Choosing between a 508(c)(1)(a) designation and 501(c)(3) status for a church centers on balancing maximum independence from government oversight (508) against administrative convenience and donor confidence (501(c)(3)).
Section 508(c)(1)(a) is a, "mandatory exception" for churches, integrated auxiliaries, and conventions or associations of churches, which means they are not required to apply to the IRS for tax-exempt status, nor are they required to file annual Form 990 returns. Section 501(c)(3) is the standard, voluntary, IRS-recognized status that requires a formal application (Form 1023) and annual reporting.
Here is a breakdown of the differences regarding tax exemption and independence:
508(c)(1)(a) "Mandatory Exception" (Maximum Independence)
No Application/Recognition: Churches are not required to file Form 1023 to be recognized as exempt.
No Annual Reporting: Exempt from filing Form 990 (no public disclosure of salaries or finances).
Political Activity: Some advocates argue that 508(c)(1)(a) churches have greater freedom to speak on political issues than 501(c)(3) entities, as they are not bound by the same "permission-based" restrictions.
Internal Control: Records are not required to be made public, allowing for greater autonomy.
Potential Challenges: Donors may be hesitant to give if they are unfamiliar with the status, and it may be more difficult to secure some grants.
501(c)(3) Status (Standard Recognition)
IRS Recognition: Provides a formal determination letter, which assures donors that contributions are tax-deductible.
Compliance & Restrictions: Requires annual Form 990 filing (if income thresholds are met), making finances public. It also restricts involvement in political campaigns.
Grants: Easier access to government and foundation grants.
Administrative Burden: Requires upfront legal/accounting costs to establish and maintain, but provides high certainty for tax-exempt compliance.
Key Takeaways for Independence
"Automatic" Exemption: According to the IRS, churches that meet the requirements of 501(c)(3) are considered automatically exempt, whether they file for recognition or not.
Legal Standing: 508(c)(1)(a) is often promoted as a way to avoid government entanglement, but legal experts note that such organizations must still comply with 501(c)(3) rules (such as no private inurement) even if they are exempt from filing paperwork.
Recommendation: A 508(c)(1)(a) is generally chosen by churches seeking to operate without state recognition or oversight, while a 501(c)(3) is preferred for ease of receiving grants and donor assurance.

What Is a “508”?
Ever wondered why a local church can be tax-exempt from day one, or how a small community charity might launch without filing the usual IRS paperwork? That perception comes from Section 508(c)(1)(A) of the Internal Revenue Code.

In this post, we’ll cover:

What Section 508(c)(1)(A) says and whom it applies to
How the IRS recognizes exemptions automatically
The exact statutory text you need to know
Key takeaways for nonprofit formation
What Is Section 508(c)(1)(A)?
Section 508(c)(1)(A) is a provision in the U.S. Internal Revenue Code that grants automatic recognition of 501(c)(3) status to specific organizations without filing Form 1023. In essence, certain groups become tax-exempt upon formation.

Who Qualifies?
Churches and integrated auxiliaries
Conventions or associations of churches
Small nonprofits with gross receipts normally not exceeding $5,000 per year
Form 1023 at a Glance: This IRS form requires detailed information on an organization’s structure, governance, finances, and activities. It helps the IRS confirm that an applicant truly meets 501(c)(3) criteria.

IRS Guidance on Automatic Recognition
The IRS clarifies automatic exemption through:

Statutory Language: Subsection (c)(1)(A) specifies the covered entities.
Revenue Rulings & PLRs: For example, Revenue Ruling 68-368 illustrates how churches qualify automatically.
Exact Text of Section 508(c)(1)(A)
Below is the precise statutory language most commonly cited:

(c) Exceptions.—
(1) Mandatory exceptions.— Subsections (a) and (b) shall not apply to—

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

Does a Church Need 501(c)(3) Status? A Guide to IRS Rules

If you’re well-versed in the basics of 501(c)(3) organizations, you know that 501(c)(3) status requires an organization to have an IRS-determined charitable purpose. One category of qualifying charitable purposes that these organizations can hold is religious. But there is a difference between religious organizations and churches, and it’s important to understand this difference before determining whether or not your church needs a 501(c)(3) status.

What does it mean for a church to be a 501(c)(3), and does a church even need that status? Let’s take a closer look at the IRS’s rules for this determination.

Overview of a Church’s Status
The practice of charity and “doing unto others” is an ancient concept. The Christian church has existed for approximately 2,000 years, and other religions have church histories going back much further than that.

But what we know today as the “nonprofit sector,” which represents a sizable part of the US economic and service systems, only came to be in the early 1970s. So, given the relative age difference between churches and the idea of a modern nonprofit, what does that mean for churches? Are they nonprofits? Should they be 501(c)(3)?

Let’s take a look at their connections to determine the answer.

Does A Church Need 501(c)(3) Status_Supplementary 1
Church Nonprofit Status
Legally, a nonprofit is an entity that is organized for a non-commercial purpose. It exists separately from the individuals who operate it, to a lesser or greater degree depending upon the entity structure chosen. For example, a nonprofit that operates as an unincorporated association has little legal separation between the parties, while a nonprofit corporation provides a significant separation between people and the entity.

No matter the legal structure, the key element is the non-commercial nature of its activities. The purpose of starting a nonprofit is not to conduct commerce for monetary profit. Operated properly, a nonprofit’s programs and activities accomplish purposes and goals that are strictly non-commercial.

A typical American church is a great example of an organization with activities that are non-commercial in nature. Even in the occasional example where a church may have some commerce, like a bookstore, the exercise and promotion of religion is the primary activity. By definition, that is a non-commercial, hence nonprofit, nature of operations.

So, yes—a church is a nonprofit.

Church 501(c)(3) Status
Now that we’ve established that a church is a nonprofit, we must answer the question of whether or not a church is a 501(c)(3) organization. This answer is a little complicated.

Section 501(c)(3) of the US tax code describes nonprofits that are charitable in nature. Organizations determined to be 501(c)(3) by the IRS are recognized as such because their purpose satisfies the limited scope allowable. Those purposes are:

Religious
Educational
Scientific
Literary
Testing for public safety
Amateur sports promotion
Preventing cruelty to animals and children
The list also covers those purposes that are more generally charitable. Churches exist to exercise and promote religion, so they are inherently religious organizations. That’s how they qualify to be 501(c)(3)s.

For the vast majority of charities, the IRS will only recognize a nonprofit as a 501(c)(3) when it applies for such recognition by filing Form 1023, and it is then subsequently granted in the form of a determination letter. For churches, it works differently.

