Are Churches required to obtain a tax determination letter?

April 16, 2012

An organization seeking exemption under section 501(c)(3) of the Code is required to apply for recognition of exemption on Form 1023. However, churches, their integrated auxiliaries, and conventions or associations of churches seeking section 501(c)(3) status are exempted from this application requirement. Churches that meet the requirements of section 501(c)(3) are automatically considered tax exempt and are not required to apply for and obtain recognition of tax-exempt status from the IRS.  However, it is noted that some Churches choose to obtain the tax-exempt status from the IRS to assure their members that any contributions made are indeed tax-exempt.    In addition, this exemption is only for types of organizations listed above.  Religious organizations, that wish to be tax-exempt and whose gross receipts exceed $5,000, must still apply to the IRS for the coveted status.

It is important to note what rules all 501(c)(3)’s (including churches ) must abide by to maintain their status:

  • Their net earnings may not be given to a private individual or shareholder.
  • Their substantial benefit cannot be to private interests.
  • The majority of their time cannot be devoted to attempting to influence legislations.
  • They cannot participate or intervene in any political campaign.
  • Their purpose and activities must be legal and not violate fundamental public policy.

In conclusion,  if you are unsure if you need to obtain an IRS determination letter, err on the side of caution and get one!

#nonprofit #determinationletter #taxexempt #irsfiling