I mentioned in my final post of 2014, that I would be featuring some ‘hard hitting’ commentary in 2015 as it relates to the Southern Gospel music industry. The first in this feature covers Southern Gospel’s biggest misrepresentation.
When did a Christian entertainment industry transform in to this ‘ministry’ designation that began in the 1970’s and still runs rampant today. One of the biggest misrepresentations is that artists use this ‘ministry’ designation to actually register their group as a 501(c)3 tax exempt organization with the Internal Revenue Service.
If my readers remember, I am an accountant in my day job. Tax season is upon us and I thought this would be a perfect topic to address as individuals begin thinking about another tax year.
- An organization must be organized and operated exclusively for exempt purposes.
- None of its earnings may inure to any private shareholder or individual.
- It can’t be an action organization or influence legislation.
- It may not participate in any campaign for or against political candidates.
If an organization qualifies under the federal guidelines, then contributions received are considered tax-deductible.
My first issue with this, is how can any artist touring/performing every weekend receiving income from performance fees and product sales and uses this income as their full-time employment wage ever consider this income tax exempt?
When did touring/performing full-time in a music group (even in a Christian music industry) automatically become a religious based tax exempt organization?
Are the wages received by the members of the group considered employment wages and therefore taxable to those specific members, leaving only the entity itself tax exempt? If so, there are still ways to accomplish this without using the religious tax exemption.
I do want preface this post by saying I searched the IRS tax exempt status of certain Southern Gospel musical artists and found at least a dozen that are set up as either a tax exempt public charity or tax exempt private foundation. I also want to state that of the dozen I found I can’t guarantee that those designations are still being used by the artists found.
I am not attacking those artists that may use this designation, I guess I am just trying to understand and am surprised the IRS would even grant it considering how the income is generated. On a side note, I am surprised many churches in the USA haven’t been stripped of their tax exempt status for breaking #4 on the criteria list, but I digress.
So what are your thoughts? As a listener of this music, do you have a problem with how certain artists classify the income they make? Do you have arguments one way or the other on why you would or would not support a tax exempt status of a Southern Gospel artist?