The consequences of not filing the SI-100

The consequences of not filing the SI-100

I intended to write on money handling controls for this Compliance Corner, but a panicky phone call from a pastor made me change my mind.

The call involved a church’s failure to file the SI-100 — something I’ve discussed before. This time it’s especially important.

Failure to file as required every two years will result in suspension of the church corporation. The Franchise Tax Board is now suspending churches as quickly as 60-90 days after the filing deadline.

CSBC is offering to file your SI-100 in a timely manner as a way to say, “Thank you!” for giving to the Cooperative Program, and to prevent a suspension.

A suspended corporation is equivalent to being a dead person ... who cannot conduct business, file a lawsuit or defend against a lawsuit. The pastor discovered this the hard way, after three years of insurance company haggling over a trip-and-fall injury claim involving a church member.

The matter was about to go to trial in LA Superior Court, when the plaintiff’s attorney surprised the church and its insurance company attorney with a motion for default judgment because the church was suspended as a corporation. How this got by the church’s attorney is beyond me, but probably inexperience. The church was given 72 hours to correct the situation.

The FTB does not usually move that fast unless litigation is pending, as it was in this case, and the court granted an additional 14-day continuance.

However, the FTB also required the church to file Form 3500, which involves detailed financial information the church did not have, so it “fudged the numbers.” They made some math errors computing rental revenue, which prompted additional questions concerning taxable income because there is a mortgage on the church.

This is going to result in unpaid taxes, penalties and interest for the past two or three years.

And the church might still lose its personal injury lawsuit to a default judgment due to the suspension, which was totally preventable long before the church’s day in court.

How do you measure the difference between a $20 filing fee and a five-, six- or even seven-figure civil judgment that might be awarded against the church in this case? Sure, the insurance company will pay the claim — and rightly so due to its mistakes — but what could happen to a church without a general liability insurance policy?

Unfortunately, there are plenty of those in our Convention. This is a fiduciary lapse, and it can come back to bite the church officers, board of directors and trustees, any of whom could be held personally financially responsible for their failure to properly protect the church.

Still think missing the SI-100 filing deadline is no big deal? Take a moment to reconsider the “perfect storm” threatening one small church in Los Angeles.

Is your church corporation at risk of suspension?

Contact me at 559-256-0858 or hrcc@csbc.com to get on the SI-100 representation list.

This Convention serves our culturally diverse congregations as we fulfill the Great Commandment and the Great Commission.