As I travel around the nation facilitating Church Tax Compliance Conferences, I am often asked, “I am a Church so why do I need to obtain a 501 (c) (3)?” Many of these same people tell me they were advised on the Internet to not apply for 501 (c) (3) tax-exempt status.
Every week we encounter Pastors and Church leaders that are completely misinformed about what 501 (c) (3) tax-exemption status means and how it can impact their Church. Below I will address some misconceptions and reveal some benefits of 501 (c) (3) status, and why every Church should obtain it for their local House of Worship.
1. Is Approval Required?
Any Pastor who has been told that the Church does not need to obtain 501 (c) (3) approval is misinformed. “Experts” who will tell you that you do not need to seek approval base their information on section 508 (c) (1) (a). Their assessment is flawed. According to Jack Lane Taylor v. Commissioner, January 2000, the United States Tax Court ruled as follows:
“Section 508(c)(1)(A) provides that churches, their integrated auxiliaries, and conventions or associations of churches are excepted from the general rule of section 508(a). Section 508(a) provides that organizations described in section 501(c)(3) and organized after October 9, 1969, are required to apply formally for recognition of their tax-exempt status. Thus, section 508(c)(1) simply relieves churches from applying for a favorable determination letter regarding their exempt status as required by section 508(a). Nothing in section 508(c)(1) relieves a church from having to meet the requirements of section 501(c)(3). In fact, it is clear that when the Commissioner determines that an