26 February 2019

Catholic Hermits and Non-Profit Status

[[Sister, I was told that diocesan hermits (solitary Catholic hermits) could file for 501c(3) tax exemption. This hermit seems to disagree: [[But a hermit does not have others in the temporal realm to help clean and unpack, organize, to cook and in our time period, handle procurement of supplies.  There is no extern nun or monk; and a consecrated Catholic hermit has not tax exempt status, so the IRS duties are the hermit's own, and for me, once I gather and provide all the numbers from receipts and appropriate 1099 income forms, a long-time accountant will crunch the numbers, fill in the proper forms, and file my tax returns.]] (Catholic Hermit, Letter from Spiritual Father, italics added) Is she correct or was I misinformed?]]

In this case Ms McClure (aka, Joyful Hermit), a privately vowed lay hermit who writes the blog you cited, and who, therefore, might well not be expected to know about tax exempt status for canonical hermits, is incorrect and you were properly informed. Solitary Consecrated Hermits (that is, Diocesan Hermits -- canonically professed and consecrated under c 603) can and do set their hermitages up as 501(c)3's if that works for them. The Church permits (and the US tax code allows) and in some instances, may even encourage this. In such cases the hermit only pays taxes on income which has nothing to do with the religious nature and mission of the hermitage; (the classic example is the charity that, besides its primary mission or reason for existing also makes some money repairing bicycles. They do pay taxes on that money). Canonical (Catholic) hermits are also free from property taxes and sales tax when they are established as 501(c)3's. Non-profits do pay various taxes for employees (Social security and Medicare). 

I should note that not every canonical (publicly professed) solitary hermit does this however; for some of us becoming recognized as non-profits is of no real benefit because 1) our incomes are so small we do not usually pay much if any income tax, and 2) we do not own our hermitages, and thus, are not responsible for property taxes anyway. Moreover, everything coming into the hermitage benefits us directly unless we are giving retreats, for instance, and have legitimate expenses connected with that. Apparently, however, for those diocesan hermits who depend on benefactors 501(c)3 is helpful because it allows those donating to the hermit's upkeep to get a tax break (deduction) on their donations.

This is not an area I am particularly expert on myself since I have not decided to use 501(c)3 to establish myself or my hermitage as a non-profit. I keep thinking I will ask an attorney about the possibilities in case I am missing some benefit that might assist me in living my life and pursuing my mission, but I haven't done so. Also, questions on this matter have been infrequent so beyond affirming the possibility of 501(c)3, I have not needed to write much about it. Your own question is pretty straightforward, however. To summarize, consecrated (that is, canonical) Catholic hermits or hermitages are allowed by the Church and the US Tax code to establish themselves/their hermitages as non-profits under 501(c)3. Each hermit who is publicly professed and consecrated under c 603 is encouraged to consider the benefits of doing this for themselves with the aid and advice of a civil attorney.