Financial Information & Tools

General Tax & Contribution Questions

Is a church required to file an annual report or income tax return to the IRS?

No. As an affiliated church with the PC(USA), your ministry is automatically tax‐exempted from federal income tax under the provisions of section 501(c)(3) of I. R. C. and therefore your church is not required to file federal income tax returns (Form 990) so long as your church retains a tax‐exempt status.

Your church is not liable for federal or state unemployment taxes.

You are responsible for Payroll Taxes except where exempted for pastors.

Can we use the Pittsburgh Presbytery EIN for opening a bank account or to issue W‐2 or Form 1099‐Misc? When can we use the Presbytery’s EIN?

No. You need to have your own EIN for the purpose of W‐2 or Form 1099‐Misc. You should never use the Presbytery’s EIN for any purpose.

Is a church liable for tax on dividend, interest, annuities, royalties and rents from real property?

Generally, those forms of income are exempted from tax on unrelated business taxable income (IRC Sec 512(b). However, if the rental income is from Debt‐Financed Property (not Mortgage‐free) and less than 85 percent of the property is used for church’s exempt purpose, then it constitutes unrelated business taxable income.

How does a church make a report to the IRS for unrelated business income?

Unrelated business taxes are reported on IRS Form 990‐T. Unrelated business income is income from a trade or business regularly carried on, which is not substantially related to the charitable purpose of the church. If your church has $1,000 or more gross income (less allowable deduction) from unrelated business, you must file Form 990‐T. Please let me know if you have any questions on this issue

Is a church required to send an annual giving record to the donors at the end of each year?

Per IRS, your church should issue a statement of receipt either when a daily contribution exceeds $250, or Quid Pro Quo contribution exceeds $75.

However, for donor’s convenience, it may be good for your church to issue an annual giving statement at each year‐end. It may be helpful for your financial planning and internal auditing purposes too.

To satisfy the IRS substantiation requirement your church needs to include the following paragraph at the end of the statement:

“No benefits were provided to you in return for your contribution other than intangible religious benefits. Please retain this letter for your tax records, since it fulfills the substantiation requirements that must be met in order to deduct your contribution.” (Title XIII of OBRA ’93 P.L. 103‐66)

Non-Profit Status for Pittsburgh Presbytery & Member Churches

Non‐Profit Status for Pittsburgh Presbytery & Member Churches

The initial Group Ruling was granted to the Presbyterian Church (U.S.A.) on January 31, 1964 by the IRS, and the IRS has reaffirmed the Group Ruling periodically with respect to the Presbyterian Church (U.S.A.) and its related entities.

The related entities entitled to the use of the Group Ruling include synods, presbyteries, local congregations, and their unincorporated affiliates.

The Legal Office, in conjunction with the Office of the General Assembly, submits to the IRS an annual filing regarding covered organizations within the Group Ruling.

The Group Ruling issued by the IRS has two important benefits for the Presbyterian Church (U.S.A.). First, all churches, middle governing bodies and affiliated entities are exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code. They are also exempt from the federal unemployment tax (FUTA), and in the state of Pennsylvania, they are exempt from the PA state unemployment tax (SUTA). Second, contributions to such organizations are deductible for federal income, gift, and estate tax.

The Group Ruling exempts churches and middle governing bodies from the Form 990 filing requirement imposed upon other nonprofits (unless unrelated business income on which tax is due has been earned during the year, in which case Form 990‐T must be filed).

A covered entity is not required to file any type of report with the IRS concerning its tax exempt status, nor are they required to file for a separate 501(c)(3) exemption number to receive a non‐ profit status.

When one of our churches has a request or requirement to provide evidence of their tax exempt
status they should contact the Presbytery Business Administrator and request a letter which will
affirm the status of the church.

Substantiation of Charitable Contributions

Charitable contribution deductions are allowed only if the taxpayer satisfies the IRS substantiation requirement. The nature of the required substantiation depends on the size of the contribution and on whether it is a gift of cash or property. For contributions of $250 or more, the taxpayer must obtain a “contemporaneous written acknowledgment” from the charity.

Separate contributions of less than $250 are not subject to this requirement regardless of whether the sum of the contributions made by a taxpayer to a charity during a taxable year equals $250 or more. The main substantiation requirements are summarized below.

