Directions for Claiming a Tax Refund on Clergy Health Plan Payments
These are simplified directions to help a United Methodist Church in the Tennessee Conference
claim a cash reimbursement from Uncle Sam under the Patient Protection and Affordable Care Act
(PPACA). This reimbursement for most churches is related to your churches apportionment remittance
in 2010 for our Clergy Health Plan Apportionment. Not every church will qualify, and for those
that qualify, not all will qualify for the maximum 25% refund. In any case, your church is
ultimately responsible for properly completing and filing tax forms. In case of inconsistency,
federal law, not these directions, controls.
To qualify, you must complete and file two forms with the IRS. Those are:
 Form 8941 http://www.irs.gov/pub/irs-pdf/f8941.pdf
 Form 990-T http://www.irs.gov/pub/irs-pdf/f990t.pdf
Churches of complexity or churches with financial links to related non-profits may wish to consult
with the directions published by the IRS. Instructions for 8941 can be found at
http://www.irs.gov/pub/irs-pdf/i8941.pdf and instructions for 990-T can be found at
http://www.irs.gov/pub/irs-pdf/i990t.pdf.
I. Completing IRS Form 8941
Name is the name of your church as it is printed on your payroll tax forms and filings such as Form
941 and Form W-2.
Identifying Number is your church’s Employer Identification Number (EIN) used to report payroll
taxes on Form 941 and on Form W-2.
Line 1: All employees of the church, whether part-time or full-time and whether or not offered or
covered by health insurance. Include clergy in this count. Exclude contractors (such as a janitor
working for an outside service) and seasonal employees working fewer than 120 days. For this line,
even a part-time person is counted as a whole number.
Line 2: The number of “full-time equivalent employees” (FTEs) with or without health insurance.
Clergy are usually counted. Contractors (those receiving a Form 1099 instead of a Form W-2),
leased employees (from another company), and seasonal employees working less than 120 days
during the year are excluded. Employees working 20 hours per week all year would generally be
counted as a 1/2 (0.5) FTE. An employee working full time half the year also would count as a 1/2
(0.5) FTE. No employee, regardless of overtime, counts for more than 1.0 FTE. The total number of
FTEs is always rounded down to a whole number (but cannot be less than 1).
Line 3: First, add all the salaries/wages paid in 2010, then reduce by excluding (i) clergy
compensation, housing and allowances; (ii) seasonal employees’ (working less than 120 days) pay;
(iii) contractors or self-employed persons; and (iv) leased workers (e.g., a janitor working for an
outside company). The amount should resemble the amount reported by your church on Line 5c of
Form 941 Taxable Medicare Wages for the year.
Second, divide the total wages by the number of FTEs from Line 2. You must use the FTE number
as the denominator (which usually will include the clergyperson even though the numerator does not
include his or her compensation). It seems odd, but it is correct to include clergy positions, but not
clergy salaries.
Line 4: Total premiums the church paid for health insurance premiums beginning January 1, 2010
through December 31, 2010. In the Tennessee Conference, this is the amount paid by your church
for the Clergy Health Plan apportionment in 2010. You can find that amount on your church’s yearend apportionment report, or on the listing that is on the conference’s website at:
click here> 2010 Health Plan Remittances PAID <click here.
Line 5: The state of Tennessee’s “average premium” is $4,611 for an individual. If the only
employee(s) receiving a health care benefit at your church is the pastor(s), enter $4,611 times the
number of full time pastors who are covered by the Conference’s Clergy Health Plan. If the church
provides coverage for the pastor’s dependents, enter $10,369. If the church provides coverage for
other staff, increase this amount accordingly. See Instructions for Form 8941 for more information.
Why: The premiums paid for health insurance coverage that count toward the Tax Credit are subject
to a maximum amount not to exceed the state average premium for the type of coverage. To
calculate this maximum, compare the premiums (described above in Line 4) to the average premium
for the church’s state, which are listed in the instructions to Form 8941. The premiums in Line 4 are
limited to the amount that the church would have paid (based on what percentage share of the
premium it pays versus what the employee pays) had the church’s plan carried an average premium
for the state.
Line 8: If Line 2 is 10 or fewer, Line 8 will be the same as Line 7. If the number of FTEs is greater
than 10, use the following formula:
A.
B.
C.
D.
E.
FTEs written on Line 2
Subtract 10 from Line A
Divide Line B by 15
Multiply Line C by Line 7
Subtract Line D from Line 7
_________
_________
_________
_________
_________
write this amount on Line 8
Line 9: If Line 3 is below $25,000, Line 9 will be the same as Line 8. If Line 3 is above $25,000 use
