When May the IRS Audit a Church?

Mission Accountable is pleased to present another guest author, J. Daniel Beirute, an attorney serving churches and ministries across the U.S.

Internal Revenue Code section 7611, also referred to as the Church Audit Procedures Act, governs attempts by the IRS to audit a church. According to this law, the IRS may only initiate a tax inquiry of a church if the IRS’s Director of Exempt Organizations Examinations reasonably believes that the organization: (a) may not qualify for federal income tax exemption; or (b) may not be paying tax on unrelated business or other taxable activity.

The IRS may arrive at this “reasonable believ” regarding a church’s activities from information found in sources such as a new newspaper or magazine articles or ads, television and radio reports, Internet web pages, voters guides created and/or distributed by the church, tax returns filed by the church, and information provided to the IRS by informants or other agencies.

These rules do not prevent the IRS from requesting information from a church which does not pertain primarily to the church’s tax status or liability; which pertains to criminal investigations or a church’s failure to file a tax return; of which pertains to donors to the church.

Contact Dan Beirute if your organization receives any inquiry from the IRS.