Contributions of property valued at $250 or more.
Contributions of noncash property valued by a donor at $250 or more must be substantiated with a contemporaneous written acknowledgment that includes:

A description (but not value) of any property other than cash contributed;
States whether the receiving organization provided any goods or services in exchange for the gift;
If the receiving organization did provide goods or services, include a description and good-faith estimate of their value.

The acknowledgment must contemporaneous (timely) if the taxpayer obtains it from the receiving organization on or before the earlier of:

The date the taxpayer files a return for the year of contribution; or

The due date, including extensions, for filing that return.

Contributions of property valued at more than $500
Taxpayers are required to maintain additional reliable written records with respect to each item of donated property.

These records must include:

The approximate date the property was acquired and the manner of its acquisition;
A description of the property in detail reasonable under the circumstances;
The cost or other basis of the property;
The fair market value of the property at the time it was contributed;
The method used in determining its fair market value.

Donations of clothing and household items

No deduction is allowed for “any contribution of clothing or a household item” unless such property is “in good used condition or better.”

The tax regulations specify that the term “‘household items” includes “furniture, furnishings, electronics, appliances, linens, and other similar items.” Food, paintings, antiques, and other objects of art, jewelry and gems, and collections are excluded from the definition.

A deduction may be allowed for a charitable contribution of an item of clothing or a household item not in good used condition or better only if the amount claimed for the item is more than $500 and the taxpayer obtains a qualified appraisal of the property and attaches a qualified appraisal summary (Form 8283) to the tax return claiming the deduction.

If the donated item is in good used condition or better and a deduction in excess of $500 is claimed, the taxpayer must file a completed Form 8283 (Section A or B, depending on the type of contribution and claimed amount), but a qualified appraisal is required only if the claimed contribution amount exceeds $5,000.

If the donor claims a deduction of less than $250, the donor must obtain a receipt from the church or charity or maintain reliable written records of the contribution. A reliable written record for a contribution of clothing or a household item must include a description of the condition of the item. If the donor claims a deduction of $250 or more, the donor must obtain from the church or charity a receipt that meets the requirements of a contemporaneous written acknowledgment (see above).

What This Means for Churches
A deduction may be allowed for a charitable contribution of an item of clothing or a household item not in good used condition or better only if the amount claimed for the item is more than $500 and the taxpayer obtains a qualified appraisal of the property and attaches a qualified appraisal summary (Form 8283) to the tax return claiming the deduction.

Household items include furniture, furnishings, electronics, appliances, linens, and other similar items. Food, paintings, antiques, and other objects of art, jewelry and gems, and collections are excluded from the definition.

If the donated item is in good used condition or better and a deduction in excess of $500 is claimed, the taxpayer must file a completed Form 8283 (Section A or B, depending on the type of contribution and claimed amount), but a qualified appraisal is required only if the claimed contribution amount exceeds $5,000.

Failure to understand and comply with these rules can lead to a loss of a charitable contribution deduction. As a result, it is helpful for church leaders to be familiar with these rules so they can advise persons who donate clothing and household items.

Records Retention Schedule for Churches

Keeping and maintaining accurate records for your church is prudent and necessary if not imperative. The following is a partial lists of recommended records retention schedules. You may wish to add to the list based on your particular needs.

Your church may want to consider keeping many of these documents and records electronically.
The following time periods applies to both physical and electronic documents.

Permanent Records Retention Schedule

These are records vital to your organization. Copies or originals of some of these records (articles of incorporation, bylaws, etc.) should be stored offsite of your church or nonprofit organization perhaps in a secure location such as a local bank.

Corporate records and documents such as articles of incorporation, bylaws, annual corporate reports, corporate seals, minute books, signed minutes of the Board and all committees
Licenses and permits
Property records and documents such as property deeds, assessments, and rights of way
Property Insurance policies
Property appraisals by outside appraisers
Construction documents
Audit reports
Financial Statements
General Ledgers
Contribution records
Cash Books
Charts of Accounts
Documents evidencing terms, conditions, or restrictions on gifts
Tax-exemption documents and related correspondence
Depreciation schedules
IRS rulings Tax returns-income, franchise, property
Annual Information returns – federal and state
IRS or other government audit records
Child Protection Clearance Information & Forms

Temporary Records Retention Schedule

The retention period for the following documents and records is 7 years.