By default, the US government considers churches to be 501(c)(3) organizations automatically, simply by virtue of existing. Because no corporate structure is needed, a church (generally) is a 501(c)(3).

Churches vs. Religious Organizations
As you can see, churches are nonprofit organizations. However, religious nonprofits are not always churches.

Religious nonprofits such as nondenominational ministries and organizations that study religion can have religious purposes as determined by the IRS without being a place of worship. However, these organizations must apply for 501(c)(3) status to be tax-exempt.

Does a Church Need To Apply for 501(c)(3) Status?
If a church is automatically considered a 501(c)(3) tax-exempt charity, why bother filing Form 1023 and applying for an IRS determination letter? Watch this short video to explore the answer:


As our video explains, the lack of a determination letter doesn’t imply a “lesser” 501(c)(3) status. A church operating without official IRS recognition is still tax-exempt, and it is still able to provide its donors with a potential tax deduction for gifts given. It has all the rights, privileges, and accountabilities of any other charity with a 501(c)(3) determination letter.

However, churches can choose to officially apply for 501(c)(3) status, and there are some advantages and disadvantages to doing so.

Pros and Cons of Applying for Church 501(c)(3) Status
While there are some disadvantages to obtaining 501(c)(3) status, all US churches should seek and obtain an IRS determination letter. Let’s weigh the pros and cons.

The pros and cons of applying for 501(c)(3) status during the church planting process, which are detailed in the text below.
Churches should obtain 501(c)(3) status for the following benefits:

Proof of satisfying necessary requirements: While rights and privileges are the same, there is a distinct difference between assumed status and official recognition. Churches operating under an assumed status have the burden of proof that they are indeed satisfying the necessary requirements, while those with a determination letter have no such burden.
Tax-deductible donations: Taxpayers under audit who have their donations to your church challenged are at a distinct disadvantage if you do not have a determination letter. The tax deduction may be disallowed if the donor can’t prove the church is a qualifying charity. Remember, if you are operating under an assumed status, the IRS isn’t even aware of your church.
Property tax exemption for land and facilities: Your church may find it difficult to obtain property tax exemption for its land and facilities without a determination letter.
It’s also important to note that most donors expect your church to have a determination letter. After all, official 501(c)(3) status signals that your church has been deemed charitable by the IRS, increasing your trustworthiness in the eyes of those who support it.

However, 501(c)(3) organizations do have some limits on activity, especially where it involves campaigns for public office, as well as commercial activities. This could be a potential downside to gaining official 501(c)(3) status, as your church will have:

Limited political influence: 501(c)(3) organizations cannot support political candidates or campaigns.
No private shareholder benefit: A 501(c)(3) status requires that your organization’s activities and earnings do not benefit private individuals in any way.
A tiny handful of churches have given up 501(c)(3) status in order to do and say whatever they choose without regard to limits otherwise placed on charities. However, this comes at the cost of tax exemption and privileges, as well as the ability to have donors give tax-deductible gifts.

If for some reason you and your church leadership decide that you don’t want to be a 501(c)(3), you are simply deciding to be treated like a taxable, for-profit business.

Final Thoughts On 501(c)(3) Status for Churches
A US-based church is, by definition, both a nonprofit organization and a 501(c)(3) tax-exempt entity. The best practice is to solidify that standing by incorporating at the state level and seeking official IRS determination. There’s a lot of misinformation out there, so lead well and stay informed—your congregation will thank you for it!

"Do we have to be a 501c3? I read we can be a 'government-free 508c1a,' not be accountable to the IRS, and operate as a nonprofit independently from government oversight."

Although some websites and authors offer to instruct organizations on how to set up a nonprofit as a “508” instead of a “501”, promising it provides freedom from government interference, HR Ministry Solutions does not recognize these efforts as legitimate.


Section 508 of the US tax code is simply the part of the law that spells out how 501(c)(3)s go about applying for tax-exempt status. 508(c)(1)(a) is the section that addresses the automatic recognition of churches as 501(c)(3)s but is not a legitimate status of its own. The law already provides the freedom and ability of a church to operate as a tax-exempt charitable nonprofit without applying for an official status or receiving a 501(c)(3) determination letter.


As a reminder, non-profit status only applies to an organization’s ability to be tax-exempt and accept tax-deductible gifts. It does not apply to employment practices. For more details, please refer to our resource “Nonprofits & Religious Organizations”.

Church 501(c)(3) Exemption Application & Religious Ministries
The question of "does a church need a 501(c)(3) status?" comes up almost every day, and the short answer, and maybe, the correct answer is No. There's no good reason to apply for 501(c)(3) tax exemption for a church as many will claim. And depending on how you look at it, it's very true. Churches are automatically exempt from taxation, period. However, ministries and other religious organizations are not!

If you're wondering how to start a church, a 501(c)(3) ministry, or how to take it one step further by starting a 501(c)(3) church with an exemption letter from the IRS, you should read all the church articles on this site from top to bottom, as these instructions apply to all churches and religious organizations, automatically exempt or otherwise.

It's doubtful that the Pope is reading this article to find out how the Catholic Church can apply for 501(c)(3) tax exemption letter. To the contrary, the reader of this article is most likely an honest man, trying to do the right thing, in spite of the status quo.

Church 501(c)(3) Exemption Application Table of Contents
Should you Apply for 501(c)(3) Tax Exemption for a Church? Are There Any Benefits?
501(c)(3) Tax Exemption for Churches Comes With Transparency
The Myth That Destroyed More Churches Than Sin: "Church Automatic Exemption Means no Compliance"
What is Considered a Church and What are the Qualifications
The IRS Can't Define a Church and Why That Matters When you Start a Church
Starting a Church Means Showing a Real Congregation, Not an Audience
Why Congregation Determines Whether you Get 501(c)(3) Church Status
Why Your 501(c)(3) Church Application is Easier if you Have a Congregation
Digital, TV, Radio, and Internet Ministries are Not Automatically Churches
Best Advice to Anyone Starting a Church or Seeking 501(c)(3) Church Status
The Legal Characteristics the IRS Looks for in a Church
What is an Integrated Auxiliary of a Church?
Starting a Church With 501(c)(3) Tax Exemption Status
How to Apply for Church 501(c)(3) Tax Exemption Status
Church 501(c)(3) Tax Exemption Status and How you Can Lose it
Record Keeping Requirements for Churches
Form 990 Requirements for Churches and Religious Organizations
Should you Apply for 501(c)(3) Tax Exemption for a Church? Are There Any Benefits?
When pastors think about starting a church, they usually don't think of the legal ramifications. To tell you the truth, your church will generally be exempt from paying some federal taxes whether you apply for 501(c)(3) status or not. On the other hand, it's a myth that applying for 501(c)(3) status puts an undue burden of any kind on your church. Under the law, churches with 501(c)(3) exemption letter and without are all dealt with equally.

