Seems like the release of the MP Handbook creates tax problems for the Church.

Tax Evasion?

According to the Mission Presidents Handbook the Church has knowingly failed to report the taxable earnings of its mission presidents and pay tax and national insurance contributions. The total U.K. tax evasion could amount to $12 million.

A rough estimate of the total ‘gross taxable’ earnings of a mission president in the U.K. has been put at $170k

Mission Presidents are clearly ‘employees’ under U.K. tax law and are paid a ‘living allowance’ plus provided with housing, car, health insurance and education fees etc. These are all considered taxable income under U.K. tax law and have not been disclosed to HMRC as required by HM Revenue & Customs - Ministers of religion:
http://www.hmrc.gov.uk/worksheets/sa102m-notes.pdf

In fact, the instruction to the mission presidents is not to disclose this income and not to open a U.K. bank account. Payments are then made into a U.S. bank account in the name of the employee and his wife.

The home they are provided with is for the personal use of the employee and his family, not for business purposes as evidenced by this statement from their Mission Presidents Handbook

“Make sure the missionaries understand your family responsibilities. Preserve the mission
home as your family residence, and protect the family’s privacy there. Teach your missionaries,
including those serving in the office, that they should come to the home only by invitation
or after calling ahead. “ page 9

In addition to the car provided exclusively to the MP, a pool car can be used by his wife and any of his children who have driving licences, all for personal use.

Any relocation expenses above £8,000 will also be taxable and the tax added to the above estimate of $170k.

I understand someone has reported this fact and other details to the U.K. tax authorities. If they take action against the church, how soon will other countries follow and what would the total amount be worldwide?

Does a certain Article of Faith and also a temple recommend question come to mind?

Per annum - each year - annual pay

Don't forget they can buy gifts for other people, and they are paid for by the church. Also the housekeeper and gardener.

All of their gas, maintenance, and insurance for vehicles. Air fare for their children to come visit.

Wouldn't those things be considered income?

I hope the UK makes LDS Inc open all their books. Roll Boyd up to the gallows.

Hilarious.

No one is supposed to show up at the home without prior invitation or calling ahead first.

Apparently, they understand they rules of privacy and courtesy but won't give the same to everyone else.

That made me think, every time a mishey shows up on my door step, I need to go knock on the mission homes door. Obviously they value their privacy.

The paush Hyde Park Mission Home, where I served in London, came with a maid, a cook, a cleaner, etc. Must have been nice for the MP and his haughty wife, while most of us lived in squalor.

the mission president's house in the tokyo north mission was average size for an house in america, but for tokyo, it was HUGE. also came with domestic help.

The tokyo temple was in the tokyo south wasn't it?

I know that there is an apt in the temple for the temle prez, but where did the mish prez live? Do you happen to know?

I was in Okayama 89-91. Back then the honbu was next to the stake center and IIRC, the actual home was the main floor with bedrooms upstairs and the mission office was either one floor up, or townhouse style next door. I don't think I ever went into the mission office per se. I remember the home part though. Damnit. time to dig out pics.

They don't want the missionaries spending much time in their apartments, they should be out recruiting new tithe payers. In Puerto Rico, I had an apartment with no hot water, another apartment with almost no water pressure and the policy "if it's yellow let it mellow, if it's brown flush it down".

Meanwhile, the MP's home which I visited on numerous occasions when I worked in the mission office, was beautiful. Gated community, and all the amenities and services heretofore mentioned.

Living allowance for missionaries was $180/month. It was also forbidden for missionaries to have their own credit card.

I had no idea that they were paying that much. Is that salary typical worldwide?

No wonder they are able to get guys who won't even do their home teaching to quit their jobs and go babysit for 3 years.

"Every man is entitled if he can to order his affairs so as that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow taxpayers may be of his ingenuity, he cannot be compelled to pay an increased tax."

Thomas James Chesshyre Tomlin, IRC v. Duke of Westminster (1936)

That only applies to legal tax avoidance with full disclosure. The church appear to be concealing their arrangements and not reporting them as well as failing to pay any tax due. That is evasion not avoidance. Evasion is illegal,

Tom, in case there was any lingering doubt, the MP Handbook we have all seen is in fact official.

Scanned and posted official letter here.
http://mormonthinkblog2012.blogspot.com/2012/12/acting-expeditiously.html

I really hope someone in the UK can get this investigated. The church has done a very good job of keeping their finances secret and giving the membership the impression that the General Authorities only get very modest living allowances. I would love to have them audited and for this to get some media coverage with some details on how much they were compensated and did not report on their taxes that I could show my mom. I was talking to her a couple days ago about how I could never pay tithing when the church keeps all their finances secret. I said I would rather pay 10% of my income to a charity that is open about their finances. She said that charities pay to much to their CEOs and so I asked her if she thought President Monson doesn't get paid. She said she didn't think so except for being reimbursed for living expenses. She seemed really uncomfortable when I told her that all general authorities and also mission presidents are paid. It is probably true that they don't get paid much but when every expense that normal people have is reimbursed you don't need to earn much. It is quite a system they have worked out for themselves.



