Hey, Fletch: Are We Tax Exempt?
What does the IRS say about tax-exempt status for churches?
Hey, Fletch: Are We Tax Exempt?
Image: Colin Maynard / Freely Photos

In this biweekly column, longtime executive pastor and XPastor.org founder David Fletcher takes on readers’ questions about finances, staffing, communications, and more. Submit your questions using the subject line "Hey, Fletch" to editor@churchlawandtax.com.

I just began as the pastor of a rural Midwestern church with 150 in worship. We do not have a tax-exempt status. We pay tax on what we purchase, but we haven’t paid tax on our income. Maybe that’s not related to being 501(c)3, but I don’t know. I haven’t had to look into this before. What should we do?

Congratulations on your new role. That is exciting! Don’t get too worried too fast. You may be fine. Here are selections from the IRS in Tax Guide for Churches & Religious Organizations:

“Churches that meet the requirements of IRC Section 501(c)(3) are automatically considered tax exempt and are not required to obtain recognition of tax-exempt status. Many churches seek recognition of tax-exempt status from the IRS because this recognition assures contributors that the church is recognized as exempt.”

The IRS explains the requirements: “To qualify for tax-exempt status, the organization must: be organized and operated exclusively for religious purposes; net earnings may not inure to the benefit of any private individual; no substantial part of its activity may be attempting to influence legislation; the organization may not intervene in political campaigns; and the purposes and activities may not be illegal or violate fundamental public policy.”

I’m not a CPA or attorney—perhaps you have one in your congregation. Get professional advice to confirm your church’s position.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is published with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations."

Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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