By applying for 501(c)(3) tax exemption status for your church, you have nothing to lose and much to gain. There are many benefits that a 501(c)(3) recognized church can receive such as:

Eligibility for many grants that otherwise you couldn't apply for. A lot of foundations look for an excuse to not give their grants to churches by requiring exemption letter! Right or wrong, it's the way it is.
Eligibility to receive donations in the form of wholesome excess food and food items from restaurants, grocery stores, and supermarkets alike by shielding the donor's liability under the Bill Emerson Good Samaritan Food Donation Act of 1996. While the Act applies to churches as a matter of law regardless of how exemption is obtained, in practice this benefit is functionally limited to churches with a 501(c)(3) determination letter, as most donors require formal documentation before donating. They simply want a tax write-off, and no paperwork means no food.
Major nonprofit discounts at many wholesalers, stores, and companies. Almost all companies require documentation showing that your church has a 501(c)(3) tax exemption letter.
Exemption from paying sales tax from other states which do require 501(c)(3) tax exemption letter.
And business benefits aside, It all comes down to honesty. The most important thing is the message that you send to your congregation by the manner that you form and start your church: Our Church is not part of the secretive non-transparent status quo.

501(c)(3) Tax Exemption for Churches Comes With Transparency
There are two kinds of people in this world, honest people and dishonest people. Churches and religious organizations run by human beings are no different.

Being a Christian means more than a social identity. It's a commitment to non-negotiable principles: honesty, transparency, compassion for those in need, treating others as you'd want to be treated, humility, respect, and non-violence.



If you're starting a church, those same standards don't loosen, they intensify. You can't claim to build a house for God while cutting corners on the values He preached. The real foundation isn't concrete or church's bylaws. It's character.

More and more churches are distancing themselves from the long running non-transparency policy because they're simply sick of hearing that all churches are in the business of embezzling public funds, raping altar boys, polygamy, and tax evasion. We're not talking about transparency to the government, but transparency to the congregation and the general public. You're not asking the IRS for approval, you're telling the public that you have nothing to hide.

There are many honest and god-fearing pastors who are just fed up with everything because of the conduct of the money-grubbing conglomerate churches who've forgotten what it's like to follow in the footsteps of Jesus Christ. The image your church projects, and the convictions it truly lives by, are entirely up to you.

Did you know?
Clergy are considered self-employed for Social Security even if paid by the church.
The Myth That Destroyed More Churches Than Sin: "Church Automatic Exemption Means no Compliance"
This is the lie that leads sincere pastors straight into federal disaster. Churches are automatically exempt from some taxation without applying for 501(c)(3) status, but they're not exempt from the law itself. The IRS doesn't care whether you filed Form 1023. They care whether you follow the rules that apply to every church under the Internal Revenue Code.

Here is the reality:

Automatic exemption doesn't protect your church from the ban on inurement.
It doesn't protect your church from private benefit.
It doesn't protect your church from compensation abuse, political activity, sloppy bookkeeping, or payroll violations.
It doesn't protect your church from an audit.
It doesn't protect your church from whistleblowers, state revenue agencies, or the consequences of pretending your living room is a cathedral.
The idea that "we didn't apply, so the rules don't apply" is spiritual suicide. Courts have revoked churches' status consistently for pastors who believed their exemption was a shield instead of paperwork.

A church that ignores compliance is not brave. It's unprepared. And unprepared churches end up as IRS audit exhibits in training manuals instead of places of worship.

If you want your church to survive, stop believing internet folklore. Automatic exemption removes one form. It doesn't remove the commandments of federal law.

What is Considered a Church and What are the Qualifications
Before starting a church, whether 501(c)(3) or not, you have to know that not all religious organizations are considered churches. Because special tax rules apply to churches, it's important to distinguish churches from other religious organizations.

The word church for the sake of tax exemption is not a reference to the Christian Church of any denomination, it encompasses any recognized place of worship including synagogues, mosques, and temples. It's just a collective term the IRS uses in the context of tax exemption.

Religious organizations that aren't churches usually include nondenominational ministries, interdenominational or ecumenical groups, and other entities whose main purpose is to study or advance religion.

Churches and religious organizations can be legally organized in several ways under state law, including as unincorporated associations, nonprofit corporations, or charitable trusts. If you're applying for 501(c)(3), then it should be a nonprofit corporation.

The IRS Can't Define a Church and Why That Matters When you Start a Church
Anyone trying to start a church or apply for 501(c)(3) church status eventually discovers that even the IRS can't define what a church is. People expect a clean legal definition. What they get is a seventy-year paper trail of confusion, court fights, and IRS manuals that contradict each other, all because of religious sensitivity.

The Tax Court's famous case, Chapman v. Commissioner, 48 T.C. 358 (1967), produced three different definitions of a church, all from judges ruling on the same facts. One said a church means a denomination. Another said a church is any group that gathers for religious purpose. Another said a church must administer sacraments and conduct worship. If the referees can't agree on the rulebook, you know you're dealing with chaos.

The IRS tried to fix the problem with what's knows as the fourteen points. They collected traits that most churches historically shared and used those traits as a guide for deciding whether an organization counts as a church for tax exemption.

That's why some pastors can start a church with twenty people and qualify for 501(c)(3) status immediately, while a giant televised "ministry" with millions of viewers may not qualify at all. The IRS cares about the religious mission and community, not production value.

Starting a Church Means Showing a Real Congregation, Not an Audience
If you want to start a church the right way, here is the single most important fact: the IRS cares about congregation. Not equipment. Not livestreams. Not subscriber counts. A congregation.

Courts have stated repeatedly that a church must include "a body of believers or communicants that assembles regularly in order to worship." This is the clear line between a church and every other religious organization.

Many new churches fail because they believe that:

A radio audience counts.
A livestream audience counts.
Their employees in the studio count.
Their mailing list counts.
Their donors count.
None of these count as a congregation when applying for church 501(c)(3) tax exemption. Those people don't assemble for worship and don't form a religious community. They're spectators.

