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What is the difference between 501(c)(3) and 508(c)(1)(A)?

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What is the difference between 501(c)(3) and 508(c)(1)(A)?

What is the difference between 501(c)(3) and 508(c)(1)(A)?

Section 501(c)(3) of the Tax Code is the section that describes charitable organizations that are exempt from paying federal income tax, including churches.  Section 508 of the Code, which is entitled "Special rules with respect to section 501(c)(3) organizations," requires any organization created after October 9, 1969 that seeks 501(c)(3) charitable exemption to notify the Internal Revenue Service and apply to obtain an official recognition, but exempts those organizations described in Section 508(c) from the filing requirement. 

Section 508(c)(1)(A) exempts churches, their integrated auxiliaries, and conventions or associations of churches, while subsection (B) exempts charities that are not private foundations and normally have gross receipts of not more than $5000 a year.  Basically everybody who wants 501(c)(3) status, except churches, has to file a Form 1023 or 1023-EZ to be recognized as a 501(c)(3) charity by the IRS.

The religious organizations mentioned in (A) are also exempt from filing an annual Form 990 series tax information return.  The small nonprofits that don’t have to file for recognition of exemption under 508(c)(1)(B) nevertheless have to file a tax information return, normally the Form 990-N electronic postcard.  They will automatically lose their exempt status (even though the IRS may not know that they exist) if they fail to file for three consecutive years.

Tuesday, February 2, 2021


I have been looking into options that churches have in maintaining a tax exempt status other than 501(c)(3). I read that a church can file under 508(c)(1)(A), but am not able to find any information about it on the IRS website. I am looking for something with less governmental control. 

     There is no exempt status for a church other than section 501(c)(3).  As pointed out in the answer to the original question, churches are exempt under section 501(c)(3).  Section 508 does not grant exempt status.  It merely says that organizations that qualify as churches under section 501(c)(3) don't have to file with the IRS to obtain that status.    —Don Kramer


Thank you for your service.

Most of us are not lawyers, and certainly not tax lawyers. While the text above talks about 501(c)(3) and 508(c)(1)(A) differences, it does not seem to clarify the situation. There are websites out there, and purported churches and ministries, which declare themselves as a 508(c)(1)(A) nonprofits, and enable others to become one as well. The legality of a 508 church claiming nonprofit status while not seeking a 501(c)(3) to obtain official status appears at best murky and at worst illegal or shady. Are donations to a 508(c)(1)(A) church legally recognized as tax-deductible by donors the same as they would be for a 501(c)(3) church? If yes, it seems there is also a condition that the 508(c)(1)(A) church fulfills all the requirements of a 501(c)(3) church organization, even if not apply for that status. Why form under a 501(c)(3) church exempt status if you get all the benefits and less headaches (filing requirements) with a 508(c)(1)(A) church organization?

     You have put your finger on one of the things that I believe those selling the idea of 508(c)(1)(A) churches generally fail to point out.  To qualify to use 508(c)(1)(A), you have to be meet the requirements of 501(c)(3), just as any other charity.   The entity must meet the IRS definition of a church, must be both organized and operated exclsively for religious purposes, there can be no private benefit or inurement to the insiders, it may not participate in election campaigns and it may not do more than an insubstantial amount of lobbying.  Section 508(c) removes the requirement to file to obtain exemption, but not the requirements to meet the definition of a church and function like every other 501(c)(3).  If the IRS investigates and finds that the organization does not meet the 501(c)(3) standards, it can deny the tax exempt status, including retroactive denial.

For a donor, contributions would ordinarily be deductible so long as the donor doesn't have reason to know that the recipient does not qualify under 501(c)(3). But an IRS auditor of a personal tax return might not readily grant a deduction to an organization that is not listed as a church with the IRS.  The auditor could ask the donor to prove that the organization qualifies as a church.  Since most taxpayers don't itemize the charitable contributions these days and since there aren't many audits of those who do, this may not be a serious problem, but the deduction would be more problematic than one to a reognized organization.    —Don Kramer

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