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Are churches required to register as 501(c)(3)s?


This is a complicated subject. The IRS attempts to help sort it our with Publication 1828 -- Tax Guide for Churches and Religious Organizations (revised and resissued in August 2008). Pub. 1828 is available as a .pdf file on the IRS website at http://www.irs.gov/pub/irs-pdf/p1828.pdf.

Below are additional thoughts on churches registering as public charties and the possibility of abuse by organizations claiming to be churches: 

It is correct that churches do not have to apply for tax-exempt status in the US or obtain classification as a 501(c)(3) to carry out their religious mission. However, it is not correct that most churches do obtain 501(c)(3) status, though many churches do apply for and obtain 501(c)3 status for their auxiliary enterprises that conduct charitable activities that are essentially non-religious in nature. This may make those 'charitable auxiliary enterprises' eligible for support from certain foundations and other private funding sources that do not donate to religious activities. No "conspiracy", just fact.

Robert D. Shriner, Ph.D. (rshriner@aol.com) of SHRINER-MIDLAND COMPANY, Management & Economic Consultants in Falls Church, Virginia

The rules waive the requirement for filing a Form 1023 (the application for recognition by the IRS under section 501(c)(3)) for churches "integrated auxiliaries". It took a while for the IRS to establish a clear definition of the latter term.

Putnam Barber, Editor of the Nonprofit FAQ

That the Internal Revenue Code gives special treatment to churches is not news. Since 1969, when Congress enacted Sec. 508, which requires all Sec. 501(c)(3) organizations to apply for exemption, churches have been exempt. Same for Form 990 filing requirements in Sec. 6033. In 1984, after several perceived abuses, Congress revised and made more specific a series of audit protections for churches, now found in Sec. 7611. These provisions simply recognize that religious freedom was one of the most important reasons America was founded; that the free exercise of religion is guaranteed against the Federal government by the First Amendment; that, as Chief Justice John Marshall said (in a case involving the power of a state to tax a federally chartered bank), "the power to tax is the power to destroy;" and that while churches are subject to the Internal Revenue Code generally, certain aspects of the Code and its administration present a sufficient threat to the free exercise of religion that special rules to protect churches are appropriate. Does this leave the door open to abuse? Unquestionably. Have abuses occurred? Of course. Are the abuses any more significant among churches than other kinds of charities? Doubtful, especially considering the number of churches relative to the number of other kinds of charities. Moreover, the information thresholds required in order to begin a church audit are not very high. They simply require that the IRS document that it has reason to believe that the church MAY not be entitled to exemption or that it MAY be subject to unrelated business income tax. (Sec. 7611 does not apply to employment tax audits, during which information relative to the other areas might be developed.)

Chip Watkins

Webster, Chamberlain & Bean in Washington, DC


Added 02/07/2011 by asblackwood, Modified 02/10/2011 by asblackwood

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