Accounts payable and accounts receivable ledgers and schedules
Bank reconciliations, statements and canceled checks
Electronic fund transfer documents
Notes receivable ledgers and schedules
Employee expense reports
Investment records (7 years after sale of the investment)
Annual audit records, including work papers and other documents that related to the audit (7 years after the completion of the audit)
Contracts and related correspondence (7 years after expiration or termination)
Excise tax records
Tax bills, receipts, statements
Tax work paper packages-originals
Sales/use tax records
Payroll tax records
Payroll registers
Personnel records such as commissions, bonuses, incentives, and awards
Payroll documents such as: payroll deductions; W-2 and W-4; and garnishments, assignments, attachments. (Termination plus 7 years)
Accident reports and claims (settled cases)

Retention Periods for Other Documents & Records

Time cards/sheets – 2 years
Employee personnel records – 6 years after separation
W-4 forms
Employment applications – 3 years
I-9s (after termination) – 1 year
Petty Cash (vouchers) – 3 years
Budget Files – 5 years
Giving Envelopes & Counting Sheets – 5 years (note that recorded contributions are to be kept permanently)
Workers compensation claims, files – 11 years

Facts About Housing Allowance for Pastors

Each year your congregation votes on the terms of call for your pastoral staff. One of the pieces of the terms of call is the housing allowance. This allowance is one of the most important tax benefits available to ministers who own or rent their homes. Ministers who own or rent their home are not required to pay federal income taxes on the amount of their compensation their church designates as a housing allowance.

The housing allowance for all pastors is also tax exempt for local taxes within the Commonwealth of Pennsylvania. You should not include the housing allowance portion of the gross payroll amount for calculating the appropriate local tax for your pastoral employees. This rule only applies to the local income tax rates and does not exclude ordained staff from the Local Services Tax, or LST.

What expenses can be included in housing allowance? Housing-related expenses include mortgage payments, rent, utilities, repairs, furnishings, insurance, property taxes, additions, and maintenance. Other considerations that must be given to calculating the appropriate level of housing allowance are:

The allowance must represent compensation for ministerial services
It must be used to pay housing expenses
The amount must not exceed the fair rental value of the home (furnished, plus utilities)

One of the most overlooked aspects of approving the housing allowance is having your pastoral staff complete and sign an annual Estimate of Housing Allowance Request. It is a simple one-page document stating the pastor is requesting a specific amount of the financial package to be designated as housing allowance. Why do this? The IRS requires the request be made in writing and the ruling body, council or session, approve the request at a regular or called meeting and that the request and approval be entered into the official record or minutes. This process must be done prior to the congregation voting on and approving the terms of call. Under no circumstances may a church designate a housing allowance retroactively.

For convenience, there is a template of the Estimate of Housing Allowance Request available on the presbytery website on the Financial Info & Tools page. Remember you will need to have the form completed by your pastoral employee(s), submitted for approval by your session, and have the request and the approval of the request recorded in the official minutes of the meeting. All of these steps need to be completed before the congregation approves the terms of call each year.

Please contact Roy Burford, Business Administrator, at 412-323-1406 if you have any questions.

Taxable Wages, Payments, & Bonuses for Employees

Taxable Wages, Payments and Bonuses for Employees

The amount of taxes that a church should withhold from an employee’s wages depends on the amount of the employee’s wages and the information contained on his or her Form W-4. A new W-4 should be completed by every employee each year.

A church must determine the wages of each employee that are subject to withholding and Social Security and Medicare taxes.
Wages subject to federal withholding include pay given to an employee for service performed. The pay may be in cash or in other forms.
Measure pay that is not in money (such as property) by its fair market value. Wages include a number of items in addition to salary. *
Taxable wages must include bonuses, Christmas and special occasion offerings, retirement “gifts,” the portion of a pastor’s self-employment tax paid by a church, the personal use of a church-provided car, and all business expense reimbursements under a non-accountable business expense reimbursement
arrangement, and most reimbursements of a spouse’s travel expenses.

(See Chapter 4 in Richard Hammar’s annual Church & Clergy Tax Guide for a description
of items of taxable income.)

