. Limit non-credentialed employees’ hours to 40 hours per week.
  2. Increase their employees’ pay to the $47,476/year threshold, to be exempt from paying overtime.
  3. Pay employees time and half for hours worked in excess of 40 hours per week. For those who are salaried, the employer needs to calculate what the hourly rate would be.

Special Notes: All employees (salaried or hourly) who are paid less than the threshold should be required by their employer to track their time, to be able to verify the number of hours worked over 40 per week.  Church employees cannot get around this ruling by volunteering some of their time, unless they are volunteering for duties that are not part of their regular job.  Some employers offer their employees time-off in a later pay period as compensation for the hours worked over 40 per week.  This is not allowed by the new law.  Any time worked over 40 hours per week, must be paid in that pay period as overtime.

Ministerial Exemption: If you have credentialed persons employed at your church, this new ruling does not affect them.  Credentialed persons include pastors, ministers, chaplains, LEADership ministers, etc.; anyone who has received their credentialing from Franconia Conference is included in this category.  They are covered under what is called the Ministerial Exemption and are, therefore, not subject to Federal Labor regulations.  This will continue to be the case until the government changes the ministerial exemption clause.  Employees who are not credentialed do not qualify for the ministerial exemption.

BREAKING NEWS: This is a constantly changing issue.  The most recent information indicates that two separate lawsuits have been brought against the US Department of Labor, challenging this ruling.  While it is unlikely that these lawsuits will change the ruling, they may delay its effective date.  We will try to keep you informed as new information becomes available.

If you have questions concerning this ruling or other congregational financial matters, feel free to contact the Franconia Conference Director of Finance, Conrad Martin, at ccmartin@franconiaconference.org.

The How of Giving

by Conrad Martin

gift-1278395_640The subject of giving comes up many times in the scriptures, but do you know how we are supposed to give?  Here are just a few of the scriptures on how we are to give:

Cheerfully – 2 Corinthians 9:7
Each of you must give as you have made up your mind, not reluctantly or under compulsion, for God loves a cheerful giver.

Expectantly – Luke 6:38
Give, and you will receive. Your gift will return to you in full—pressed down, shaken together to make room for more, running over, and poured into your lap. The amount you give will determine the amount you get back.

Extravagantly – Mark 12:41-44
 Sitting across from the offering box, he was observing how the crowd tossed money in for the collection. Many of the rich were making large contributions. One poor widow came up and put in two small coins—a measly two cents. Jesus called his disciples over and said, “The truth is that this poor widow gave more to the collection than all the others put together. All the others gave what they’ll never miss; she gave extravagantly what she couldn’t afford—she gave her all.”

Freely – Proverbs 11:24
One person gives freely, yet gains even more; another withholds unduly, but comes to poverty.

Honorably – Psalms 112:9
They give freely to the poor.  The things they do are right and will continue forever.  They will be given great honor.

Joyfully – 2 Corinthians 8:2
They are being tested by many troubles, and they are very poor. But they are also filled with abundant joy, which has overflowed in rich generosity.

Proportionately – Deuteronomy 16:17
All must give as they are able, according to the blessings given to them by the Lord your God.

Regularly – 1 Corinthians 16:2
On the first day of each week, you should each put aside a portion of the money you have earned. Don’t wait until I get there and then try to collect it all at once.

Reverently – Matthew 2:11
On coming to the house, they saw the child with his mother Mary, and they bowed down and worshiped him. Then they opened their treasures and presented him with gifts of gold, frankincense and myrrh.

Secretly – Matthew 6:3-4
But when you give to someone in need, don’t let your left hand know what your right hand is doing.  Give your gifts in private, and your Father, who sees everything, will reward you.

Willingly – 2 Corinthians 8:12
If a man is ready and willing to give, he should give of what he has, not of what he does not have.

And finally…

Eternally – Matthew 6:19-20
Do not store up for yourselves treasures on earth, where moth and rust destroy, and where thieves break in and steal.  But store up for yourselves treasures in heaven, where neither moth nor rust destroys, and where thieves do not break in or steal.

