For those of you who are interested in corporation sole I am providing this update. In January of 2007 I had the pleasure of meeting with IRS on what they called an informal inquiry into both my personal and ministerial life.
This meeting was the result of a letter that they had sent to me requesting information concerning the corporation sole formations that Impact Ministries International has provided for many ministries around the United States and abroad. What I am sharing with you now is in my own words my observations and considerations from that meeting.
At the time of our scheduled meeting I was introduced to three people. An IRS Auditor, IRS Attorney, and IRS Examiner. Mrs. Kathy Grimaldi was the examiner spearheading our meeting. The purpose of this meeting was two fold: to find out more about the purpose and motive for use of the corporation sole and that it was in keeping with the parameters as to proper usage for corporation sole and secondly, to make a determination as to whether or not IRS needed to initiate a "Cease and Desist Court Action" against Andrew DeDominicis and Impact Ministries International. I was in full cooperation with IRS in their fact finding process and we discussed many issues relevant to our ministry and the use of corporation sole. I can say without hesitancy that the outcome of our meeting was favorable with some notes of caution that only served to confirm our posture in utilizing corporation sole correctly. I want to make a couple of points very clear to those who are intending to use corporation sole in a ministerial or charitable manner.
Every one who considers using a corporation sole should understand that IRS has put together a task force to keep a watchful eye on all corporation soles established here in the United States. I personally do not see that as a problem, they keep a watchful eye on every non-profit ministry in the United States any way! Particularly 501(c)(3) organizations, and they have much more control over them. The concerns raised during our meeting were really along a couple of different lines. I am setting forth my recollection of those issues in the paragraphs that follow.
1. Corporation Sole should not be used to align itself with LLc (member managed, owner, managing director...it makes no difference) and expect to receive dividends and profits from disbursements without expecting to file a tax return for UBTI. That's a fact! But we all know that because I have shared that from day one with all of our ministry clients. If you have heard otherwise from somebody else, then you need to listen to sound wisdom from a pastor who knows what hes talking about. Don't do it!
2. People who use corporation sole exclusively to provide for their daily ministration of life, absent any real ministerial or charitable basis are abusing the purpose for which corporation sole was intended. IRS auditor in our meeting indicated to me that there are some corporation soles that have a significant amount of cash flow in the 6 figures range and almost all of it is being spent on lavish living. (These are not corporations soles that IMI has set up) I have to agree with IRS on this issue, that as a Christian living for the Lord one using a corporation sole should be ever mindful of doing the Lord's work and using the resources he has favored upon you to accomplish that means and not usurp it within ones own lusts. The balance of that statement is that on a percentage basis it is not uncommon for small ministries to spend a significantly higher amount of the cash flow for the needs of maintaining an office/ministry, facilities, daily ministrations. If you are one of those ministries with less than 50K a year you probably fall into this category, but when you start getting in the upwards of 6 figures the percentages should be dropping considerably on what it takes to run your ministry. There should be a clear defining line at the point where the expenditures are met and ultimately where the ministry can now press toward the mark of its ministerial, charitable, humanitarian out reach. this is including the provision for presiding officer. That's common sense. Keep the expenses down, save more and have more for the Lord's work!
3. Another area that we discussed at length was concerning the notion that people can just deposit their paychecks into the corporation sole and not have to pay any tax on it. This is an application of a misguided principle and those that have done it and been challenged by IRS are paying the price for it right now. In order for a clergy to be able to do what has been intimated here, they would firstly have to be functioning truly under a vow of poverty (relinquishing all personal assets, bank accounts, stocks, bonds, etc..) and be fully given to the ministerial call. Secondly, would be required by one of their own Religious order to work such a vocation as set forth by a charge. Thirdly, 100% of everything earned would have to go into the religious order for its ministerial or charitable purposes. In most cases a person attempting to do this doesn't even get past my first point. It is not enough to just have written a statement of vow of poverty, but you must also walk the walk. Living high on the hog 24/7 is an excess and demonstrates poor stewardship when one has made such a vow. Do not get mad at me, that is between you and God, but the world is watching and does see it differently! So let our light shine unblemished! The real issue here though, is to be beyond reproach. I personally believe that I have stood as a man of integrity on this ground, and it has been my caution to all of our ministers wanting to place there hard earned dollars into the corporation sole ministries they have formed. Two things here that I lead by example. 1. I have placed way over 50% of my hard earned funds into our ministry, but I never have taken a tax deduction for it. 2. I have filed a return for the 1099 income that I have earned when working in a secular job arena. You cannot go wrong when you do it that way. I trust the Lord to bring about blessing in my life and see Him as my source of life in this earth. It is not about a tax deduction. If it is for you, maybe you need to consider your motive for giving in any amount?