Questions About Housing Allowance

How is the housing allowance reported by the church to the minister?

Technically, the housing allowance is not reportable by a church for income tax purposes on any IRS forms. The church can provide the ministers with the housing allowance data in a letter or memo and there is no need for the ministers to attach this statement to your income tax returns.

The standard practice in Pennsylvania is to report the housing allowance on the W-2 form.

Housing allowance is considered taxable income in the state of Pennsylvania, but it is not considered taxable for local wage taxes. This is why it is necessary to report the housing allowance on the W-2.

On the annual W-2 form, you should use Box 14 to report the housing allowance. Make sure to label as “Housing Allowance” in the box. Please refer to the document titled “W-2Sample for Ordained Staff”, also available online.

Does a housing allowance provide any benefit for a minister living in church provided housing or a manse?

Even a minister living in church provided housing should have a portion of salary designated as a housing allowance. In this situation, the allowance may be a modest amount to cover incidental expenses such as maintenance, furnishings and utilities. For the minister without a housing allowance, every dollar of compensation is taxable for federal income tax purposes.

Who is responsible to establish the fair rental value of church provided housing?

The determination of the fair rental value is totally the responsibility of the minister. The church is not responsible to set the value. The fair rental value should be based on comparable rental values of other similar residences in the immediate neighborhood or community.

Must the housing allowance designation be in writing?

The housing allowance should be evidenced in writing. This must be done by a Session resolution (since the Session is responsible for approving the budget) and it must be voted on by the congregation at a called congregational meeting. The dollar amount of the housing allowance should be on a “Pastor’s Estimate of Housing Allowance” declaration or form (please see the file “Pastor’s Estimate of Housing Allowance” available online).

Further, it is necessary to make sure to have the Terms of Call included in the official minutes of the congregational meeting. If the minister is hired via an employment,contract, the housing allowance must be included there. You should also include the “Pastor’s Estimate of Housing Allowance” declaration or form in the employment contract

Tax law does not specifically say that an oral designation of the housing allowance is unacceptable. Still, the use of a written designation is preferable and highly recommended. The lack of a written designation significantly weakens the defense for the housing exclusion upon audit.

When must the housing allowance designation be made?

The housing allowance must be officially designated before any payroll or other payments of the housing allowance is made by the church. The allowance may be prospectively amended at any time.

It is improper and ineffective for a church to amend the housing designation mid-year in
an attempt to compensate for an allowance that was too low for the first part of the year.
We would suggest that you avoid doing so.

May the total of the designated housing allowance be excluded for income tax purposes?

The housing allowance exclusion is limited to the lowest of (1) reasonable compensation, (2) the fair rental value of the home furnished plus utilities, (3) the amount used to provide a home from current ministerial income, or (4) the amount properly designated. When a minister lives in rented housing, there is no need to apply the fair rental value test.

Is there a maximum amount that may be set as the housing allowance?

The IRS does not place a limit on how much of a minister’s compensation may be designated as a housing allowance by the employing body. In other words, as much as 100% of the compensation may be designated. But practical and reasonable limits usually apply.

For a minister owned home, the lower of actual expenses or the fair rental value, including utilities, will usually be the limiting factor. For a minister renting a home, the actual expenses will typically be the limit. However, it is usually better to over designate than to under designate. The amounts must be substantiated by the minister.

How many ministers serving one church may receive housing allowances?

There is no limit on how many ministers may receive a housing allowance by one church. If there are multiple pastors on a church staff, the church should designate housing allowances for each of them.

The dollar amount may vary depending on the estimated housing expenses of the respective minister. A lump sum housing allowance covering multiple ministers of one church, without any designation of the amount relating to specific individuals, is not an appropriate designation.

May the housing allowance be established as a percentage of salary?

Some churches set the housing allowance by applying a percentage to the total cash salary. Housing allowance percentages are often in a range of 40% to 60% of the total cash salary. Setting the housing designation based on an estimate of housing expenses for each minister is highly preferable over the percentage method.

May the minister’s housing allowance be adopted at the denominational level?

If the local congregation employs and pays the minister, a resolution by the PC(USA) or by the Presbytery does not constitute a housing allowance designation for your church. The local congregation must officially designate the part of your salary that is a housing allowance and it must include the resolution in the congregational minutes.

