Forum Moderators: martinibuster
Quick summary, we have a church that wants to start an adsense account. It's complicated, but basically we're a 501(c)(3) corporation (we haven't filed for it, but churches have that recognition automatically, I can quote the IRS code if anyone's interested), and we're about to get incorporated in our state. According to the IRS, we do NOT have to file any kind of tax return, if we for whatever reason chose to we'd file form 990 (again, I can show you where the IRS says a church does not have to file, but can voluntarily if they choose to).
We'd prefer that Adsense did not send anything to the IRS. If they did, we'd have to find out whether we'd now be obligated to file a 990. Has anyone been in this situation and knows how Adsense handles it?
My guess would be that Google filing with the IRS has nothing to do with what you need to do. The rules are the rules. If you don't need to file, I wouldn't think you would need to file just because Google turned in some figures on you. Plus, if you have no tax liability, so what if you don't file? They aren't going to penalize you, since you weren't delinquent, since you never owed anything. It's somewhat analogous to not filing a personal tax return if you are owed a refund. Theoretically, you are probably supposed to file, but if you don't they don't do anything.
[edited by: martinibuster at 10:09 pm (utc) on May 28, 2006]
[edit reason] Spelling. [/edit]
I strongly advise that you do NOT change your account so it can be used by the church. Signup for a new account with all the church business contact info.
Unrelated Business Income Tax [irs.gov]
To determine if a business activity is "substantially related" requires examining the relationship between the activities that generate income and the organization's exempt purpose. Trade or business is related to exempt purposes, in the statutory sense, only when the conduct of the business activities has causal relationship to achieving exempt purposes (other than through the production of income).
Selling advertising space, which may or may not show ads that are "substantially related" to the basis for the exemption, doesn't seem to fit the criteria the same way.
[edited by: Marcia at 1:45 am (utc) on May 29, 2006]
Thanks, but it doesn't answer my question. I'm guessing you think we're going to run an unrelated site?
Has anyone here setup an adsense account for a church (if not, anyone set one up for a non-profit at least) and know how taxes are handled? Is there anything special we need to do before or after we sign up?
Hence there are no McDonalds logos on a priests cassock
No, not at all. I happen to manage a very small local church site that certainly has filed for 501 exemption (one of the elders is a business attorney - every detail is tended to), and if we were to have a shopping section for related materials like books or films or music that would be entirely different from running Adsense on the site.
Being in a certain city, it's not at all impossible that local shopping sites, car dealers, real estate, or hotels or travel sites could appear in contextual advertising - and that isn't at all related to the purpose of the organization. A page about the congregation's holiday dinner at a local hotel could easily trigger restaurant ads or banquet facility ads or coupon books. Those would not be related to the organization's qualifying purpose.
>>Why would a church want to deal with Adsense anyway? I know religion is a money making venture, but I do not think direct advertising will fall within their remit...
Fund raising for missionaries/hospitals/orphanages or camp scholorships for kids comes to mind. Or for revenue for a "benevelence" fund - which certainly is one of the reasons for tax exemptions as a charitable trust.
That still doesn't mean that Adsense for local shopping (or McDonald's) is substantially related to the purpose of the organization as the basis for its exemption.
[edited by: Marcia at 2:03 am (utc) on May 29, 2006]
I strongly advise that you do NOT change your account so it can be used by the church. Signup for a new account with all the church business contact info.
Will definitely do that. I am going to continue to have my own account with my sites, and help the church setup its own account with its site. I was just saying I didn't want to find out if there's a special selection for churches or other non-profits when entering your tax information, as it might mess up my account somehow.
As for why show ads on a church site, I've seen quite a few that do, and quite a few that don't. Websites are just one of many avenues churches can use to raise funds. Either they sell products on their site (which we don't wish to get into right now), or have ads. We're also looking into setting up an easy way to donate via the site too, for people who cannot do so in person or with cash/check (useful for someone like me who rarely carries a checkbook or cash, and for those who worship with us online, though a video or podcast of sermons are a ways off right now).
I'll probably end up just recommending that we setup the adsense account now and figure out the rest later. I'll need to find an accountant to make sure that these 1099s that are going to the IRS won't make us have to file.
Fund raising is within the policy of a charity charter the other is not.
A company can sponsor a church by donation and be thanked in some way, but the church could not sell 'holy widgets' and endorse them ...
And certainly the occuring randomness of adsense will probibly throw up more problems that it would generate in cash ..
That still doesn't mean that Adsense for local shopping (or McDonald's) is substantially related to the purpose of the organization as the basis for its exemption.
I too am no lawyer (else I probably would already know the answers to all my questions and not bother anyone here), but I *THINK* that this wouldn't be an issue. What I think matters, is the way you go about raising funds. We'd be raising funds by ads being placed on a church or other related site. The site is related to the church, our mission, etc. Now, if we ran a McDonald's, then no that would be unrelated income. But if we accept an ad from a McDonald's, place it on our site, and get paid, it should be ok. If we were the advertising agency and that's all we did was place ads for people on other sites, then again, no. But Google is the advertising agency here (or whatever you'd call it).
You do bring up a good point though, I'll have to clarify this too.
The upside -adsense revenues from a mixed bag of possible advertisers, certainly not a high potential- simply didn't justify the hassle of the potential problems. A car dealer or realtor advertising on your site is much different from your selling religous materials.
The one potential wasn't worth the other.
Besides that, we thought AdSense ads on a church website sent a poor message about who we were. Don't forget: you do not have 100% control over who might advertise. Have you considered that issue carefully, and is it worth the few dollars a church site might make?
If it's too support a cause -a ministry, perhaps- why not set up a seperate site, entirely commercial, pay your fair taxes, and contribute the earnings to your church fund?
Volunteer Labor - Any trade or business is excluded in which substantially all the work is performed for the organization without compensation. Some fund-raising activities, such as volunteer operated bake sales, may meet this exception.
So, using that scenario, the website will be run by volunteers, and we'll get money from advertising. Kinda like the bake sale idea, someone does all the work baking the stuff, then sells that product; all the labor is free, so it's exempt. Even if one was to say that Adsense did some of the work, the quote above says "substantially all the work" has to be done for free. I would guess, though I'll still try to find out for sure, that designing and maintaining a site would be considered the majority of the work?
BTW, thanks for the answers so far, gives us something to think about. Still curious if anyone has setup an Adsense account specifically for a church, but I think I know the questions to ask now.
Yes, I did.
Was there anything special you had to do when setting it up, or choosing the tax status?
>>Trade or business is related to exempt purposes, in the statutory sense, only when the conduct of the business activities has causal relationship to achieving exempt purposes (other than through the production of income).
Producing income or raising funds, in itself, doesn't make the income exempt - regardless of other factors. There are non-exempt profit making organizations that use volunteer labor; it doesn't look like that nullifies that "other than."
Two places to contact (even though it *should* be a separate account without doubt), are emailing Adsense support to ask how to register, and calling IRS with the 800 number to ask questions. No identifying information need be given, it's just for information.
Also, knowing the sort of ads that Google allows, I think a good deal of blocking is going to be required to stop all the ads for "New and used dead Pope's" from Ebay, "Meet sexy singles in...", and all of the other crappy ads they invariably show. Still, I guess a thread on what ads you see and block would make entertaining reading :)
