Churches and 501(c)(3) Status

Must a church file an exemption application in order to be recognized as tax-exempt under I.R.C. § 501(c)(3)?

No.

GENERAL RULE. An organization shall not be treated as tax-exempt under I.R.C. § 501(c)(3)

  1. unless it has given notice to the Secretary in such manner as the Secretary may by regulations prescribe, that it is applying for recognition of such status, or
  2. for any period before the giving of such notice, if such notice is given after the time prescribed by the Secretary by regulations for giving notice under this subsection.

“MANDATORY” EXCEPTIONS. The general rule shall not apply to

  • churches, their integrated auxiliaries, and conventions or associations of churches, or
  • any organization which is not a private foundation (as defined in section 509(a)) and the gross receipts of which in each taxable year are normally not more than $5,000.

A church may nonetheless want to obtain official recognition of its tax-exempt status. It does so by filing IRS Form 1023. If the applicant is successful, the IRS will issue a determination letter confirming that the organization qualifies under I.R.C. § 501(c)(3).

In some cases, persons will not deal with a charitable organization unless it has a determination letter. For example, large donors tend to be reluctant to make contributions to organizations that do not have a determination letter. Rightly or wrongly, a determination letter conveys legitimacy to an organization (as well as ensures that donations to the organization are tax-deductible). 

Source: I.R.C. § 508

Posted by Joel D. Roettger, JD, LLM, EPLS

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