Most churches in America have organized as "501c3 tax-exempt religious organizations." This is a fairly
recent trend that has only been going on for about fifty years. Churches were only added to section 501c3 of the tax code
in 1954. We can thank Sen. Lyndon B. Johnson for that. Johnson was no ally of the church. As part of his political agenda,
Johnson had it in mind to silence the church and eliminate the significant influence the church had always had on shaping
Although Johnson proffered this as a "favor" to churches, the favor also came with strings attached (more
like shackles). One need not look far to see the devastating effects 501c3 acceptance has had to the church, and the consequent
restrictions placed upon any 501c3 church. 501c3 churches are prohibited from addressing, in any tangible way, the vital issues
of the day.
For a 501c3 church to openly speak out, or organize in opposition
to, anything that the government declares "legal," even if it is immoral (e.g. abortion, homosexuality, etc.), that church
will jeopardize its tax exempt status. The 501c3 has had a "chilling effect" upon the free speech rights of the church. LBJ
was a shrewd and cunning politician who seemed to well-appreciate how easily many of the clergy would sell out.
Did the church ever need to seek permission from the government
to be exempt from taxes? Were churches prior to 1954 taxable? No, churches have never been taxable. To be taxable a church
would first need to be under the jurisdiction, and therefore under the taxing authority, of the government. The First Amendment
clearly places the church outside the jurisdiction of the civil government: "Congress shall make NO LAW respecting an establishment
of religion, nor prohibiting the free exercise thereof."
Religion cannot be free if you have to pay the government, through
taxation, to exercise it. Since churches aren't taxable in the first place, why do so many of them go to the IRS and seek
permission to be tax-exempt? It occurs out of:
- Ignorance ("We didn't know any better")
- Bandwagon logic ("Everyone else is doing it")
- Professional advice (many attorneys and CPAs recommend
Does the law require, or even encourage, a church to organize as
a 501c3? To answer that question let's turn to what the IRS itself has to say.
Churches Need Not Apply
In order to be considered for tax-exempt status by the IRS an organization
must fill out and submit IRS Form 1023 and 1024. However, note what the IRS says regarding churches and church ministries,
in Publication 557:
- Some organizations are not required to file Form 1023. These include:
- Churches, interchurch organizations of local units of a church,
conventions or associations of churches, or integrated auxiliaries of a church, such as a men’s or women’s organization,
religious school, mission society, or youth group. These organizations are exempt automatically if they meet the requirements
of section 501(c)(3).
Churches Are “Automatically Tax-Exempt”
According to IRS Code § 508(c)(1)(A):
- Special rules with respect to section 501(c)(3) organizations.
- (a) New organizations must notify secretary that they are applying
for recognition of section 501(c)(3) status.
- (c) Exceptions.
- (1) Mandatory exceptions. Subsections (a) and (b) shall not apply
- (A) churches, their integrated auxiliaries, and conventions or
associations of churches.
This is referred to as the "mandatory exception" rule. Thus, we
see from the IRS’ own publications, and the tax code, that it is completely unnecessary for any church to apply for
tax-exempt status. In the IRS’ own words a church “is automatically tax-exempt.”
Churches Are “Automatically Tax-Deductible”
And what about tax-deductibility? Doesn’t a church still
need to become a 501c3 so that contributions to it can be taken as a tax deduction? The answer is no! According to IRS Publication
- Organizations That Qualify To Receive Deductible Contributions
- You can deduct your contributions only if you make them to a qualified
organization. To become a qualified organization, most organizations other than churches and governments, as described
below, must apply to the IRS.
In the IRS’ own words a church “is automatically tax-deductible.”
Churches Have a Mandatory Exception To Filing Tax Returns
Not only is it completely unnecessary for any church to seek 501c3
status, to do so becomes a grant of jurisdiction to the IRS by any church that obtains that State favor. In the words of Steve
Nestor, IRS Sr. Revenue Officer (ret.):
- "I am not the only IRS employee who’s wondered why churches
go to the government and seek permission to be exempted from a tax they didn’t owe to begin with, and to seek a tax
deductible status that they’ve always had anyway. Many of us have marveled at how church leaders want to be regulated
and controlled by an agency of government that most Americans have prayed would just get out of their lives. Churches are
in an amazingly unique position, but they don’t seem to know or appreciate the implications of what it would mean to
be free of government control."