LEGAL UPDATE FROM BOB RAMPI May 19, 2011

CASE THAT COULD AFFECT MINISTERS HOUSING ALLOWANCE

April 7, 2011

The Supreme Court, in Arizona Christian School Tuition Organization v Winn, held 5-4 to reverse a lower court decision holding that a state tax credit was a violation of the establishment clause and therefore unconstitutional. This state tax credit was for donations that offer scholarships to private schools, both religious and non-religious organizations.

Notably the Court did not decide the case on the establishment clause basis, but rather on whether the group of taxpayers challenging the bill had standing. The Court held that taxpayers lacked standing to challenge a state program allowing tax credits.

Some legal scholars believe the outcome of this case could lead to the dismissal of the 2009 lawsuit Freedom from Religion Foundation v. Geithnerbrought forward by atheist Michael Newdow. Lloyd Mayer states in a blog post that the court in this case will likely be seeing some renewed motions to dismiss the case based on the Supreme Court’s decision in Arizona Christina School Tuition Organization v. Winn.

MEDICAL INSURANCE REPORTING ON W-2 FORMS FOR 2011 – 2012

The IRS announced the issuance of interim guidance for employers on the informational reporting of the cost of employer-sponsored health insurance coverage on annual Forms W-2 furnished to employees. This new reporting to employees is for their information only.

The Affordable Care Act provides that employers are required to report the cost of employer-provided health care coverage on the Form W-2. However, taxpayers are reminded that employer-provided health coverage continues to be excludable from an employee’s income and is not taxable.

Reporting the cost of health coverage on the 2011 Form W-2 (furnished to employees in 2012) is voluntary for all employers and will continue to be optional for small employers for 2012 (for 2012 Forms W-2) and until further guidance is issued.

The Notice provides guidance for those who are subject to the new requirement for 2012 as well as those who voluntarily choose to comply with the requirement for 2011 and 2012. Comments are requested as well.

Health Care Tax Credit Missed by Thousands of Churches

Thousands of churches missed filing Forms 8941 and 990-T, says ECFA President Dan Busby.  He believes this true in spite of considerable information available to churches about the credit including a special IRS webpage.

Many churches overlooked filing for the special credit because they did not understand that while the minister is included in the calculation of average full time employees, their compensation is excluded from the average compensation calculation in most instances.

While the May 15, 2011 filing deadline is over for churches with calendar years, there is still time to file the forms for churches with fiscal years.  Calendar year churches should plan now to file the forms for the 2011 year.