If you want the IRS to classify you as a church, your organization needs:

A real, continuous congregation.
Regular worship services.
A physical gathering, not passive consumption.
A religious community that treats your organization as their church.
That's why house churches qualify all the time when televangelism ministries fail, even when they reach millions.

Why Congregation Determines Whether you Get 501(c)(3) Church Status
Your church can be small. Your church can be just starting. Size doesn't matter. What matters is activity, continuity, and intent. The IRS looks at whether you're building a religious community or simply running a personal project with religious content.

Courts have rejected small "churches" that never grow, never advertise, and never attempt outreach because that behavior suggests one thing: insider benefit. A real church grows because it's trying to grow.

Here is the blunt rule: If your "church" is a family of four, stays a family of four for a decade, and never tries to reach anyone else, the IRS assumes you built a tax shelter, not a church.

If you want to start a church and get 501(c)(3) status, show the life of a church, not the paperwork of one.

Why Your 501(c)(3) Church Application is Easier if you Have a Congregation
When pastors ask how to start a church and get a 501(c)(3) determination letter, the answer is simple: build the congregation first. Automatic exemption exists, but it doesn't help you when you want proof of church status, a nonprofit bank account, grant eligibility, donor confidence, or state sales tax exemption.

If you want a clean 501(c)(3) approval:

Assemble your congregation.
Document your services.
Show continuity of worship.
Show a body of believers, not a private club.
Show stability and biblical governance.
That's the difference between a church and a ministry. Ministries apply as 501(c)(3) organizations because they lack a congregation. Churches qualify under the church classification because they have one.

How This Protects Your Church From Losing Its 501(c)(3) Status
When you start a church, the fastest way to lose your 501(c)(3) status is to look like a personal financial vehicle. IRS agents are trained to look for red flags:

No growth.
No outreach.
No attempt to build a congregation.
All "members" are related.
Leaders financially benefit from donations.
This is the blueprint for revocation. Inurement kills churches faster than anything else, and tiny, insular "churches" with no congregation are the IRS's favorite place to find it.

If you want to protect your church long term, build a congregation that exists because of higher calling, not family ties or tax benefits.

Digital, TV, Radio, and Internet Ministries are Not Automatically Churches
People starting online churches usually assume followers equal a congregation. The IRS has said the opposite for decades. A digital audience is not a congregation, and consuming religious content is not worship in the legal sense.

Radio ministries tried calling their listeners a congregation. TV ministries tried calling their viewers a congregation. Today, online ministries try the same with subscribers, followers, and livestream counts. Every one of those arguments has failed. A church requires a community that assembles for worship, not spectators consuming content from home.

A digital ministry can qualify as a 501(c)(3) religious organization, but it can't qualify as a church unless it has:

a physical congregation that actually gathers
regular, continuous group worship
a community that treats the organization as their church, not entertainment
leadership and governance tied to that congregation
religious activity where assembling people is the primary means of carrying out the mission
Courts have repeated this point: broadcasting is not congregation, viewership is not membership, and digital engagement is not worship. If your primary method of delivering your religious purpose is media distribution rather than assembling people, the IRS classifies you as a religious organization, not a church.

Online ministries can do meaningful work, but legally they're evangelistic or teaching organizations. They're not churches unless they have a real congregation behind the camera.

If your goal is to start a church and obtain 501(c)(3) church status, build the congregation first. If you want to operate a digital or broadcast ministry, file as a 501(c)(3) religious organization, not as a church.

Best Advice to Anyone Starting a Church or Seeking 501(c)(3) Church Status
If you want to start a church and be recognized as a church, act like one.
If you want the IRS to treat you like a church, give them what they actually evaluate.
Not slogans. Not livestreams. Not a PO box. A congregation.

The IRS may be confused about doctrine, but they're crystal clear about structure. Build an actual religious community and you will be treated as a church, with all the protections, exemptions, and 501(c)(3) benefits that follow.

The Legal Characteristics the IRS Looks for in a Church
Before the IRS even looks at your doctrine, your mission statement, or your passion for ministry, they look at structure. If you want the government to recognize your organization as a church instead of a generic religious nonprofit, these are the characteristics they expect to see.

To qualify for tax exemption as a church, you must demonstrate certain key characteristics, such as:

a church with a distinct legal existence;
a church with recognized creed and form of worship;
church should have a definite and distinct ecclesiastical government;
formal code of doctrine and discipline;
distinct religious history (you can't be a church if you just invented your religion);
membership not associated with any other church or denomination;
organization of ordained ministers;
ordained ministers selected after completing prescribed courses of study;
literature of its own;
established places of worship (the actual location of the church);
regular congregations;
regular religious services (it can't be on and off);
Sunday schools for the religious instruction of the young; and
schools for the preparation of its ministers.
The IRS generally uses a combination of these characteristics, together with other facts and circumstances, to determine whether a nonprofit organization is considered a church for federal tax purposes.

The IRS doesn't judge what a church believes. The only requirement is that the beliefs are sincerely held and the related practices aren't illegal or against public policy.

When they ask whether a church has "a literature of its own," they're not looking for a new holy book, they just want to see that your beliefs exist in writing. Using the Bible is fine. Having your own scripture or doctrine is fine too. But having nothing at all; no written teachings, no statement of faith, no materials that define what you believe, means there's no visible foundation for the religion you claim to practice.

What is an Integrated Auxiliary of a Church?
Besides ministries and churches, there are also organizations that qualify as integrated auxiliaries of a church under IRS rules. An integrated auxiliary of a church is an organization that's affiliated with or controlled by a church, convention, or association of churches, but is not itself a church. These groups include church-run schools, mission societies, or men's and women's ministries.

In general, the IRS will recognize an organization as an integrated auxiliary of a church if it meets three main requirements related to its relationship with the church, its internal operations, and its nonprofit religious purpose.

These types of organizations must:

be described both as an IRC (Internal Revenue Code) Section 501(c)(3) charitable organization and as a public charity under IRC Sections 509(a)(1), (2) or (3);
be affiliated with a church or convention or association of churches; and
receive financial support primarily from internal church sources as opposed to public or governmental sources.
 This is where the 501(c)(3) determination letter becomes valuable. It allows you to apply for grants not just for the church itself, but for one of its integrated auxiliary programs, for example, youth outreach, community education, or children's development initiatives.

The same rules that apply to a church generally apply to its integrated auxiliaries, with one major difference: an integrated auxiliary does not share the limited audit protections that churches enjoy. In other words, it's tax-exempt like a church, but it doesn't have the same degree of IRS audit immunity as a church.

