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Tax credits for churches?

Tax credits for churches?


Episcopal Church Foundation Vital Practice reports:

Last week, Bishop Curry of the Diocese of North Carolina learned that two of the congregations in his diocese were eligible for a tax credit through the Health Care Act of 2010. Kristin Hoyle, a Raleigh CPA specializing in nonprofits who worked with these congregations, contacted the Diocesan Canon for Administration so that information about this credit could be shared throughout the diocese.

In the video, Kristin explains that churches with 25 or fewer employees who pay 50% or more of their employees health insurance and have a payroll of $50,000 or less, may qualify for a tax credit through the Health Care Act of 2010. And, because clergy do not participate in social security, their salaries are not included in the $50,000 cap. While the deadline for filing form 990T was May 15, when the IRS recognized that many churches did not realize that they could apply for this special tax credit, they extended the filing deadline.

To find out if your congregation qualifies, Kristin recommends working with a CPA in your area. Or, you can contact her at her office.

The Evangelical Lutheran Church in America (ELCA) and the United Methodist Church (UMC) have already published this information for their congregations:

ELCA January 2011 document here

UMC Dec 2010 here.

Relevant links from IRS here.

Pursuant to this notice, because a church welfare benefit plan is subject to State insurance law enforcement as if it were licensed under State law, it will be treated as satisfying the requirements for health insurance coverage for purposes of the § 45R credit. Therefore, for these purposes, an arrangement under which a small church employer pays premiums for employees who receive medical care provided through a church welfare benefit plan may be a qualifying arrangement and a small church employer paying for employees’ medical coverage under such a plan may be a tax-exempt eligible small employer. This treatment of church plan coverage as health insurance coverage applies solely for purposes of § 45R, which applies to the tax treatment of the employer but does not affect the rights of plan participants and


See also here

h/t to John Chilton for the ELCA, UMC and IRS links

See the video below:


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Bob McCloskey

“And, because clergy do not participate in social security, their salaries are not included in the $50,000 cap…”

CLARIFICATION PLEASE. Clergy are self-employed persons by social security law, and therefore pay SS tax on the appropriate SE form as self employed persons. The only exemption is in the case of clergy who have declined social security for reasons of conscience. My hunch is that the majority of clergy do not exempt themselves on this basis.

To me, the wording of the quote is at best confusing.


John B. Chilton

Our government frequently uses tax credits to subsidize products. The aim of the health care act is universal coverage. The choice was made to do this in the context of the existing system where most of us get health insurance through our employers. Small businesses are believed to be an area where employers frequently don’t pay for health insurance. Solution? Tax credit. But what about small churches that don’t pay taxes? Include them, too.

Think of it as a subsidy and it makes sense.

More generally, note that the subsidy is going to firms and churches that would have provided insurance anyway. What we have is a large government transfer to the middle class to bring a comparatively small number of folks into the insurance pool.

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