Whether your church is in its beginning stages or you have been established for many years, your time is focused on pastoring people, communicating vision, and leading people to Jesus. In the midst of all that kingdom work, it can be easy to overlook the administrative aspects of legally establishing your church. One decision you need to make is whether you will pursue 501(c)(3) tax exempt status from the IRS. Under the current tax law, your church is already considered a public charity, so donations to your church are legally tax deductible. But your church can be an approved 501(c)(3) tax-exempt nonprofit organization if you submit the 1023 application to the IRS.
Benefits of 501(c)(3) Status
The question you may be asking is, why would I spend the time and money to get 501(c)(3) status?
Having 501(c)(3) status can enhance your church’s financial transparency, establish a strong foundation that protects you, your board, and your church, and can help you receive certain benefits.
For example, in the past, I worked with the Conroe Vineyard on this process. They had been a church for 15 years but just never had time or expertise to get their 501(c)(3) paperwork completed. It became a priority for them as they wanted to be able to receive supplies from the government food bank for their food pantry, one of the benefits of having the 501(c)(3) status. I worked with their pastor and his team and they received their nonprofit approval in 90 days.
As I have helped other churches go through this process, here are some of the other reasons they have decided to get their 501(c)(3) status:
- Donations are tax-deductible and protected from potential changes in laws affecting church tax-exempt status. This has become a greater concern recently as calls for revoking the tax-exempt status of churches has recently been in the news again.
- Proof of nonprofit exemption is typically required for leasing facilities at a nonprofit rate.
- Multisite churches can be under your “group exemption” umbrella.
- Staff and visiting pastors that are non-US citizens can more easily procure visas.
- Grant funding and donations from local businesses are more obtainable.
How To Apply for 501(c)(3) Status
First thing is: take a deep breath. This is a complex, yet doable process. You just need to complete the IRS Form 1023 application and send it to the IRS along with a filing fee of $600. It also includes completing a Schedule A, which requires information specific to churches. You’ll need these documents before filing:
- Articles of Incorporation
- Bylaws and Constitution
- A Board of Directors
- 3-year Budget
- Written narrative to answer the questions on the 1023 and Schedule A
Resources
Did you just throw your hands in the air and say, “Help me, Jesus!” There are some great resources out there to guide you through the process of tax exempt status. I suggest How to Form a Nonprofit Corporation: A Step-by-Step Guide to Forming a 501(c)(3) Nonprofit in Any State by Nolo Press. This resource is helpful and easy to understand. You can also go to the source itself and check out the IRS Website for help with completing the 1023. You can also find more resources on topics like copyright, articles of incorporation, and more from Multiply Vineyard here.
Addendum
It was brought to our attention that some of the information in this article seems misleading. While we believe the information is accurate, we also believe it’s worth clarifying a few things. A church is not required to complete the IRS request for tax exempt status because that status is automatically provided by law. Churches may, however, formally request exempt status by submitting a request to the IRS. There are a number of benefits of making a formal request, including the receipt of a “determination letter” that unequivocally states that the church is, in fact, tax-exempt. This provides a number of valuable benefits, including certainty to donors (of the church’s exempt status), which gives them confidence that the church’s exempt status is “official.” There are other benefits as well, but we felt this piece of clarification was necessary.
This article originally appeared here, and is used by permission.
