Q: I am confused about our church’s tax-exempt status. Are we required to apply to the IRS for recognition of exemption, or are we automatically exempt because we are a church?
Are Churches Automatically Exempt?
Churches that meet the requirements of section 501(c)(3) of the federal tax code are automatically considered tax-exempt. They are not required to apply for recognition of tax-exempt status from the Internal Revenue Service (IRS). To qualify, churches must satisfy the following five requirements:
- A church must be organized exclusively for exempt purposes.
- A church must be operated exclusively for exempt purposes.
- None of a church’s resources can “inure” to the benefit of a private individual, except for reasonable compensation for services performed.
- The church may not engage in substantial efforts to influence legislation.
- The church may not intervene or participate in any political campaign on behalf of or in opposition to a candidate for public office.
Why Seek IRS Recognition of Tax-Exempt Status?
Although applying for formal recognition is not required, many churches choose to do so. Official IRS recognition offers several advantages, including:
- Reassurance for church leaders, members, and contributors that the church qualifies for tax-exempt status.
- Confirmation for contributors that their donations are generally tax-deductible.
To apply for recognition, most organizations submit IRS Form 1023. However, churches that meet the five requirements above are exempt from this requirement.
Group Rulings for Affiliated Churches
If a church is affiliated with a parent organization that holds a group ruling, it may already be recognized as tax-exempt. Under the group exemption process, the parent organization submits updates to the IRS that list affiliated churches or organizations.
In such cases, the church does not need to apply for individual recognition. Instead, the parent organization provides updates on additions, deletions, and changes to the group.
Additional IRS Resources
For further details, visit the IRS page on churches, integrated auxiliaries, and conventions or associations of churches.
FAQs About Church Tax-Exempt Status
- Do churches automatically qualify for tax exemption? Yes, churches that meet the 501(c)(3) requirements are automatically exempt from federal income taxes.
- What are the benefits of applying for IRS recognition? It provides assurance to contributors and simplifies access to other tax benefits.
- What is a group ruling? It allows a parent organization to include affiliated churches in its tax-exempt status.
- Do churches need to file Form 1023? No, churches meeting the five requirements are exempt from this filing.
