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IRS, Knights Organizations, Parish Entities & Financial Matters

Doug Oldmixon, State Advocate

Knights of Columbus councils, assemblies and chapters are individual subordinate units of the Supreme Council organization of the Knights of Columbus.  Each such unit is required to register with the IRS, obtain an individual tax ID number (EIN) and to provide that number to the Supreme Council.  Supreme will then add that unit to the master list of units they provide to the IRS so that each unit is now officially associated with the “group exemption” from federal income taxation granted to the Order as a qualified 501 C 8 fraternal non-profit organization.

Each unit must file a Form 990 each year and report all of its income.  Under the exemption qualified income is non-taxable.  Some income may be non-qualified and therefore become subject to federal income tax.  One example is unrelated business-type income.
 
Parishes are most often individual units of the diocese to which they belong.  Each diocese qualifies as a 501 C 3 religious charitable organization and is exempt from federal income taxation under that section.  Each parish typically has an individual EIN as well, often as a sub-unit of the diocese. 

Councils are not “parish organizations” in the sense that many other groups at the parish might be – such as the parish youth group, men’s club, ladies’ club, choir, social outreach ministry or even a school.  Each of these might fall directly under the control, guidance and tax ID of the parish.  A Knights of Columbus Council is legally different, even if its membership is drawn 100% from parish families, and the council meets and conducts all or most of its activities on parish grounds and in coordination with parish guidelines.  Therefore, all funds of the council must be kept separate and distinct from parish funds. 

Often a pastor will ask all parish based organizations to provide financial details to the parish office for record keeping and other purposes.  Councils should willingly provide their pastor with copies of the semi- annual audits performed by the council trustees.  If the pastor is a Brother Knight, all of his questions about financial matters should be answered and the council books be made reasonably available for inspection, like for any other Brother.  Audit sessions are open to all brothers of the council and to the District Deputy.  Even if the pastor is not a Brother Knight, every reasonable effort should still be made to comply with his requests for reasonable explanations of the council’s financial matters.  We have nothing to hide from our priests.  This openness does not extend to the right to demand an independent audit of the books and records, except by a superior unit of the order.  For example, the State Council can order that a local council’s books and records be made available for a separate audit. 
All organizations that are “sponsored” by a council, such as a Ladies’ Auxiliary or a Squires Circle, should share the council’s EIN and will be subject to consolidation when the council trustees conduct the audit.  This is not true for a local Scout organization or Catholic Daughters courts which have their own EIN.

State sales tax matters are handled differently from IRS tax matters.  The Texas Comptroller will issue sales tax exemption certificates to qualified non-profit organizations which meet the state’s criteria.  Many councils have qualified, though many also use their parish’s sales tax exemption number when purchasing supplies for parish based activities.  There is nothing “illegal” about this, but a council cannot expect access to the parish’s certificate by right.  Such access is always discretionary with the parish.


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