Bay View’s Tax Exemption Is Not Dependent on Membership Requirements

Tax exemptions for churches and their affiliated organizations are complex; it is not surprising that even CPAs and other experts draw wrong conclusions.

To understand Bay View’s unique position one must go back 45 years to the creation of the United Methodist Church (UMC) by the merger of the Evangelical United Brethren Church and the Methodist Episcopal Church.  Although each former denomination had their own 501(c)(3) church exemption, the new United Methodist Church had to apply for its own.  The request took six years to wend through the IRS, but in October 1974 the General Council on Finance and Administration (GCFA) of the UMC received a “letter ruling exemption”.  That letter says in part:

For the purposes of this group ruling, your affiliated religious organizations include The General Conference, Judicial Council; General Agencies, Commissions, Committees, their divisions and departments thereof, and, other related organizations; Jurisdictional Conferences and Affiliated Agencies, Commissions, and other organizations; Annual Conferences and divisions and departments thereof; Annual Conference Agencies, Commissions, Committees, and affiliated organizations; Local Churches and Local Church Agencies, Commissions, Committees, and other affiliated organizations;

Based on the information supplied, we rule that you and your affiliated religious organizations, on the list you submitted, are exempt from Federal income tax under section 5o1(c)(3) of the Code.

We have further determined that you and the affiliated religious organizations you operate, supervise, or control, and which are covered by your notification to us, are not private foundations . . .

Later in the four-page letter the IRS requires GCFA to submit an annual list of all its affiliated organizations.  Each year they send the name, address, and Employer Identification Number (EIN) of every affiliated organization.  Each local UMC and groups like Bay View are on that list.

GCFA is the gatekeeper of the tax exemption for the UMC; it’s difficult to get on the list.  You can see the application at

http://www.gcfa.org/sites/default/files/u3/Group%20Ruling%20Request%20Form%20%28Group%20I%29%2012-9-10_2.pdf

When Bay View negotiated with the Legal Department of GCFA to be included in the letter ruling, they required us to keep in our by-laws statements that should Bay View go out of existence, all assets would revert to the Detroit Annual Conference and the West Michigan Annual Conference; that the two annual conferences affirm the election of the Board of Trustees, the majority of whom must be United Methodists; and that these provisions could not be changed without the approval of both annual conferences.  With these safeguards in place, Bay View came under the UMC letter ruling.

Technically, Bay View is not tax exempt – the United Methodist Church, of which we are a part, is the exempt organization.  We come under their umbrella.  This is also true of all 35,000 United Methodist Churches in the U.S.  The IRS maintains a list of all tax-exempt charitable organizations which is available at

http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check

You won’t find The Bay View Association on that list, even if you know our EIN.  You won’t find your local UMC on the list. You won’t find any group that comes under the UMC letter ruling on this IRS database. The IRS sees the UMC as one tax-exempt group with GCFA being the sole referee as to who’s in and who’s out.

As long as we abide by our by-laws 2, 75-B, and 77-B we come under the letter ruling.  Dan Gary, the attorney who handles tax issues for GCFA and who negotiated our coming under the ruling, wrote in 2011:

“In short, Bay View’s inclusion in the UMC group ruling does not turn on whether the provision in the bylaws requiring that every member be a Christian is interpreted literally or is interpreted to mean that every member is “upholding Christian values.”  That is (“merely”) an internal political dispute that you folks will need to work out.”

Many issues are debatable when considering membership in Bay View; its tax status is not one.

Grace and Peace,

Stan Sutton
May 2013

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The Rev. Stan Sutton is a United Methodist Pastor who served as an Annual Conference Treasurer for almost 30 years.  He was elected to GCFA for 8 years and chaired the Audit Committee for the denomination for four years.

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