IRS Basics: Churches
by
Churches that meet the requirements of IRC section 501(c)(3) are automatically considered tax exempt and are not required to apply for and obtain recognition of tax-exempt status from the IRS. BUT, there are some important things that you should know . . .
Qualification
To qualify for tax-exempt status under 501(c)(3), an organization must meet the following requirements: the organization must be organized and operated exclusively for religious, educational, scientific, or other charitable purposes, net earnings may not inure to the benefit of any private individual or shareholder, no substantial part of its activity may be attempting to influence legislation, the organization may not intervene in political campaigns, and the organization's purposes and activities may not be illegal or violate fundamental public policy.Nuts and Bolts
Form 1023 is the application for obtaining tax exempt status. This is necessary for a not-for-profit organization to attain 501(c)(3) tax exempt status from the IRS. Churches are exempt from this requirement and are automatically recognized as 501(c)(3) organizations. However, Churches should still file the Form 1023 in order to obtain the letter from the IRS recognizing the 501(c)(3) status because some larger donors may require this verify the tax-exempt status. Form 990 is the tax return, similar to a 1040 for individuals. Generally, any 501(c)(3) organization must file an annual 990, however, there are certain exception which include: - Churches (as opposed to "religious organizations") - Inter-church organizations of local units of a church - Mission societies sponsored by or affiliated with one or more churches or church denomination, if more than half of the activities are conducted in, or directed at, persons in foreign countries - An exclusively religious activity of any religious order See the form instructions for a list of other organizations that are not required to file. A 501(c)(3) organization generally has to file a Form 990 annually, among other items such as W-2s, and Form 944 or 941(which must be filed quarterly). However, West Venture Law generally advise all 50(c)(3)'s (even churches) to file the Form 990 regardless of any exceptions to avoid any inadvertent tax liability that could arise from an improper classification under the exceptions.