Does Our Church Need To Receive 501(c)(3) Approval From The IRS?

The quick answer is NO. Section 508 of the Internal Revenue Code sets forth special rules with respect to section 501(c)(3).  In subsections (a) and (b) are how new organizations must notify the IRS they are applying for 501(c)(3) status and the presumption that if they don’t they will be deemed a private foundation.  Section 508(c)(1) states “Subsections (a) and (b) shall not apply to–(A) churches, their integrated auxiliaries, and conventions or associations of churches,..”  The IRS recognizes that under 508(c)(1)(A) churches are exempted from the notice requirement.  Therefore, churches are automatically exempt by virtue of being a church.

So why do so many churches choose to seek 501(c)(3) status from the IRS.  Joseph J. Urban, Acting Director, Exempt Organizations, Technical Guidance & Quality Assurance in 2001 responded “By receiving formal recognition of exemption from the IRS the organization will have a letter available that may help them satisfy requirements for exemption from state or local taxes, including real estate property taxes.  In addition, preferred postal rates or exemption from certain federal excise taxes may be available to recognized 501(c)(3) organizations.  Also, recognition of exemption allows potential donors to have advance assurance of the deductibility of their contributions to the organization.”  (emphasis supplied)  Obviously, it is the latter reason that makes the churches submit themselves to IRS review through applying for 501(c)(3) status.

However, the church must understand that if it submits to the IRS and receives 501(c)(3) status  then the church must follow whatever rules the IRS sets forth to establish the conduct of 501(c)(3) organizations. One rule the IRS imposes is that the following must be incorporated into the organizational documents of the church: “No substantial part of the activities of the corporation shall be the carrying on of propaganda or otherwise attempting to influence legislation, and the corporation shall not participate in or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office.  Notwithstanding any other provision of these articles, the corporation shall not carry on any other activities not permitted to be carried on (a) by a corporation exempt from federal income tax under 501(c)(3) of the Internal Revenue Code or the corresponding section of any future federal tax code or (b) by a corporation, contributions to which are deductible under 170(c)(2) of the Internal Revenue Code or any other corresponding section of any future federal tax code.” (emphasis supplied)

Once the church accepts 501(c)(3) status, it has submitted itself to the IRS and has waived certain of its rights to the extent that IRS regulations demand, therefore, the church has waived its right to free speech; waives its right to freedom of religion; waived its right to attempt to influence legislation and the election of those who produce that legislation; and has placed itself in a position where its pastor cannot speak out to those issues that are vital to the church and its members.   In order to protect the donor’s contributions, the church has agreed to muzzle itself.

Don’t give up your inheritance for a bowl of pottage.

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