How Do I Get Tax-Exempt Status?
What is 501(c)(3)
Church leaders are often confused by their friends (or their Attorney's), when they are told they must "Get" a 501(c)(3). What they mean to say is, "Do you have a favorable "Ruling Letter" from the IRS." When a church chooses to file the IRS Form 1023, they will receive this letter.
The Church must meet both the organizational and operational test. Whereas Section 501(c)(3) of the US Tax Code (and its’ various sub sections) describe the various organizations exempt from paying taxes, and requires specific (organizational) IRS terminology written in their Articles of Incorporation. The tax code does not define a "church." The IRS has been careful not to ever officially in any way endorse any definition of "church," or any list of criteria. The Courts have adopted a 14 point (operational) test as a matter of common law. The IRS has implicitly followed this test without ever officially adopting it. A church would have to "substantially" meet this test, (but would not have to meet every one of the 14 points) to be tax exempt. The 14 points are listed below.
Deductibility of contributions is determined under sections 509 and 170. Section 508 speaks to reporting requirements, and 508(a) requires all new non-profit organizations to file Form 1023 for recognition of exempt status within 15 months of their organization. However - 508(c) exempts churches from the requirement of filing the IRS Form 1023.
Is A Church Subject To Federal Income Tax Without An Exempt Ruling Letter? NO! Churches are immune (exempt), as long as they meet the 1) organizational and 2) operational test found in the Internal Revenue Code 501(c)(3), that is "organized and operated exclusively for religious purposes," (and this "purpose" must be so stated in the churches Articles of Incorporation), and the 14 common law criteria.
"IRS News Release 1930" issued to IRS agents, lists guidelines for determining whether an organization is a church. An organization would have to "substantially" meet this test, but not all of the 14 points have to be present. Following is the 14 point list:
1. A distinct legal existence.
2. A recognized creed and form of worship.
3. A definite and distinct ecclesiastical government.
4. A formal code of doctrine and discipline.
5. A distinct religious history.
6. A membership not associated with any other church or denomination.
7. A complete organization of ordained ministers ministering to their congregations.
8. Ordained ministers selected after completing prescribed courses of study.
9. A literature of its own.
10. An established place of worship.
11. Regular congregation.
12. Regular religious services.
13. Sunday School for the religious instruction of the young.
14. School for the preparation of its’ ministers.
If the church is structured and functioning according to the above – IT IS a 501(c)(3).
For more specific information, contact an Attorney or C.P.A., who fully understands these issues. THE PURPOSE OF THE 14 POINT CRITERIA The IRS uses this criteria to screen out the phony "house church," often designed as a means of tax evasion – a money laundry scheme. This statement is not, in any wise, meant to cast aversion on the many great outreaches of today’s churches, which meet in the homes of their members, or for that matter are in the beginning stages of a new church.
But situations do exist where "churches" were established by anti-tax activists for the sole purpose of avoiding taxation. Then having paid $25.00 for a sham Ministerial Credential from the Universal Church of the Whatever; incorporated as a "church;" invited all their friends and neighbors to join and donate their income in exchange for tax deductible receipts. Having purchased a hunting lodge or duck pond for their "religious retreat," they now pose as a tax exempt "religious organization." They will likely not "measure up," when screened against the required "purposes" clause of the Articles of Incorporation, and the above 14 point list.
It is also worth noting, that it is not only the Church that is tax exempt – but the Synagogue, Wicca (organized witchcraft), and all the other "Religious Organizations," who deny Jesus as the Christ, are also exempt. So you see – it is not a "church" issue, it is a "religious" issue.
You can easily determine this fact for yourself by looking at the instruction sheet on how to fill out this Form. http://www.irs.gov/pub/irs-pdf/i1023.pdf Look carefully on the first page of the instruction sheet, lower right hand side. See:
PURPOSE OF FORM. - Below that read:
1. "Completed form 1023 is required for section 501 (c)(3), unless it meets one of the exemptions in 2 below:"
2. "Organizations not required to file Form 1023, - The following types of organizations may be considered tax-exempt under section 501 (c)(3), even if they do not file Form 1023:
1. Churches, including synagogues, temples and Mosques
2. Integrated auxiliaries of churches and conventions or associations of churches ….... "
Note – The author has underlined the points above for emphasis only.
SUMMARY: As shown in the IRS’ own printed word – the church is exempt of all taxes, even if they do not file the Form 1023. The church is automatically 501(c)(3).