Edited 1 time(s). Last edit at 12/20/2012 10:11PM by dazed11.

1. Probably
2. I sure hope so

Ron Burr

Tom, I would be willing to help get this to the IRS...will do some research. Thanks for the idea.

I don't know about U.S. and other countries, but in the U.K. the employer has to deduct the tax and pay it over.

Also, the church as employer has told the MPs not to disclose their income as they maintain it is not employment income but reimbursements of expenses to volunteers.

In the States, most of the tax burden is on the individual. However, there are certain taxes, such as social security, that your employer has to match out of his own pocket, the amount he takes out of yours. Those taxes he is required to take out of your paycheck.

Of course social security, is capped, so once you pay in so many hundreds of thousands of dollars over your life time, you no longer have to contribute. In theory, this makes older employees who have reached this point, or are near it, more valuable then younger employees, but real life doesn't always work that way.

Most MPs have probably passed the life time cap. Especially since they are drawn out of jobs where they typically make millions of dollars. The exception would be guys who worked middle management in the church office building their entire life.



Edited 1 time(s). Last edit at 12/21/2012 02:56AM by forbiddencokedrinker.

This year the cap is $110,100 in earned income. Earned income in the US is subject to SS tax no matter how old you are, or what your lifetime earning have been.

As far as withholding tax, in the US it depends on whether you are an employee or independent contractor. If an employee, your employer withholds income, SS and Medicare tax. You get a W-2, or a 1099 Misc with some box checked indicating that tax was withheld.

If you are an independent contractor, you are responsible for paying all your taxes, including all of the Self Employment (aka Social Security) tax, usually by sending in a payment to the IRS every 3 months. You get a 1099 MISC from your employer, and your income is reported on a 1040 Schedule C. That is the small business schedule, so you are effectively a small business hired by your employer to do a temporary (though possibly multi-year) job.

I'm pretty sure in the US that an MP would not be considered an employee of LDS Inc, and would be completely responsible for their own tax payments.

edit: Looks like LDS Inc is telling the IRS that an MP is not any form of employee, but just a "volunteer" who receives no income, but is just reimbursed for expenses, so they have no earned income at all. IMHO, this is a tax dodge of questionable legality.



Edited 2 time(s). Last edit at 12/21/2012 08:15AM by Brother Of Jerry.

Brother Of Jerry Wrote:
-------------------------------------------------------

> edit: Looks like LDS Inc is telling the IRS that
> an MP is not any form of employee, but just a
> "volunteer" who receives no income, but is just
> reimbursed for expenses, so they have no earned
> income at all. IMHO, this is a tax dodge of
> questionable legality.


Exactly, the pretense that the mission presidents are unpaid volunteers is akin to saying the CEO’s of corporations aren’t millionaires when paid only a $200,000 salary but are gifted $5,000,000 to $10,000,000 bonuses and stock options.

What does the IRS say about such "volunteer" clergy back-door payments (i.e., “reimbursements”)?

IRS document http://www.irs.gov/taxtopics/tc417.html states:

“A minister who receives a housing allowance may exclude the allowance from gross income to the extent it is used to pay expenses in providing a home. Generally, those expenses include rent, mortgage interest, utilities, repairs, and other expenses directly relating to providing a home. The amount excluded cannot be more than the reasonable pay for the minister's services.”

One has to question if gardeners, tuitions, dental plans, dry cleaning, Christmas gifts and more are included in the reasonable pay clause.

Hold on, even though the mission presidents do receive a large allowance, they are told to never claim any pay, so there’s no gross income from which they can exclude these “reasonable” expenses. Tricky tricky.

true, brother of Jared, but there used to be, and probaly still is something in the UK called 'failure to operate pay as you earn', where employers are responsible for not deducting tax correctly from employees.
My question is, would the church be regarded as a UK 'company'?

The church already has a UK company (several of them) which states it acts for the US church on transactions for its missions etc.

However, even a US corporation, with employees in the UK, is required to operate PAYE and submit tax returns itself or by its UK agent.

Do you think the recent attention on Starbucks and other multinationals who paid no taxes in the UK will help bring pressure over this? Would letters to the editors of widely read British papers help?

Yes, you are absolutely right.

With all the anger at Starbucks and Amazon acting legally, there should be outrage at a church acting illegally.

It should be taken to the British press. Any volunteers?

Those with UK addresses and writing styles would probably be best.

Just work 'pleb' into it, and the Guardian will certainly publish.

In Australia too the responsibility to deduct tax is that of the employer. Any resident earning an income must surely have to declare that income and pay tax.