4. Substance over Form. We discussed the maxim in law of Substance over Form as it relates to corporation sole. I find this to be particularly important to any ministry providing outreach services of any kind. The layman term here is that if it looks like a duck, walks like a duck and quacks like a duck, ITS A DUCK! Same Logic applies to your ministry. If it looks like a business, runs like a business, acts like a business...is it really a ministry? This is where you should be mindful that you are a non profit formation and as such need to conduct yourself in a ministerial or charitable fashion or face the consequences of possibly being deemed a DBA sham by IRS for tax purposes. And that's really the issue, they could care less about the type of ministry operation. They are interested in Tax Revenue and if your owe it, that you pay it. That's the bottom line!
There are many corporation sole providers out there saying you can do pretty much anything you like with these formations and that just simply is a bold face lie when comes to certain situations, specifically. One is in the area of business. You cannot and should not involve your corporation sole to engage in active for profit business. Your corporation sole is designed to be a passive formation in that it is a created office of perpetuity within the church( Body of Christ). We have then taken such an office and have allowed it to be recognized in a favorable state that allows for primary filing of corporation sole to give it recognition within the system (USDC). Our deliberate intention is not to encumber the church/ministry in 501(c)(3) status. The purpose for securing an EIN with the minister is for the ability to do Banking. The ministry, if it wants to have banking of any kind in the system will in most cases be required to have and EIN #. I am not aware of any bank in the US or abroad that will allow you to set up a bank account with just a state issued number. I am not saying there aren't some still out there, but I am unaware of them in general. 10 years ago there were banks that would allow for banking to be set up for non-profits without and EIN, but those days are nearly long gone if at all.
I still find corporation sole to be a very relevant formation for ministry today and have no reservation in using it within its intended use. It is better having a formation that is recognized as valid within a states jurisdiction than to have an organization formed by the state. I know this is a debatable issue for some, I can certainly respect that. We are living in the days where we are seeing massive methodical steps being taken as our country moves in to the New World Order. For now, corporation sole is and remains to be a viable way to interface with the system without entangling one in their own personal capacity. I trust you can see the necessary value in that from a ministry standpoint.
The conclusion of my meeting with IRS was that no cease and desist was pursued. The IRS Auditor remarked to the IRS Attorney and I quote, "Don't get use to this, this is not the norm on how these meetings go." I was thanked for my thoroughness and attention to detail by the auditor and examiner. The following day Kathy Gramaldi contacted our ministry and thanked us for our cooperation with IRS in understanding and identifying problem corporation sole abuse.
For all of the ministries that IMI has had a hand in establishing, I commend you to continue serving the Lord. We are not the problem, we are the exception!
With Blessings...
Brother Andrew
This meeting was the result of a letter that they had sent to me requesting information concerning the corporation sole formations that Impact Ministries International has provided for many ministries around the United States and abroad. What I am sharing with you now is in my own words my observations and considerations from that meeting.
At the time of our scheduled meeting I was introduced to three people. An IRS Auditor, IRS Attorney, and IRS Examiner. Mrs. Kathy Grimaldi was the examiner spearheading our meeting. The purpose of this meeting was two fold: to find out more about the purpose and motive for use of the corporation sole and that it was in keeping with the parameters as to proper usage for corporation sole and secondly, to make a determination as to whether or not IRS needed to initiate a "Cease and Desist Court Action" against Andrew DeDominicis and Impact Ministries International. I was in full cooperation with IRS in their fact finding process and we discussed many issues relevant to our ministry and the use of corporation sole. I can say without hesitancy that the outcome of our meeting was favorable with some notes of caution that only served to confirm our posture in utilizing corporation sole correctly. I want to make a couple of points very clear to those who are intending to use corporation sole in a ministerial or charitable manner.
Every one who considers using a corporation sole should understand that IRS has put together a task force to keep a watchful eye on all corporation soles established here in the United States. I personally do not see that as a problem, they keep a watchful eye on every non-profit ministry in the United States any way! Particularly 501(c)(3) organizations, and they have much more control over them. The concerns raised during our meeting were really along a couple of different lines. I am setting forth my recollection of those issues in the paragraphs that follow.
1. Corporation Sole should not be used to align itself with LLc (member managed, owner, managing director...it makes no difference) and expect to receive dividends and profits from disbursements without expecting to file a tax return for UBTI. That's a fact! But we all know that because I have shared that from day one with all of our ministry clients. If you have heard otherwise from somebody else, then you need to listen to sound wisdom from a pastor who knows what hes talking about. Don't do it!
