It is a little known fact that, according to the constitutional principle of separation of church and state, a bona-fide church does not have to apply for tax-exempt status with the IRS. In its Tax Guide for Churches, the IRS states:

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.

So what’s the catch? Why not just tell everyone you are a church and start taking tax-deductible contributions?

There are two main reasons:

1. Registering as a 501(c)(3) church provides proof to your members and other potential donors that your organization is tax-exempt. Once you are registered as a 501(c)(3), your group is listed on the IRS website and in other charity directories, and donors can rely on their tax deductions being valid. Also, other benefits such as non-profit discounts, bank accounts, and grants are only available to registered churches.
2. Note the above quote says that the group must “meet the requirements of IRC section 501(c)(3).” Who decides if your group meets the requirements? The IRS! So wouldn’t it be better to know ahead of time if you meet the requirements? If it turns out later that due to some technicality you didn’t quite meet all the requirements, the IRS will track down all your donors and bill them for unpaid taxes (plus penalties and interest). And they will send your group a bill for the taxes on all those donations received (plus penalties and interest). They can go back all the way to the date your group was started. Needless to say, that could be a very costly mistake.

This is the reason that most churches do register for 501(c)(3) status, even though technically they aren’t required to. Registering does not take away any rights or add any new restrictions—as quoted above, even a church that does not register still needs to conform to the requirements of section 501(c)(3) of the tax code in order to be tax-exempt. So the smart thing to do is to register, and make sure to do it right. Enlist some professional assistance to save time, money, and headaches in the long run.

Previously:

• End Tax Discrimination Now!
• What benefits can I take advantage of as a member of a spiritual group?
• How do I know whether my group qualifies as a “church”?