Church leaders are often confused by their friends (or their Attorney's), when they are told they must "Get" a 501(c)(3). What they mean to say is, "Do you have a favorable "Ruling Letter" from the IRS." When a church chooses to file the IRS Form 1023, they will receive this letter.
The Church must meet both the organizational and operational test. Whereas Section 501(c)(3) of the US Tax Code (and its’ various sub sections) describe the various organizations exempt from paying taxes, and requires specific (organizational) IRS terminology written in their Articles of Incorporation. The tax code does not define a "church." The IRS has been careful not to ever officially in any way endorse any definition of "church," or any list of criteria. The Courts have adopted a 14 point (operational) test as a matter of common law. The IRS has implicitly followed this test without ever officially adopting it. A church would have to "substantially" meet this test, (but would not have to meet every one of the 14 points) to be tax exempt. The 14 points are listed below.
Deductibility of contributions is determined under sections 509 and 170. Section 508 speaks to reporting requirements, and 508(a) requires all new non-profit organizations to file Form 1023 for recognition of exempt status within 15 months of their organization. However - 508(c) exempts churches from the requirement of filing the IRS Form 1023.
Is A Church Subject To Federal Income Tax Without An Exempt Ruling Letter? NO! Churches are immune (exempt), as long as they meet the 1) organizational and 2) operational test found in the Internal Revenue Code 501(c)(3), that is "organized and operated exclusively for religious purposes," (and this "purpose" must be so stated in the churches Articles of Incorporation), and the 14 common law criteria.
"IRS News Release 1930" issued to IRS agents, lists guidelines for determining whether an organization is a church. An organization would have to "substantially" meet this test, but not all of the 14 points have to be present. Following is the 14 point list:
1. A distinct legal existence.
2. A recognized creed and form of worship.
3. A definite and distinct ecclesiastical government.
4. A formal code of doctrine and discipline.
5. A distinct religious history.
6. A membership not associated with any other church or denomination.
7. A complete organization of ordained ministers ministering to their congregations.
8. Ordained ministers selected after completing prescribed courses of study.
9. A literature of its own.
10. An established place of worship.
11. Regular congregation.
12. Regular religious services.
13. Sunday School for the religious instruction of the young.
14. School for the preparation of its’ ministers.
If the church is structured and functioning according to the above – IT IS a 501(c)(3).
For more specific information, contact an Attorney or C.P.A., who fully understands these issues. THE PURPOSE OF THE 14 POINT CRITERIA The IRS uses this criteria to screen out the phony "house church," often designed as a means of tax evasion – a money laundry scheme. This statement is not, in any wise, meant to cast aversion on the many great outreaches of today’s churches, which meet in the homes of their members, or for that matter are in the beginning stages of a new church.
But situations do exist where "churches" were established by anti-tax activists for the sole purpose of avoiding taxation. Then having paid $25.00 for a sham Ministerial Credential from the Universal Church of the Whatever; incorporated as a "church;" invited all their friends and neighbors to join and donate their income in exchange for tax deductible receipts. Having purchased a hunting lodge or duck pond for their "religious retreat," they now pose as a tax exempt "religious organization." They will likely not "measure up," when screened against the required "purposes" clause of the Articles of Incorporation, and the above 14 point list.
It is also worth noting, that it is not only the Church that is tax exempt – but the Synagogue, Wicca (organized witchcraft), and all the other "Religious Organizations," who deny Jesus as the Christ, are also exempt. So you see – it is not a "church" issue, it is a "religious" issue.
You can easily determine this fact for yourself by looking at the instruction sheet on how to fill out this Form. http://www.irs.gov/pub/irs-pdf/i1023.pdf Look carefully on the first page of the instruction sheet, lower right hand side. See:
PURPOSE OF FORM. - Below that read:
1. "Completed form 1023 is required for section 501 (c)(3), unless it meets one of the exemptions in 2 below:"
2. "Organizations not required to file Form 1023, - The following types of organizations may be considered tax-exempt under section 501 (c)(3), even if they do not file Form 1023:
1. Churches, including synagogues, temples and Mosques
2. Integrated auxiliaries of churches and conventions or associations of churches ….... "
Note – The author has underlined the points above for emphasis only.
SUMMARY: As shown in the IRS’ own printed word – the church is exempt of all taxes, even if they do not file the Form 1023. The church is automatically 501(c)(3).
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