the following formula:
A.
B.
C.
D.
E.
Average Salary on Line 3
Subtract 25,000 from Line A
Divide Line B by 25,000
Multiply Line C by Line 7
Subtract Line D from Line 8
________
________
________
________
________
round to at least 3 decimal places
write this amount in Line 9
Lines 10 and 11 should be $0 for most churches.
Line 12 should be the same number as Line 9 for most churches.
Line 13: The number of employees enrolled in the health plan. If only the clergyperson is covered,
this should be 1.
Line 14: The number of FTEs. If only the clergyperson is covered, this should be 1.
Lines 15, 17, 19, 20, 22 and 23 should be $0 for most churches.
Lines 16, 18 and 21 should be the same number as Line 9.
Line 24: Not all payroll taxes should be reported here, because not all payroll taxes qualify for the
credit. Three types of payroll taxes are added to calculate the number for Line 24:
1. Medicare taxes (not Social Security taxes) withheld from paychecks of all employees
(whether or not the employee is covered in the health plan).
2. Medicare taxes (not Social Security taxes) paid by the local church as the employer share for
all employees (whether or not the employee is covered).
3. Federal income tax withheld from paychecks for all employees (whether or not they are
covered).
Report what was paid and withheld by the local church for everyone, not just those who have health
insurance. It may help to consult the Form 941s your church submitted during 2010. Income tax
withheld is on Line 3. For the Medicare taxes, you can use Line 5c (column 2) for the year (this is
the October 2010 Form 941), or Line 4c (column 2) for the older form.
Line 25: The smaller of Line 21 or Line 24. This is also the amount for line 44f of Form 990-T.
II. Completing IRS Form 990-T
Most tax-exempt (non-profit) organizations are required annually to file Form 990 with the IRS.
Churches are exempt from this requirement. Form 990-T is an amendment to Form 990 for
reporting Unrelated Business Income Tax (UBIT) and is rarely needed by churches, but Form 990-T
is used at this time is to claim the Tax Credit. It appears complicated, but for the purposes of the Tax
Credit should be fairly easy to use.
Provide the name and address of the local church. For the Tax Credit in 2010, the tax year will be the
tax year beginning January 1, 2010.
Box A: May be left blank.
Box B: The box next to “501” should be checked, and (c) and (3) added in the spaces to the right,
since all churches are tax exempt under IRC Section 501(c)(3).
Box C: I wouldn’t sweat this one too much. Write the value of your church-owned real estate plus
the value of any financial accounts. It has no bearing on anything, but sometimes a blank draws the
IRS’s attention.
Box D: The local church’s “employer identification number” or EIN, the number used to file payroll
taxes forms. (Same number used on Form 8941).
Box E: May be left blank.
Box F: The group ruling number for The United Methodist Church (the denomination) is 2573. This
may be the only time this number is used. This is different from your church’s 9-digit EIN.
Box G: Check the box for 501(c) 3 corporation.
Box H: May be left blank.
Box I: This box generally may be left blank, unless the local church is closely affiliated with another
tax-exempt employer, meaning the organizations share budgets, management, and routine
operational control.
Box J: Provide the name and phone number of the individual completing the Form 990-T.
Part I: Lines 1-13: skip.
Part II: Lines 14-34: skip.
Part III: Lines 35-39: skip.
Part IV: Skip lines 40, 41, 42 and 43.
Line 44f: Enter the amount from Line 25 of Form 8941 This number should be carried through to
Lines 45, 48 and 49 – same as Line 44f
Lines 46 and 47 – skip. Churches should not ask that any of the Tax Credit be credited to estimated
taxes in 2011—rather they should ask it be refunded.
Part V: Lines 1 and 2 – most will check “No.” Skip line 3.
Sign the Form 990-T and save a copy for the church’s records. Be sure to include Form 8941. For
the 2010 tax year, Form 990-T is due by May 15, 2011. However, since no taxes are due, there are
no interest or penalties associated with late filing.
III. Other resources
General Board of Pension and Health Benefits

Health Care Reform document listing:
https://www.gbophb.org/health_welfare/healthcarereform/index.asp

Small Business Health Care Tax Credit
o Frequently Asked Questions—Part I
https://www.gbophb.org/thewell/root/HFLX/4196.pdf
o Frequently Asked Questions—Part II
https://www.gbophb.org/TheWell/Root/HFLX/4233.pdf
Internal Revenue Service

IRS Form 8941 http://www.irs.gov/pub/irs-pdf/f8941.pdf
o Instructions for 8941 http://www.irs.gov/pub/irs-pdf/i8941.pdf

IRS Form 990-T http://www.irs.gov/pub/irs-pdf/f990t.pdf
o Instructions for Form 990-T http://www.irs.gov/pub/irs-pdf/i990t.pdf
Tennessee Conference Statistics:
2010 Health Plan Remittances PAID
Jim Allen
Conference Treasurer
Office of Administrative Services
Tennessee Conference
The United Methodist Church
treasurer@tnumc.org