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Can we be a church and not a 501(c)(3)?

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Can we be a church and not a 501(c)(3)?

My wife and I started our church in my mother’s living room in 1990.  Over the years we moved periodically to larger spaces and finally rented a church building.  We now have the opportunity to buy the building.  One issue we have to address is whether we need to be a 501(c)(3) registered with the IRS.  Everything I read is that churches don’t have to be 501(c)(3).  We also want to make certain that we meet all the legal requirements of our state.  We want to be recognized as a church and not as a 501(c)(3).  What do we need to do?

I think you are confusing your federal tax status with your state entity status.  They are distinct and separate issues.

If you meet the IRS definition of a “church” — generally an organization organized and operated for religious worship — you are automatically considered a tax-exempt charity described in section 501(c)(3).  You don’t have to file an application to be recognized and don’t have to file annual tax information returns to retain the status.  If you weren’t a church and didn’t apply for tax-exempt status, you would have to be paying federal income tax on your revenue.  I suspect that you haven’t paid federal income tax and are enjoying 501(c)(3) status without recognizing that you have it.

In order to buy real estate under state law, you have to buy in the name of an entity, unless you want to take title in your personal name.  I don’t see the name of your church on the state list of corporations and suspect that you never formed a corporation to operate the church. Since your state has adopted the Uniform Unincorporated Nonprofit Association Act, you may be operating an unincorporated association, but a corporation is more traditional.  Your state doesn’t have a special law for religious organizations, so you will probably want to file simply as a nonprofit corporation with a religious purpose.  If you take title as an individual, you wouldn’t be eligible for exemption from local real estate taxes in your state and could raise other issues that might be of interest to the IRS or perhaps even the state Attorney General. 

As you grow and acquire more property, it would be worth your while to get help from an attorney who understands these issues.  You don’t want to create problems that will take more time and money to correct.

Tuesday, June 4, 2019


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