Did You Know?

Did you know these legal and financial tidbits?

by C. Conrad Martin

Are churches a 501c3 charity?

dollar-questionmarkDid you know that churches are automatically a charitable organization (or a 501c3 organization) and do not need to apply for their own 501c3 status?  According to the Internal Revenue Service (IRS) the only requirements for a church to be considered a charity is that they be organized and operating exclusively for charitable or religious purposes, not sharing earnings with individuals, and not influencing legislation.  So in simple terms, if your church is following the above then your church is a charity.

Sometimes donors want proof that a church is indeed a charity.  How can you prove that your church is a charity?  If your church is a member congregation of Franconia Conference, conference staff can provide your church with a document stating that your church is in fact a church as defined by the IRS and therefore a charity.  This document works to satisfy the needs of donors.

What is a ministers housing allowance, who is eligible to claim this, and how much can be claimed?

Did you know that ministers, as defined by the IRS, can designate a portion of their gross salary as a housing allowance which is not subject to federal income taxes?  In the past churches used to provide housing for their ministers, however in more recent years ministers often have their own housing arrangements.  Therefore a housing allowance was created to provide a similar benefit for those ministers.

Who is a minister as defined by the IRS?  A person who: 1) is ordained, commissioned or licensed, 2) administers the sacraments of the church, 3) conducts religious worship, 4) has management responsibilities in the local church or parent denomination, and 5) is considered to be a religious leader by the church or parent denomination.  Number 1 is definitely required and some balance of the other four is factored in.

How much can a minister claim for housing allowance?  If the minister rents their home, then the fair market rental value can be included.  If they own their own home, then the down payment, mortgage payments, real estate taxes, and property insurance can be included.  Also included in the calculation of housing allowance can be utilities, furnishings and appliances, structural repairs and remodeling, yard maintenance and improvements, maintenance items and homeowners association dues.

Who designates this housing allowance?  The governing body of the church designates how much of the minister(s) income is allowed to be designated for housing.  This is to be done by official action prior to January 1.  If a church fails to do this in a timely manner, housing allowance deductions are not retroactive, but can be applied from the approval date forward.  How does the governing body know how much to declare?  The minister should calculate their housing costs, as mentioned above, and submit this request to the governing body.

For more details on these and other legal and financial tidbits, contact Conrad Martin, Director of Finance, Franconia Mennonite Conference.

 

 

Conference Finance Update (December 2011)

Dance Team
Nueva Vida Norristown New Life received a grant for creative youth ministry which was partly used to develop a sacred dance team that helped to lead worship at Conference Assembly 2011 at Penn View Christian School in November. Photo by Stacy Salvatori

The 2011-12 fiscal year is almost over. Congregational giving continues to be behind expectations so far this year, by $34,000. Expenses have come back to expectations, running $2,850 below budget at this point in the year. We are currently in the time of year (December and January) when congregations usually make up for giving shortfalls, so we are praying for this to continue. 26% of congregational giving usually comes in these last two months.

A sampling of the various activities of the conference during the months of October & November:

  • $1,200 in Missional Operations Grants (MOG) was disbursed for youth ministry to Nueva Vida Norristown New Life.
  • The annual Conference Assembly meetings occupied of lot of staff time these past two months. Developing worship themes, partnering with Eastern District, contacting the guest speakers, translating into four languages, organizing the Prayer Room, coordinating video recordings, and so on, took a lot of energy; for both the assembly scattered meetings and the main meetings at Penn View Christian School.
  • Sandy Landes continues to lead a weekly prayer gathering at the conference center, but also led a day of prayer and fasting and a teaching on prayer.
  • Conference leaders attended the Constituency Leadership Council in October, a meeting of the “elders of the denomination”, who spent this time reflecting on the convention in Pittsburgh and church-wide communication.

FinancesOther tidbits:

  • The conference relies on contributions from congregations for approx. 60% of its operating budget. 27% of the revenue comes from conference-owned property subsidies, and 4% from conference related ministries. The other 9% comes from a variety of sources.