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Should churches apply for tax exempt status?

Most churches, by nature of a stated mission for religious purposes, qualify for tax-exempt status. But without the official designation of a 501(c)(3), many of the benefits of tax-exemption are lost. We have seen that some churches want to consciously abstain from anything that connects them to a government entity. However, you are subject to IRS regulations whether or not you officially apply for tax-exemption. In addition, if someone makes a contribution to your church without 501(c)(3) status, then the burden of proof is on the taxpayer to show that your church operates in a manner compliant with tax-exempt practices.

Here are the general qualifications for 501(c)(3) status from the IRS:

  1. The organization must be organized and operated solely for exempt purposes, with earnings not going to a private individual or shareholder.
  2. The organization must not use a substantial amount of its activities in an attempt to influence legislation or campaign for political candidates.
  3. The organization must not be operated for private interests. If one person has substantial influence over the organization, they may be subject to a personal excise tax.

The IRS Web Site has a step-by-step explanation of what you need to do to apply for tax-exemption with a 501(c)(3) status.

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