Faith Church is exempt from Federal income taxation under § 501(c)(3). To supplement its contribution revenue, it holds bingo games on Saturday nights. It has the licenses and permits required to do so. The net income from the bingo games is $90,000. Of these funds, $60,000 are used to support the ministry of the church. The balance of $30,000 is invested in Faith’s endowment fund for church music. Faith Church is located in a resort city where bingo games can be conducted by churches, charities, and for-profit entities.

a. Will conducting the bingo games affect the exempt status of Faith Church? Explain.

b. Calculate the Federal tax liability, if any, associated with the bingo games.