Starting a Church With 501(c)(3) Tax Exemption Status
Further above, we talked about the automatic tax exemption so let's dig in deeper on what's required for starting a 501(c)(3) church and how to file a church 501(c)(3) application.

Starting a Church With Tax Exemption Under the Umbrella of a Central or Parent Organization
A new church that's affiliated with a parent organization should first check whether the parent holds a group exemption ruling from the IRS. If the parent organization has a group ruling, the IRS may already recognize the new church as tax-exempt under that umbrella.

Under the group exemption process, the parent organization, sometimes called the "central organization," acts as the holder of the group ruling. It maintains a list of subordinate churches or related organizations covered by that ruling. If your church appears on that list, it's already recognized as tax-exempt and doesn't need to file a separate 501(c)(3) application or request its own 501(c)(3) determination letter. If the group ruling is jeopardized, there goes your legal status and protection.

Most new churches are avoiding this exact scenario because they are fed up with people who don't really know them controlling their congregation. If it's time to stand on your own two feet as an independent church, read From Group Exemption to Independence: The Church Reboot Guide.

Religious Organizations That are Not Churches
Unlike churches, non-church religious organizations must apply to the IRS for 501(c)(3) tax exemption status, unless their gross receipts normally don't exceed $5,000 per year.

How to Apply for Church 501(c)(3) Tax Exemption Status
The process of applying for church or ministry 501(c)(3) exemption through 501(c)(3) application (Form 1023) is covered in detail throughout this website and it's exactly the same as any other nonprofit. However, churches and religious organizations have somewhat different compliance requirements which are detailed in the following articles that specifically apply to religious entities:

Church Charitable Contributions and Donations Regulations & Laws
Church Ministers Compensation and Salaries Laws & Regulations
Churches and Unrelated Business Income TAX
Churches Political Activities and its consequences
When a Church or Ministry Gets Audited by the IRS
Churches are also required to complete the Form 1023 Schedule A.

Employer Identification Number (EIN) for Churches
Every tax-exempt organization, including a church, needs an Employer Identification Number (EIN), even if it has no employees. An EIN is required for several common activities, such as opening a bank account, being listed as a subordinate in a group exemption ruling, or filing IRS forms like W-2, 1099, or 990-T.

An organization can apply for an Employer Identification Number (EIN) by filing Form SS-4, Application for Employer Identification Number, following the instructions provided by the IRS. If the organization is submitting Form 1023, Application for Recognition of Exemption Under Section 501(c)(3), the EIN must be included on that form.

501(c)(3) Application Form 1023 for Churches
When applying for recognition as tax-exempt under IRC Section 501(c)(3), churches and some religious organizations must use the long version of Form 1023. Smaller religious organizations may qualify to use Form 1023-EZ, Streamlined Application for Recognition of Exemption.

A church applying for 501(c)(3) exemption cannot use the Form 1023-EZ.

A religious organization must generally file its Form 1023 application within 27 months from the end of the month when the organization was legally formed. Filing within that window allows the IRS to recognize it as tax-exempt and eligible to receive tax-deductible contributions dating back to its formation.

However, if the religious organization happens to be a church, it's treated differently. The IRS can recognize a church as tax-exempt from the date it was established, even if its application is submitted more than 27 months later.

 This means your church doesn't have to be a new church. Even if your church is 100 years old, you can still apply for church tax exemption status without worrying about deadlines or penalties. No other type of organization is given this kind of flexibility by the IRS.

The cost of applying for church 501(c)(3) tax exemption is exactly the same as any other nonprofit organization. The IRS is required by law to collect a non-refundable form 1023 user fee from any organization seeking a determination of tax exemption status under IRC Section 501(c)(3).

Church 501(c)(3) Tax Exemption Status and How you Can Lose it
All Section 501(c)(3) organizations, including churches and religious organizations, must follow specific IRS rules. Despite what some church leaders claim, these rules DO APPLY to churches that are automatically recognized as tax exempt.

Churches and religious organizations, like many other charitable organizations, qualify for exemption from federal income tax under Internal Revenue Code Section 501(c)(3) and are generally eligible to receive tax-deductible contributions. To qualify for tax exemption status, a church or a religious organization must meet the following requirements (covered in detail throughout this website):

the church or the ministry must be organized and operated exclusively for religious, educational, scientific or other charitable purposes;
net earnings of church or the ministry may not inure to the benefit of any private individual or shareholder;
no substantial part of the church or the ministry's activity may be attempting to influence legislation;
the church or the ministry may not intervene in political campaigns; and
the church or the ministry's purposes and activities may not be illegal or violate clear public policy.
Inurement and Private Benefit of Churches
Inurement to Insiders: Churches and religious organizations are not allowed to use their income or property to personally benefit insiders. An insider is anyone with a personal interest in the church's operations, such as the pastor, officers, board members, and key employees. in Church's case, pastors are always insiders.

Improper use of church funds or assets includes paying excessive salaries, transferring property to insiders below fair market value, or distributing profits to individuals. These actions violate federal law for 501(c)(3) organizations and can result in the loss of tax exemption status.

The rule is absolute, any amount of private benefit can trigger IRS penalties. Insiders who personally benefit may also face excise taxes and must repay the organization for the improper gain.

Reasonable compensation for legitimate work and fair market payments for goods or services are allowed. What crosses the line is when payments or transfers go beyond what's reasonable or serve private interests instead of the church's exempt mission.

When a church or religious organization gives an insider an economic benefit that exceeds fair value, it becomes what the IRS calls an excess benefit transaction. In these cases, both the insider and any managers who knowingly approved the transaction can be penalized. The insider must repay the excess amount, and the IRS may assess additional excise taxes.

For technical details, see Title 26 of the Code of Federal Regulations, sections 53.4958-0 through 53.4958-8.

Church Private Benefit: A church or religious organization recognized under section 501(c)(3) must operate solely for charitable, educational, religious, or other exempt purposes. Its activities can't be designed to serve private interests, whether of an individual or another organization.

The people or groups who benefit from a church's programs should be legitimate charitable recipients, such as the poor, the sick, or the general public. In other words, the church's work must advance its religious mission or provide a clear public benefit, not personal gain.

Private benefit is different from inurement to insiders. Inurement involves people within the church, while private benefit can involve anyone outside the organization who gains from its activities. Private benefit must be substantial to put a church's tax exemption status at risk. Read the following for further information on what jeopardizes the tax exemption status of a nonprofit organization.