It may be that the individual MPs have the responsibility to pay taxes on this reimbursement. However, the church is the money bags to go after. I believe that any government seeing that there is a trail of evidence leading to this hush-hush "paid volunteer" strategy being systematic (which is exactly what it is) then we can probably add to the tax evasion fraud, racketeering penalties. They have a bigger fish in COJCOLDS than in 3-year vacationing MPs.

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Topic 417 - Earnings for Clergy

For income tax purposes, a licensed, commissioned, or ordained minister is generally treated as a common law employee of his or her church, denomination, or sect. There are, however, some exceptions such as traveling evangelists who may be treated as independent contractors. If you are a minister performing ministerial services, you are taxed on wages, offerings, and fees you receive for performing marriages, baptisms, funerals, etc.

The services you perform in the exercise of your ministry are generally subject to self-employment tax (social security and Medicare taxes). See Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers, for limited exceptions from self-employment tax.

Even though, for social security tax and Medicare tax purposes, you are considered a self-employed individual in performing your ministerial services, you may be considered an employee for income tax or retirement plan purposes. For income tax or retirement plan purposes, some of your income may be considered self-employment income and other income may be considered wages. Depending on all the facts and circumstances, under common-law rules you are considered either an employee or a self employed-person. Generally, you are an employee if the church or organization has the legal right to control both what you do and how you do it, even if you have considerable discretion and freedom of action. For more information about the common-law rules, see Publication 15-A (PDF), Employer's Supplemental Tax Guide. If you are employed by a congregation for a salary, you are generally a common-law employee and income from the exercise of your ministry is considered wages for income tax purposes. However, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services, are considered self-employment income.

If you itemize your deductions, you may be able to deduct certain unreimbursed business expenses related to your services as a common-law employee on Form 1040, Schedule A (PDF), Itemized Deductions. You may need to fill out Form 2106 (PDF), Employee Business Expenses, and attach it to your Form 1040 (PDF), U. S. Individual Income Tax Return. Refer to Topic 514 for information on Employee Business Expenses, and Topic 508 for information on the 2% of adjusted gross income limitation. For your self-employment income (the offerings or fees you receive for performing marriages, baptisms, funerals, etc.), use Form 1040, Schedule C (PDF), Profit or Loss From Business, or Form 1040, Schedule C-EZ (PDF), Net Profit From Business, to report these earnings and related expenses.

The gross income of a licensed, commissioned or ordained minister does not include the fair rental value of a home (a parsonage provided), or a housing allowance paid, as part of the minister's compensation for services performed that are ordinarily the duties of the minister.

A minister who is furnished a parsonage may exclude from income the fair rental value of the parsonage, including utilities. However, the amount excluded cannot be more than the reasonable pay for the minister's services.

If you own your home, you may still claim deductions for mortgage interest and real property taxes. If your housing allowance exceeds the lesser of your reasonable salary, the fair rental value of the home, or your actual expenses, you must include the amount of the excess as other income.

A minister who receives a housing allowance may exclude the allowance from gross income to the extent it is used to pay expenses in providing a home. Generally, those expenses include rent, mortgage interest, utilities, repairs, and other expenses directly relating to providing a home. The amount excluded cannot be more than the reasonable pay for the minister's services.

The minister's employing organization must officially designate the allowance as a housing allowance before paying it to the minister.

The fair rental value of a parsonage or the housing allowance is excludable from income only for income tax purposes. No exclusion applies for self-employment tax purposes. For Social Security and Medicare tax purposes, a duly ordained, licensed or commissioned minister is self-employed. This means that your salary on Form W-2, the net profit on Schedule C or C-EZ, and your housing allowance, less your employee business expenses are subject to self-employment tax on Form 1040, Schedule SE (PDF), Self-Employment Tax.

However, you can request an exemption from self-employment tax, if you are conscientiously opposed to public insurance for religious reasons. You cannot request exemption solely for economic reasons. To request the exemption, file Form 4361 (PDF), Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, with the IRS. You must file it by the due date of your income tax return (including extensions) for the second tax year in which you have net earnings from self-employment of at least $400.00. This rule applies if any part of your net earnings from each of the two years came from the performance of ministerial services. The two years do not have to be consecutive tax years.

For more information, refer to Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers.

More Tax Topic Categories
Page Last Reviewed or Updated: November 07, 2012

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This is from the IRS website. Are MP's considered "clergy"?

The 1989 General Handbook of Instructions refers to a Mission President's Handbook (PBMI4278). If anybody has that, it could be useful to show whether this policy has been in place for the last 23 years.

With all the attorneys and CPAs at their disposal, I'm sure TSCC has studied the tax laws carefully and made certain they are not in violation.

I'm not a CPA, but I would guess the church calls these people volunteers instead of employees, and the money that goes to support their expenses is called something other than a salary (living allowances, etc.)