2. People who use corporation sole exclusively to provide for their daily ministration of life, absent any real ministerial or charitable basis are abusing the purpose for which corporation sole was intended. IRS auditor in our meeting indicated to me that there are some corporation soles that have a significant amount of cash flow in the 6 figures range and almost all of it is being spent on lavish living. (These are not corporations soles that IMI has set up) I have to agree with IRS on this issue, that as a Christian living for the Lord one using a corporation sole should be ever mindful of doing the Lord's work and using the resources he has favored upon you to accomplish that means and not usurp it within ones own lusts. The balance of that statement is that on a percentage basis it is not uncommon for small ministries to spend a significantly higher amount of the cash flow for the needs of maintaining an office/ministry, facilities, daily ministrations. If you are one of those ministries with less than 50K a year you probably fall into this category, but when you start getting in the upwards of 6 figures the percentages should be dropping considerably on what it takes to run your ministry. There should be a clear defining line at the point where the expenditures are met and ultimately where the ministry can now press toward the mark of its ministerial, charitable, humanitarian out reach. this is including the provision for presiding officer. That's common sense. Keep the expenses down, save more and have more for the Lord's work!
3. Another area that we discussed at length was concerning the notion that people can just deposit their paychecks into the corporation sole and not have to pay any tax on it. This is an application of a misguided principle and those that have done it and been challenged by IRS are paying the price for it right now. In order for a clergy to be able to do what has been intimated here, they would firstly have to be functioning truly under a vow of poverty (relinquishing all personal assets, bank accounts, stocks, bonds, etc..) and be fully given to the ministerial call. Secondly, would be required by one of their own Religious order to work such a vocation as set forth by a charge. Thirdly, 100% of everything earned would have to go into the religious order for its ministerial or charitable purposes. In most cases a person attempting to do this doesn't even get past my first point. It is not enough to just have written a statement of vow of poverty, but you must also walk the walk. Living high on the hog 24/7 is an excess and demonstrates poor stewardship when one has made such a vow. Do not get mad at me, that is between you and God, but the world is watching and does see it differently! So let our light shine unblemished! The real issue here though, is to be beyond reproach. I personally believe that I have stood as a man of integrity on this ground, and it has been my caution to all of our ministers wanting to place there hard earned dollars into the corporation sole ministries they have formed. Two things here that I lead by example. 1. I have placed way over 50% of my hard earned funds into our ministry, but I never have taken a tax deduction for it. 2. I have filed a return for the 1099 income that I have earned when working in a secular job arena. You cannot go wrong when you do it that way. I trust the Lord to bring about blessing in my life and see Him as my source of life in this earth. It is not about a tax deduction. If it is for you, maybe you need to consider your motive for giving in any amount?
4. Substance over Form. We discussed the maxim in law of Substance over Form as it relates to corporation sole. I find this to be particularly important to any ministry providing outreach services of any kind. The layman term here is that if it looks like a duck, walks like a duck and quacks like a duck, ITS A DUCK! Same Logic applies to your ministry. If it looks like a business, runs like a business, acts like a business...is it really a ministry? This is where you should be mindful that you are a non profit formation and as such need to conduct yourself in a ministerial or charitable fashion or face the consequences of possibly being deemed a DBA sham by IRS for tax purposes. And that's really the issue, they could care less about the type of ministry operation. They are interested in Tax Revenue and if your owe it, that you pay it. That's the bottom line!
There are many corporation sole providers out there saying you can do pretty much anything you like with these formations and that just simply is a bold face lie when comes to certain situations, specifically. One is in the area of business. You cannot and should not involve your corporation sole to engage in active for profit business. Your corporation sole is designed to be a passive formation in that it is a created office of perpetuity within the church( Body of Christ). We have then taken such an office and have allowed it to be recognized in a favorable state that allows for primary filing of corporation sole to give it recognition within the system (USDC). Our deliberate intention is not to encumber the church/ministry in 501(c)(3) status. The purpose for securing an EIN with the minister is for the ability to do Banking. The ministry, if it wants to have banking of any kind in the system will in most cases be required to have and EIN #. I am not aware of any bank in the US or abroad that will allow you to set up a bank account with just a state issued number. I am not saying there aren't some still out there, but I am unaware of them in general. 10 years ago there were banks that would allow for banking to be set up for non-profits without and EIN, but those days are nearly long gone if at all.
I still find corporation sole to be a very relevant formation for ministry today and have no reservation in using it within its intended use. It is better having a formation that is recognized as valid within a states jurisdiction than to have an organization formed by the state. I know this is a debatable issue for some, I can certainly respect that. We are living in the days where we are seeing massive methodical steps being taken as our country moves in to the New World Order. For now, corporation sole is and remains to be a viable way to interface with the system without entangling one in their own personal capacity. I trust you can see the necessary value in that from a ministry standpoint.