Record Keeping Requirements for Churches
All tax-exempt organizations, including churches and religious organizations, must keep accurate accounting books and records, even if their tax exemption status hasn't been formally recognized by the IRS. These records are necessary to support the organization's claim for exemption if the IRS conducts an audit. Churches must also maintain financial records detailed enough to complete any required federal tax or information returns.

There's no specific format for keeping records. However, the types of required records frequently include organizing documents (charter, constitution, articles of incorporation) and church bylaws, minute books, property records, general ledgers, receipts and disbursements journals, payroll tax records, banking records and invoices. The extent of the records necessary generally varies according to the type, size and complexity of the religious organization's activities. Please read the following for further information on 501(c)(3) record keeping and accounting requirements.

Form 990 Requirements for Churches and Religious Organizations
Generally, all religious organizations must file Form 990, Form 990-EZ or Form 990-N except churches and the following related 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

Pros and Cons of Seeking IRS Recognition of 501(c)(3) Status for Churches

For many churches, the question of whether to formally seek 501(c)(3) status with the IRS is a pivotal one. While churches are automatically considered tax-exempt under section 501(c)(3) and are not required to obtain IRS recognition of exemption, some choose to apply anyway, seeking added legitimacy or access to certain benefits. However, obtaining an IRS determination may be perceived as coming with limitations that affect how a church operates, speaks, and engages in public life. Understanding both the advantages and disadvantages is key for church leaders, boards, and pastors looking to make informed decisions.

The Built-In Tax Benefits for Churches

Unlike most other nonprofits, churches do not have to apply for tax-exempt status to be treated as such. Under Internal Revenue Code Section 508(c)(1)(A), churches are automatically recognized as 501(c)(3) organizations if they possess certain characteristics, including: a recognized creed and form of worship, a regular congregation, regular religious services, and an established place of worship. Organizations meeting the IRS definition of a “church” do not need to file Form 1023 with the IRS or pay an application fee to begin receiving federal tax-exemption benefits.

Churches are also exempt from filing Form 990 annual information returns, a requirement for most other nonprofits. This privacy can be an advantage in and of itself.

Advantages of Applying for 501(c)(3) Status for Churches

Some churches still choose to file Form 1023 and become officially recognized by the IRS for strategic or public-facing reasons. The potential benefits include:

Greater transparency: Filing an exemption application can increase confidence in financial management for a church’s congregation and the general public.

Additional Tax Exemptions: Some state or local tax exemptions may require IRS determination or be easier to obtain with an IRS determination letter. Similarly, it is often required for property tax exemption.

Access to Greater Funding Sources and Services: Many grant application portals, donation platforms, or bank services require an IRS determination letter.

Comfort for Donors: IRS recognition provides clear documentation for donors, especially for large gifts or foundation grants that may prefer to give to churches that can provide an official IRS determination letter.
Disadvantages of Applying for 501(c)(3) Status for Churches

However, churches that seek formal determination of 501(c)(3) status also subject themselves to greater regulation and scrutiny. The most common drawbacks include:

Increased Oversight: Applying for and maintaining 501(c)(3) status means filing detailed information about governance, operations, and activities with the IRS. It opens the door to greater scrutiny, potential audits, and possible revocation if the church strays from tax-exempt purposes.

Public Accountability: Though churches are not required to file Form 990, seeking a 501(c)(3) determination may increase pressure to disclose information, such as key financial or leadership information, and operate in accordance with nonprofit best practices, which not every small or independent church is prepared to adopt.
There is no one-size-fits-all answer for churches deciding whether to formally seek recognition of 501(c)(3) status. For some, the benefits of public perception and expanded funding access outweigh the risks. For others, particularly smaller or more mission-focused congregations, the built-in exemption with its minimal administrative obligations and increased privacy may be preferable. As always, churches should consult legal counsel and review their long-term goals before making a decision that could reshape both their ministry and their regulatory obligations.

NOTE: The information contained herein is not intended to be legal advice and the reader should know that no Attorney-Client relationship or privilege is formed by the posting or reading of this article which is also not intended to solicit business.

What Is The Difference Between Nonprofit, 501(c)(3), and Tax Exempt?
What Is The Difference Between Nonprofit, 501(c)(3), and Tax Exempt?
by Admin
September 5, 2017 | 0 Comments


Nonprofit, 501(c)(3), and tax exempt are terms that are often used interchangeably. However, these terms do not mean exactly the same thing. A nonprofit organization is not necessarily tax exempt, but it can be with special features granted by the IRS. Understanding the differences between the two terms is important while filing your 990-N or 990 EZ forms on File 990.
Nonprofit
Nonprofit refers to a corporation that is created for a nonprofit purpose, usually a cause, mission, or community need. Because the organization serves a purpose to the public, it receives special treatments by law. Contrary to popular belief, nonprofit corporations are actually able to make a profit, but the main focus of the organization can not be profit-making. There are many different branches within nonprofit organizations that distinguish themselves based on what the cause for the nonprofit is. Some of these branches include nonprofit corporations, unincorporated associations, and charitable trusts.

501(c)(3)
501(c)(3) refers to a nonprofit organization that is specially recognized by the IRS because of its charitable programs. These organizations are granted tax exemption by the IRS. The (c) & (3) refer to specific tax categories in the Internal Revenue Code. A nonprofit organization that has been granted this status can also utilize write-off donations.

Tax Exemption
Tax exemption is the product of a 501(c)(3) organization that is granted by the IRS. This status exempts nonprofits from needing to pay corporate income taxes on any revenue related to the purposes of the nonprofit organization. To apply for this status, a nonprofit must be classified in one of the 28 different categories of nonprofit organizations, including trade, research, and religious associations.

Learn More With File 990
The differences between a nonprofit, 501(c)(3), and tax exempt organization can be difficult to comprehend, but we hope that this quick guide helped to explicate the specific details of each. File 990 is the leading nonprofit tax e-filing software that allows organizations to securely and easily complete 990-N and 990 EZ forms online. Read our blog for more interesting information like this and professional insight on nonprofit tax filing.

Benefits and Disadvantages of 501c3 Status for Churches


The Internal Revenue Code Section 501(c)(3) provides churches and religious organizations with federal tax-exempt status.

There is no requirement for churches to obtain this status, but there are several major benefits to registering as a 501c3 nonprofit organization.

In this comprehensive guide, we'll examine the benefits and disadvantages of 501c3 tax exemption for churches and provide tips and best practices for how you can obtain and maintain this for your church!

