Does my church need a 501c3?

Nonprofit Status for Religious Organizations

Churches, synagogues, mosques, and other places of worship are automatically considered tax exempt by the IRS (as long as they meet certain requirements), without filing for recognition of 501(c)(3) status officially. So why would a church file for 501(c)(3) status? Let’s delve into the legal requirements to be considered automatically tax exempt and why a place of worship might choose to file for 501c3 status with the IRS. We’ll use the word “church” throughout this article, but this applies to places of worship of all religions, regardless of belief system.

What is legally required to be considered a church (or place of worship) with the IRS?

The IRS has a formal list of attributes associated with churches, but let’s break down what that means. Churches need to have “distinct legal existence”, which simply means, the church needs to be incorporated as an entity with your state. If you’d like assistance incorporating your church with your state, please contact us and we can help. We’ve helped religious organizations get started all over the country. 

The IRS also describes having a form of worship and/or creed, literature, regular religious services, and an established place of worship. For most churches, this simply means that there is an established way to practice your religion, whether you have a religious text (like the Torah), a building or place outside that your worship or church services are held, and some form of written explanation as to what your belief system entails.  The IRS lists fifteen attributes, your place of worship does not need to meet all fifteen in order to be considered a church. They look at the combination of attributes your organization possesses and determine from there if the organization will legally be considered a church or not.

You might be surprised. Many organizations that we don’t traditionally or colloquially consider to be a “church” are in fact recognized by the IRS as churches. This means they get all the benefits–less oversight, non-filing of 990s, etc.

Why would a church file for 501(c)(3) tax exempt status if they aren’t required to?

It’s common for churches to still apply for 501(c)(3) status, even though they aren’t legally required to do so. There are a few reasons for this:

  1. Having 501(c)(3) status assures your congregation and donors that the church is recognized officially by the IRS as legitimate and tax-exempt, thus guaranteeing their donations and tithes will be tax deductible. 
  2. 501c3 status increases the transparency of the organization, as the church will then be required to file a tax return (called IRS form 990) each year. Those forms are available to the public, again, ensuring donors know that their money is being used in a charitable way. For churches who provide programming like missions work or children’s programs, this transparency can be a great way to let donors know that their contributions are going to a worthy cause.
  3. Another factor is that 501c3 organizations are given a variety of discounts and benefits. Many companies have programs that discount their services or products for established nonprofits like churches, but require 501c3 status to ensure the legitimacy of the organization. The US Postal Service also offers discounted rates for mailing and postage for established 501c3 organizations.
  4. Some states provide additional tax exemptions for established 501c3 organizations like exemption from state sales tax or state employment tax. These tax exemptions can help churches spend more of their funding on their religious services and programs, rather than on taxes.

Not all churches in the US are registered 501c3 organizations, but it could be right for your church. If you’re looking to start a church, whether you want to apply for 501c3 status or not, we can help you get started legally and look at the pros and cons for your church. Request a free consultation with one of our attorneys to find out more!

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