The conclusion of my meeting with IRS was that no cease and desist was pursued. The IRS Auditor remarked to the IRS Attorney and I quote, "Don't get use to this, this is not the norm on how these meetings go." I was thanked for my thoroughness and attention to detail by the auditor and examiner. The following day Kathy Gramaldi contacted our ministry and thanked us for our cooperation with IRS in understanding and identifying problem corporation sole abuse.
For all of the ministries that IMI has had a hand in establishing, I commend you to continue serving the Lord. We are not the problem, we are the exception!
With Blessings...
Brother Andrew
REQUIRES TWO-THIRDS MAJORITY VOTE (§§ 21, 28, 32)
S.B. 317
- *SB317*
SENATE BILL NO. 317-SENATOR CARE
MARCH 19, 2007
____________
Referred to Committee on Judiciary
SUMMARY-Makes various changes to provisions relating to
agents for service of process. (BDR 7-445)
FISCAL NOTE: Effect on Local Government: Increases or Newly
Provides for Term of Imprisonment in County or City
Jail or Detention Facility.
Effect on the State: Yes.
~
EXPLANATION - Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.
AN ACT relating to agents for service of process; providing in
skeleton form for the certification and regulation of agents
for service of process and for the elimination of the
formation of new corporations sole; providing penalties;
and providing other matters properly relating thereto.
Legislative Counsel's Digest:
1 This bill provides in skeleton form for the certification and regulation of agents
2 for service of process and for the elimination of the formation of new corporations
3 sole.
4 This bill creates the State Board of Registered Agents and sets forth the Board's
5 functions and duties. This bill also establishes provisions relating to the issuance,
6 renewal, reinstatement, suspension or revocation of a certificate for commercial
7 registered agency. This bill further establishes provisions relating to disciplinary
8 proceedings against a registered agent. Finally, this bill makes it a misdemeanor to
9 violate certain provisions relating to commercial registered agents.
10 This bill also prohibits the formation of a new corporation sole on or after
11 July 1, 2007, and eliminates certain provisions relating to the formation and
12 reinstatement of a corporation sole.
Sec. 6. Chapter 84 of NRS is hereby amended by adding
thereto a new section to read as follows:
No new corporation sole may be formed in this State on or
after July 1, 2007. A corporation sole formed pursuant to this
chapter before July 1, 2007, may continue in existence until such
corporation is dissolved or its charter is revoked. A corporation
sole that has its charter revoked pursuant to NRS 81.140 may not
be reinstated.
Please Be Aware!!! This law did not pass in the senate and has been overwhelimingly shot down. I doubt this will be revisited for at least a couple of years. This is what the state secretary's department has indicated to me. Thanks, Brother Andrew
S.B. 317
- *SB317*
SENATE BILL NO. 317-SENATOR CARE
MARCH 19, 2007
____________
Referred to Committee on Judiciary
SUMMARY-Makes various changes to provisions relating to
agents for service of process. (BDR 7-445)
FISCAL NOTE: Effect on Local Government: Increases or Newly
Provides for Term of Imprisonment in County or City
Jail or Detention Facility.
Effect on the State: Yes.
~
EXPLANATION - Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted.
AN ACT relating to agents for service of process; providing in
skeleton form for the certification and regulation of agents
for service of process and for the elimination of the
formation of new corporations sole; providing penalties;
and providing other matters properly relating thereto.
Legislative Counsel's Digest:
1 This bill provides in skeleton form for the certification and regulation of agents
2 for service of process and for the elimination of the formation of new corporations
3 sole.
4 This bill creates the State Board of Registered Agents and sets forth the Board's
5 functions and duties. This bill also establishes provisions relating to the issuance,
6 renewal, reinstatement, suspension or revocation of a certificate for commercial
7 registered agency. This bill further establishes provisions relating to disciplinary
8 proceedings against a registered agent. Finally, this bill makes it a misdemeanor to
9 violate certain provisions relating to commercial registered agents.
10 This bill also prohibits the formation of a new corporation sole on or after
11 July 1, 2007, and eliminates certain provisions relating to the formation and
12 reinstatement of a corporation sole.
Sec. 6. Chapter 84 of NRS is hereby amended by adding
thereto a new section to read as follows:
No new corporation sole may be formed in this State on or
after July 1, 2007. A corporation sole formed pursuant to this
chapter before July 1, 2007, may continue in existence until such
corporation is dissolved or its charter is revoked. A corporation
sole that has its charter revoked pursuant to NRS 81.140 may not
be reinstated.
Please Be Aware!!! This law did not pass in the senate and has been overwhelimingly shot down. I doubt this will be revisited for at least a couple of years. This is what the state secretary's department has indicated to me. Thanks, Brother Andrew
