Many churches view having a 501(c)(3) as being ‘worldly.’ After all, churches are tax exempt anyway, right? As a tax advisor. I’ve seen the complications that arise from the lack of having a 501(c)(3). Our firm recommends taking the steps needed to be an official tax-exempt organization. Here’s why:
- Your donors can have confidence that you’re meeting the requirements for a tax-exempt organization. You must meet the compliance regulations that oversee a 501(c)(3) to ensure integrity. Such regulations are a watchdog and provide transparency about your church’s
- You are able to offer donors a confident tax deduction. Actually, donations to churches are already tax deductible. However the 501(c)(3) gives you the ability to offer tax-deductible receipts for all cash and non-cash donations. While not important to some contributors, the ability to deduct charitable contributions is still a viable tax strategy for many people.
- You receive the protection of limited liability for directors and officers for operations of the organization, assuming you have incorporated.
- You avoid a recently popular scam known as a ‘corporate sole.’ This is promoted as the ultimate way to detach yourself and your church from ‘the world,’ yet maintain a legal entity. However, the assets that are transferred to the corporate sole end up in someone else’s pocket.
- You qualify for nonprofit postal rates when mailing over 250 of the same mail piece.
In addition to accounting and consulting for churches, Salmon Sims Thomas specializes in accounting and consulting for nonprofit organizations. We’ll be happy to walk you through the steps you need if your church is not already a 501(c)(3). Or, talk with us if you have questions regarding your tax status.