Church Status: Can (and Should) Your Religious Nonprofit Seek Church Status With The IRS?

• Published date: 10 August 2022
• Subject Matter: Tax, Income Tax, Tax Authorities, Property Taxes
• Law Firm: Freeman Law
• Author: Cory Halliburton

Can and should your religious organization seek church status with the IRS? A look at a few pros, cons, and due diligence considerations.

Through over 15 years of representing nonprofit organizations, one thing is for certain-there are infinite exempt purposes that may be served within the confines of section 501(c)(3) of the Internal Revenue Code. No matter how similarly situated for tax purposes, every tax-exempt or nonprofit organization has unique attributes of governance, operations, and focus. The same is certainly true in the religious organizations space. As my long-time religious law mentor once said, "God loved us so much there is a church, synagogue, mosque, temple, or other place of worship available for every individual to pray and seek peace."

Some of my nonprofit clients exist primarily to advance religious purposes-religion is a core and fundamental focus of all things organizational and operational for those organizations. That focus does not, however, make those organizations a "church," as that term is defined (or considered) by the Internal Revenue Service. As in any organization structure, there are advantages and disadvantages to church status.

This Freeman Law Insights blog provides an overview of some key considerations on the topic of whether an organization that exists primarily to advance religious purposes might be in a position to (and should) apply for church status with the IRS.

Organized and Operated Exclusively for Exempt Purposes

The organization must be organized and operated exclusively as a tax-exempt organization as described in section 501(c)(3) of the Internal Revenue Code and related Treasury Regulations. For a deeper dive into these federal tax law requirements, see State Bar of Texas white paper linked here, Representation of Texas Nonprofit Corporations.

In the Beginning-Considerations for Church Status

The organization should evaluate the process and requirements for seeking church status as well as the current state of the organization's existence, governance, and operations. Although perhaps not exclusive, the main disadvantages for moving forward with an application for church status are essentially three-fold:

(1) Whether the organization desires to undertake the time, energy, and expense for a wholistic evaluation and, where appropriate or necessary, to modify current articles of organization, bylaws, and other foundational policies as well as operations to best qualify the organization into church status.

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