If a church chooses to file Form 1023 for an official determination of 501(c)(3) tax exemption from the IRS, (for ease of opening bank accounts, doing business and soliciting tax deductible donations etc.), does it have to regularly file to maintain this status and does it then forfeit its exemptions under 508 or other religious protections? Does it then have to file an annual 990?
A church does not lose any legal rights by filing Form 1023 for formal recognition as a church exempt from taxation under section 501(c)(3) of the Tax Code. The IRS, in its recognition letter, will also specifically provide that it does not have to file an annual Form 990 tax information return. What the church gains is the ability to show anyone who asks that the IRS agrees it is a church, so that contributions are clearly deductible by those who deduct charitable contributions and are qualifying distributions by private foundations who may be suspicious and want to avoid having to do expenditure responsibility. There is no requirement for regular filings to maintain the status.
There is a lot of confusion about “rights” granted by section 508. The only “right” granted to churches by section 508 is that an organization that in fact qualifies as a church under section 501(c)(3) does not have to file a 1023. That qualification is recognized if the IRS approves the 1023. If the organization did not file a 1023, the IRS could refuse to recognize the status later if an issue arises and the organization does not meet the IRS criteria for a church.
Add new comment