What Is 501c3 Status?
501c3 status is a federal tax-exempt status that is granted to qualifying nonprofit organizations, including churches and religious organizations. The main reason any church would want to become a 501c3 organization is so the church may operate without paying federal income tax on their revenue and allow donors to make tax-deductible contributions.

Churches apply for 501c3 status so they can operate without paying federal income tax and to allow donors to make tax-deductible contributions
To be considered tax-exempt, churches must meet certain requirements established by the IRS, including 1) being organized and operated exclusively for religious, charitable, or educational purposes, and 2) not engaging in lobbying or political campaign activities.

I'll say this upfront: There is no requirement for churches to obtain 501c3 status. However, it can provide numerous benefits...

Benefits of 501c3 Status for Churches
Being recognized by the IRS as a 501(c)(3) organization offers benefits for churches and religious organizations. These benefits include:

Tax-exempt status: Churches with 501c3 status are exempt from federal income tax on their revenue, which will save the organization a significant amount of money

Tax-deductible donations: Supporters can deduct their contributions to established nonprofits like churches, which can encourage giving and help churches raise more funds

State tax exemptions: Some states provide additional tax exemptions for churches with 501c3 status, including exemptions from state employment, state sales tax, and/or income taxes

Exemption from federal unemployment tax: Churches with 501c3 status are exempt from paying federal unemployment tax, which also saves money

Tax-exempt financing and reduced postal rates: Churches with 501c3 status may also be eligible for tax-exempt financing, which can help the organization save money on interest and other fees, as well as eligible for reduced postal rate

Nonprofit discounts: Churches with 501c3 status may also be eligible for a variety of discounts and benefits from businesses, which is especially helpful for a new church or church plant as you are just beginning to purchase everything you need

Reduced Online Giving transaction fees: Churches with 501c3 status may be able to receive lower transaction fees with online merchant processors, reducing the fees paid to receive donations online.

These benefits make obtaining 501c3 status an attractive option for many churches and religious organizations
These benefits make obtaining 501c3 status an attractive option for many churches and religious organizations. However, there are a few drawbacks to being a 501(c)3 that many church leaders aren't aware of...

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Disadvantages of 501c3 for Churches
Many pastors and church leaders I talk to are surprised to learn that there could be drawbacks to making their church a 501(c)3. Those include:

No private ownership: Nonprofit organizations are publicly owned, which means that 501c3 churches cannot be sold like a business or transferred to private individuals by their founders. Additionally, in situations where a church misuses or misapplies its assets (e.g., church funds used exclusively for the benefit of one person), the government can seize those assets

No political campaigning or lobbying: Churches with 501c3 status cannot contribute to or get involved in political campaigns

Limited purpose: 501c3 churches are subject to limitations based on the law. If they act outside of those limitations, they can lose their nonprofit status. If they make money outside of their purposes, they can be subject to Unrelated Business Income Tax (UBIT)

Loss of privacy: Nonprofit organizations are obligated to publicly disclose certain information. While 501c3 churches are exempt from filing some of the same documentation as other nonprofit organizations, there is still information that is required to be public

It's important to carefully consider these potential drawbacks before pursuing 501c3 status for your church or religious organization
Most leaders won't find these drawbacks to be an issue for them or their church. But it's important to be aware of them before taking the plunge!

With proper planning and adherence to the rules and regulations surrounding 501c3 status, many churches can reap the benefits of this status without running into any significant issues.

Do Churches Need to File for 501c3 Status?
In a word: No!

Even if a church does not file for 501c3 status, they are still considered tax-exempt under federal law as long as they meet certain requirements, including being organized and operated exclusively for religious, charitable, scientific, or educational purposes and not engaging in substantial lobbying or political campaign activities.

There Are Still Rules to Follow
It's important to note that churches must still comply with the rules and regulations surrounding tax-exempt organizations, even if they do not file for 501c3 status

This includes adhering to the limitations on political campaigning and lobbying, as well as being careful not to engage in any activities that would violate public policy or the law.

The core difference between a 501(c)(3) and a 508(c)(1)(A) (often referred to as a "508 church") lies in formal recognition by the IRS. While both are tax-exempt religious organizations under the same Internal Revenue Code section, a 508(c)(1)(A) church is not required to apply for, or maintain, formal recognition of its tax-exempt status, offering greater administrative independence and confidentiality.
At-a-Glance Comparison
Feature 	501(c)(3) Church	508(c)(1)(A) Church
Application (Form 1023)	Required for official recognition	Not required (automatic)
Annual Tax Filing (990)	Required (if over threshold)	Not required
IRS Designation Letter	Yes (Publicly listed)	No (Private)
Political/Policy Speech	Restricted (Johnson Amendment)	Generally considered unrestricted
Donor Confidence	High (due to IRS letter)	Moderate (lesser known)
Public Scrutiny	High (files 990)	Low (no 990 filed)
1. 501(c)(3) Church: The Traditional Path
A 501(c)(3) church has officially applied to the IRS (Form 1023) for a determination letter recognizing its exempt status.
Independence: While not required to apply to be tax-exempt, they choose to, which subjects them to more IRS interaction.
Tax/Filing: They are technically considered 501(c)(3) organizations by the IRS, but are exempt from the annual Form 990 filing, similar to 508 churches.
Independence: They must adhere to regulations regarding political campaigning (the "Johnson Amendment").
2. 508(c)(1)(A) Church: The "Mandatory Exception"
Section 508(c)(1)(A) of the tax code provides an automatic exception for churches, their integrated auxiliaries, and conventions/associations of churches.
Independence: These organizations are deemed tax-exempt simply by existing and operating as a church. They do not need to file for approval.
Independence: Proponents argue that by not filing for 501(c)(3) recognition, these churches are less under the jurisdiction of the state, allowing for greater freedom of speech, including the ability to discuss politics and candidates without fear of losing their status.
Confidentiality: Because they do not file Form 1023 or 990, their financial records and board meeting minutes are not subject to public inspection.
How They Affect Church Tax Exemption
Both types of organizations are exempt from federal income tax and, in most cases, state income tax. The tax exemption for both is generally based on the same underlying code section 501(c)(3), even if the 508 church doesn't have the paperwork.
Donation Deductibility: Donors can claim a charitable deduction for donations to a 508(c)(1)(A) church just as they can for a 501(c)(3) church, as both meet the requirements of Section 501(c)(3).
Risk: If a 508 church does not have a formal letter of determination, and a donor is audited, the donor might have to prove the entity qualifies as a church.
How They Affect Church Independence
Independence: The 508(c)(1)(A) status is designed to protect churches from government entanglement, particularly in matters of speech.
Independence: 508 churches are not bound by the same restrictions on political advocacy that apply to other non-profits, allowing them to speak freely on issues of doctrine, morality, and politics.
Independence: Some 508 churches choose to structure themselves as faith-based organizations (FBOs) or trusts to further solidify their independence from state incorporation rules.

