Thank you for your service.

So I have done a ton of research and work in this area. Point blank, all churches/religious organizations are automatically tax exempt under the tax code 501(c)(3) without having to file a 1023. Even the IRS recognizes this on their website. Section 508(c)(1)(a) merely codifies the right of religious orgs/churches not to have to file a 1023 but still be tax exempt under 501(c)(3). It doesn't create any new type of entity as suggested by many. It merely codifies the right of churches to be automatically tax exempt, under 501(c)(3). As such, all religious orgs, once filed with the state of domicile, are 501(c)(3) tax exempt organizations. At that point, the only thing needed to do is to notify the IRS, per the EIN filing, that you are claiming to be a tax exempt religious organization. At that point, donors use the EIN to reference tax write offs. Many may ask, well how is it that Churches are automatically tax exempt under the Code? Well it's because the right of religious practitioners and churches to collect tax free donations and tithes is so closely married to the right to free exercise, that interjecting an executive branch agency like the IRS between religious practitioners/churches and their ability to collect tax free tithes and donations would constitute an impermissible prior restraint on First Amendment (free exercise) rights. In this country, the Courts are the arbiters of religious freedom, not the IRS, or any other executive governmental agency not specifically granted such authority, and per the Johnson Amendment to the tax code (i.e. 508(c)(1)(a)), the IRS has been robbed of any discretion over the tax exempt status of religious practitioners. Now it must be noted that the IRS's position, with which some federal circuits agree, that even though you don't have to file a 501(c)(3) application, they otherwise have to "comply with the provisions of 501(c)(3)." Exactly what is meant by this is not well defined. I always recommend that Churches put the correct 501(c)(3) language in their state filing (purpose, no political activity, distribution of assets, etc.) and also to have a good conflict of interest provision in their bylaws. In my view, that is, at the most, all that is needed to "otherwise comply with 501(c)(3)." As it relates to the way that the IRS determines whether an entity is "religious" or a "church," I don't think that could constitutionally be included in the "otherwise comply" analysis. The IRS's definition of religion or church is much different that the Court's definition. As such, to the extent that the IRS definition limits the definition, it is unconstitutional. Again, the right to collect tax free donations and tithes is commensurate with the right to free exercise. At the end of the day folks, if you are a Church or a religion, you always have the federal Religious Freedom and Restoration Act which states that the government has to show a "compelling interest" in order to substantially burden a sincere religious exercise (like collecting tax free tithes and donations). To the extent that the IRS, by and through its ultra strict religion analysis, substantially burdens a practitioners sincere religious (as defined by the Courts) exercise, then those claimants would be exempt from such requirements of the tax code (meaning you don't have to meet the ultra-strict) religion test as espoused by the IRS, and would be declared tax exempt by the Court. Moreover, such a claimant could personally sue any IRS agents involved, personally, for money damages, per the U.S. Supreme Court's decision in Tanzin. Lastly, and I don't have the citation here, I will supplement when I find if I can, there is a specific federal law on point which protects, to a large degree anyways, churches and religious orgs from IRS audit and/or inquiry. They are able to conduct them, but under this law, they have to undergo a very arduous procedure and the statute only leaves the authority to initiate these proceedings with only a handful of top IRS agents in the country. So always keep this in mind and always assert your rights, at all times. I hope this lengthy response helps someone. I'm an attorney who has been working with entheogen-based religious groups for over three years now so this has been something I've had to dig deep on. But if I could stress a few things it would be that churches/religious orgs are automatically tax exempt under 501(c)(3), 508(c)(1)(a) doesn't create any new type of entity, tax exempt status UNDER 501(c)(3) is a constitutional right for all religious orgs/churches, best practice is to include the proper 501(c)(3) provisions in formation docs and always include a conflict of interest provision in any bylaws, and there are strong federal statutes such as RFRA that protect religious practitioners from being substantially burdened. Much Love!!!!!

Thanks for this thoughtful and comprehensive discussion of the issues.  I fully agree that section 508(c)(1)(A) does not create a new type of entity and merely confirms that a 501(c)(3) "church" does not have to file for official recognition of its status from the IRS.

I would caution readers, however, from thinking this applies to a broad base of "religious organizations."  The statute says it applies only to "churches, their integrated auxiliaries and conventions or associations of churches," a set of entities that is substantially narrower than "religious organizations."  It clearly does not apply to faith-based social service organizations, for example, if they are not an integral part of the church religious structure.

The comment questions what type of 501(c)(3) restrictions will still be applied to churches.  The excess benefit tax provisions were enacted in large part because of the perception of excessive compensation of some of the "televangelists" of the 1970s and 1980s, so the IRS would have an interest in excessive compensation of church officials today as an excess benefit subject to excess benefit taxes.  It clearly takes the posiiton that churches may not engage in electioneering and has frequently revoked exempt status for churches who have supported or opposed candidates for office.  It would also seek to tax unrelated business taxable income if it knew a church was engaged in unrelated business activity.

The writer says he has been working with entheogen-based religious groups that have a constitutional right to church exemption.  The IRS has certainly disagreed with the classification for some churches that have based their religious practices on use of illegal drugs in their religious practices.  The Constitutional rights and protections under the Religious Freedom Restoration Act for such organizations may not be as clear as the writer suggests.  —Don Kramer