Does the minister or the church determine the amount of housing expenses to exclude from income on the minister’s return?

The church designates the housing allowance but the responsibility for determining the portion of the housing designation that can be excluded from income rests solely with the minister. Ministers often submit a prospective estimate of housing expenses to help the church establish a proper allowance. But the minister is not required to provide after-the fact documentation to the church of housing expenses incurred.

There will usually be a difference between the housing allowance and actual housing expenses. There is no requirement for a church to issue a corrected Form W-2 or 1099-Misc. to adjust compensation to agree with actual housing expenses since they are not required to be reported on either document.

What happens when actual housing expenses exceed the fair rental value of the residence?

Actual housing expenses that exceed the fair rental value limitation are not deductible. There are no provisions to carry over “unused” housing expenses.

When housing expenses exceed the fair rental value, spreading some housing costs over two or more years may save some deductions. This approach reduces your taxable income by maximizing your exclusion.

How should the housing allowance paid to the minister?

It is immaterial whether the payment of a properly designated cash housing allowance is a separate payment or is part of a payment that also includes other compensation. A housing allowance usually is included with the minister’s payroll check.

Per Capita

Per Capita Information

Per Capita Apportionment for Pittsburgh Presbytery
Per Capita Discounts
Why Per Capita?
Where Does Per Capita Go?
Pay Now

Per Capita Apportionment for Pittsburgh Presbytery

	2023	2024
Presbytery	$23.45	$24.15
Synod	$2.40	$2.40
GA	$9.85	$9.80
TOTALS:	$35.70	$36.35

2023 Per Capita Letters

***The Per Capita letters that were sent out to churches on October 26 contain incorrect numbers due to a database error. The Presbytery Staff is working on the corrections and corrected letters will be sent on November 3, 2023. Please email Elizabeth (emeriwether@pghpresbytery.org) with any questions or concerns and we apologize for any inconvenience.***

Per Capita Discounts

The full explanation of the payment plan discounts are available HERE.

Summary of available per capita discounts:

5% if paid in full by January 31
3% if paid quarterly
2% if paid monthly

Major credit cards will be accepted for online payment

All discounts are to be taken off of the final payment

Why Per Capita?

Like many Presbyterians, you may have wondered, “Exactly what does per capita do?”

Per capita is the amount of support, per member, that our congregation remits to our Presbytery that is then sent onto our Synod and the General Assembly. This money is part of the glue that holds Presbyterians together. It is the money that enables us to work with other Presbyterian churches in our Presbytery and across the country. It is also money that allows us to work with other churches to further the mission of Jesus Christ around the world.

How important is per capita? Here are some examples:

Your per capita pays for the General Assembly meeting every two years where Presbyterians gather together to worship and discern the mind of Christ for the church.
In many places in our world, it is difficult to “do mission” except by working ecumenically with other churches. Your per capita helps to pay for meetings of Presbyterians with people of other Christian churches, allowing us to maintain those ties for mission.
Your per capita pays for producing the Book of Order and The Book of Confessions, including in Spanish, Korean, and Braille.
Your per capita helps to fund the Presbyterian Historical Society – preserving and sharing the Presbyterian experience.
Your per capita funds the preparation, administration, and grading of standard ordination examinations for seminary students.
Your per capita pays for annual training events for presbytery executives, stated clerks, and others who help lead our work and mission.
Your per capita pays for the travel expenses of the Moderator and Vice Moderator of the General Assembly of the Presbyterian Church (U.S.A.) as they make their way across the church to share with and listen to folks like you about the exciting things God is doing in our midst.

We do not believe in being lone rangers in the PC(USA). We need each other as we work together to share the good news of Jesus Christ. As we benefit from the gifts, skills, vision, and ministry of each other in this place, so, too, do we benefit from an even wider array of gifts and ministry of our Presbyterian brothers and sisters across the church. Your per capita pays for the programs, training, and resources that help us work together and discern the mind of Christ for the PC(USA).

Thank you to all of you who have already paid your share. By contributing your portion of per capita, you have freed up dollars in our regular budget for the work of our congregation in this community.

TO PAY ONLINE NOW, please fill out the following form: