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Q&A: Consequences of a Church’s Political Participation

What happens if we lose our tax-exempt status?

I am aware that churches risk the loss of their tax-exempt status if they participate in political campaigns. Several people in our congregation would like for our church to be more politically active. As a practical matter, what difference would it make if we lost our tax-exempt status?

Loss of your church's exemption from federal income taxation would have several consequences, including the following:

  • The church's net income would be subject to federal income taxation.

  • The church's net income would be subject to state income taxation (except in the few states not having an income tax).

  • Donors no longer could deduct charitable contributions they make to the church.

  • The church would be ineligible to establish or maintain 403(b) tax-sheltered annuities.

  • The church could lose its property tax exemption under state law.

  • The church could lose its sales tax exemption under state law.

  • The church could lose its exemption from unemployment tax under state and federal law.

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Posted:
  • September 1, 2008

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