Letter Re: Churches and 501(c)3 Status

Dear Editor, I appreciated DF’s letter on IRS 501(c)3 status and forwarded an edited version of it to my church leaders and friends. This morning, I was doing further research and discovered IRS publication 4220 titled “Applying for 501(c)3 Tax-Exempt Status.” On page 6 of that publication is the following paragraph:

RELIGIOUS, The term church includes synagogues, temples, mosques, and similar types of organizations. Although the IRC excludes these organizations from the requirement to file an application for exemption, many churches voluntarily file applications for exemption. Such recognition by the IRS assures church leaders, members, and contributors that the church is tax exempt under section 501(c)(3) of the IRC and qualifies for related tax benefits. Other religious organizations that do not carry out the functions of a church, such as mission organizations, speakers’ organizations, nondenominational ministries, ecumenical organizations, or faith-based social agencies, may qualify for exemption. These organizations must apply for exemption from the IRS. See Publication 1828, Tax Guide for Churches and Religious Organizations, for more details.

I’m no lawyer or CPA, but to my reading and understanding, based on the second sentence of this paragraph, a church does not need to have a 501(c)3 tax-exempt certificate in order to qualify for tax-exempt status. Having served in a voluntary position with my church on a previous occasion, where such a certificate comes in handy is when the church conducts business with companies, the tax-exempt certificate allows the church to legally avoid paying sales taxes.

Further, in my reading of this paragraph on page 6, I do not see the lack of having a 501(c)3 certificate as a bar to legitimately claiming deductions made to a church from one’s annual income tax return. One benefit of not having such a 501(c)3 certificate is that the religious organization would not be subject to any IRS fines or penalties for having violated the rules under which such tax-exempt organizations must operate.

Reader DF’s letter served a valuable purpose in raising the issue of the restrictions associated with having IRS 501(c)3 status. I hope my research adds to that discussion and is helpful in aiding churches make a decision on whether to keep their 501(c)3 status or not. To my thinking, payment of sales taxes is a minor price to pay for a church to be free of the restrictions on freedom to preach and practice God’s word. – JM in Florida

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