| OCR Text |
Show Religious institution business income may be taxable Certain business income of a church or other religious institution institu-tion may be taxable, even if the church or institution is otherwise exempt from federal income tax, the Internal Revenue Service stated. Generally, churches must pay federal tax on income from business busi-ness activities that are not related i , to their religious or other exempt purposes. . . The law broadly defines unrelated unre-lated business income as income from a trade or business carried on regularly, and which is not substantially sub-stantially related to the organization's organiza-tion's tax-exempt purpose. For example, income from such sources as the sale of religious publications pub-lications or from the operation of a church school would be considered to be related to the church's exemptions, ex-emptions, while income received from the rental of personal property proper-ty would be unrelated and, therefore, there-fore, taxed. T he IRS stressed that if an unrelated unre-lated activity is not conducted regularly, reg-ularly, the income produced is not taxable; for example, the income from the operation of a booth at a fair is not taxable. Some other income in-come producing activities that will be exempt include: . Activities in which substan- tially all the work is performed by unpaid volunteers. Activities carried on by the church primarily for the convenience conveni-ence of its members, students, or employees. Selling merchandise, substantially substan-tially all of which has been received by the church as gifts or contributions. contribu-tions. Bingo games if certain requirements re-quirements are met. Generally, dividends, interest, in-terest, annuities, gains and losses from the sale or other disposition of certain property, and rents from real property, however, investment invest-ment income is taxable if the investment in-vestment is debt financed. Churches receiving gross income in-come of $ 1 ,000 or more from unrelated unre-lated businesses must report the income in-come using Form 990-T, "Exempt Organization Business Income Tax Return." These churches must also make quarterly estimated esti-mated tax payments for tax years beginning after 1986. More information is available in Publication 598, "Tax on Unrelated Unre-lated Business Income of Exempt Organizations." Forms and publications publi-cations are available by calling the toll-free IRS "Forms Only" number, num-ber, 1-800-424-3676. |
