Congress has recently finalized Code Section 4958, which enables the IRS to levy money sanctions against key church and ministry personnel who violate or cause the organization to violate IRS rules. The government has wised up – it wants the money instead of the tax-exempt status of the ministry, but the IRS can still take your tax-exemption, too..
Here’s how it will work: If a “control” person causes a church or ministry to provide excess personal benefits to him, an immediate tax of 25% of such benefit would be imposed. It can get worse. If the control person fails to return the benefits to the church, the next tax is 200% of the benefit, plus interest.
What is an “excessive benefit”? No one knows. Excess benefit simply could consist of paying the pastor too much salary in the opinion of the IRS. How can a church prepare for the unknown? In severe cases the IRS has announced that it will pursue the money sanctions and the church’s tax-exemption. You must be aware of how this law could affect your ministry or church.
It appears that the days of the tax free ministry are coming to a close. Be prepared for some big changes in the way the church will have to do business.