Church vs. Religious Charity Tax Law – Exploring the Differences and Similarities

One of the assumptions that we run into a lot in the course of our work is the idea that, for tax purposes, churches and ministries are essentially the same category of nonprofit. Turns out, that’s not exactly how it works.

Introduction
This article deals with a topic that surfaces pretty often at Foundation Group, and that is the difference between a church and a ministry for 501(c)(3) purposes.  Most often, the confusion comes in because people are focused on the various IRS purpose categories.  We’ve talked often about that subject before, but to summarize, the charitable purposes the IRS recognizes are:

Religious
Scientific (research)
Testing for public safety
Literary
Education
Fostering amateur sports
Prevention of cruelty to animals and children, and
Other generally charitable activities
The Religious Purpose Category
Are They the Same?

So if you look at that list, what jumps out at you?  The first one on the list is religious. So the assumption is that since a church and a para-church ministry (better referred to technically as a religious charity) are both religious organizations, they’re in the same category of 501(c)(3) nonprofit. That’s actually true from a categorical standpoint. What follows, then, is the notion that because both organizational types share a purpose category, they must be treated the same way for tax purposes. And that’s not true at all.

A Three-Tiered Categorization System

The IRS has a somewhat confusing way that they deal with this stuff. It’s best to think of it as a three tiered categorization process. The first tier or filter is that purpose category. Is your organization’s purpose a qualifying one under 501(c)(3)? Is it exclusively religious, or literary, or educational?  That’s the biggest hurdle. Assuming your purpose qualifies, then comes the Foundation Test.

In your IRS application for 501(c)(3) status, you will have told the IRS that you want to be considered either a public charity, a private foundation, or a private operating foundation. That’s Tier 2, the Foundation Test. Most likely, if you’re qualifying as a religious entity, then you probably asked the IRS for 501(c)(3) status as a public charity.

Assuming public charity status is what you asked and qualified for, that gets us to Tier 3: sub-category. And under that sub-category are a number of options, and this is where churches take a different fork in the road than do religious charities.

Religious charities most often fall under subsection 509(a)(1) and 170(b)(1)(A)(vi), while churches are actually their own category of 501(c)(3) under 509(a)(1) and 170(b)(1)(A)(i). Don’t get bogged down in the crazy subsection references. What matters is the difference in how these organizations are treated, and that’s what I’ll get into next.

Difference 1 - Applying for 501(c)(3) Status
Virtually all nonprofits that are seeking tax-exempt status from the IRS must file a Form 1023 or Form 1024 application, depending on the 501(c) status they want. Assuming it’s a 501(c)(3), as most are, it’s the Form 1023 that’s filed. Now, I say virtually all, because here’s our first point of difference between a church and a religious charity.

If you are starting a para-church ministry or other religious charity, you must file Form 1023 with the IRS and request a determination letter as a 501(c)(3). You have no choice. If you are starting a church, however, you have an option. You CAN file Form 1023 and seek formal recognition, which in our opinion is the best option most of the time, or you can choose not to. So what happens if you choose not to?

There’s another part of the tax code called Section 508 that explains the process for how a startup nonprofit is to seek tax-exemption under 501(c)(3). In Section 508, it explains that under the law, churches are presumed tax-exempt under 501(c)(3) simply by existing. It’s automatic. The ramifications of this matter, so pay close attention to what I’m about to say.

If a church forms and doesn’t apply for 501(c)(3) status using Form 1023, they are still going to be considered a 501(c)(3) automatically. That may be good for you or not at all what you want. Some prefer to apply for and receive an actual determination letter. There’s lots of reasons why this makes sense, including providing better donation deductibility protection to your members. In general, a determined status is better than a provisional one. But you can also operate as a 501(c)(3) without applying for a determination letter.

The other side of the coin, however, is that you may not want your church to be a 501(c)(3). What then, if the status is automatic? This is where it gets a little murkier and the law less clear. Most knowledgeable tax advisors will tell you to form a commercial entity like an LLC or a C-corporation, then file corporate tax returns and pay tax on any net surplus or profit. That way, you’re never presenting yourself as a church for tax purposes. I’ll say this again because there are many people out there who believe a church can be tax-exempt without being 501(c)(3), and that’s simply false.  Whether you apply with Form 1023 or you don’t, the IRS will automatically categorize your church as a 501(c)(3).  So if you don’t want that, operate as a business for tax purposes.

Difference 2 - Filing Form 990
The second major difference in the way churches are treated compared to religious charities is when it comes to ongoing reporting.

All 501(c)(3) religious organizations are required to file Form 990 annually. Form 990 is another topic we’ve covered extensively. It’s really the tax return for nonprofits, just without the tax part. They are complex annual information returns detailing the income, expense, and activities of the nonprofit during the prior fiscal year. All 501(c)(3) organizations are required to file some version of Form 990 annually, or they risk forfeiting their tax-exempt status if they miss three years in a row.

EXCEPT, if you’re a church. This is one of the most critical differences, and that’s that a church never files Form 990 with the IRS. This means, essentially, that churches have almost no governmental insight into their financial activity unless that church is audited, which is something that virtually never happens. In fact, it’s so rare that it actually requires a signoff by the IRS Director of Exempt Organizations. You’re more likely to see a UFO than a church audit.

Difference 3 - Registering for Charitable Solicitations
Our third and final major difference between churches and religious charities is when it comes to state-level solicitations registration. As a reminder, 40 states plus Washington, DC require charities to register with the state prior to soliciting donations or conducting virtually any type of revenue generation activity.

So what does that mean for religious charities? They must register and get permission to raise money. Churches, as have probably already guessed, do not in most cases. Unless a church is getting into games of chance, like bingo or something similar that would require a gaming license, states usually exempt churches from the registration and renewal process. Yet another big difference between the two subcategories of religious organizations.

Conclusion
As you can see, there are significant differences between the two religious organizational types. So many people presume they’re treated the same. That is, churches are held to the same rules as all religious nonprofits, which is not true. Or, religious nonprofits enjoy the same exemptions that churches do, which is also not true.

We hope this brief explainer post helps you understand this nuance a little bit better.  We’ve also recorded a companion video to this topic that you can find on our YouTube channel.