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1/15/10 at 02:25 PM 0 Comments

Does a Church Need to Apply to be a 501(c)(3) Nonprofit to Apply for Grants

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A church that was initially organized as a church and continues to be organized and operated as a church is exempt from the requirement that it have an IRS determination letter documenting its status as a tax-exempt Internal Revenue Code section 501(c)(3) organization.

Churches are not required to file an application (IRS Form 1023) with the IRS to qualify as tax-exempt. Churches are of course permitted to file such an application with the IRS if they wish to obtain a formal determination letter from the IRS documenting the fact that they are tax-exempt under IRC section 501(c)(3), but the vast majority of churches choose not to do so and instead simply rely upon this automatic exemption under the Internal Revenue Code and IRS regulations. Churches should be aware that some foundations require grantees to be 501(c)(3) nonprofits thereby eliminating churches relying on an automatic exemption from applying for funding. It is our experience at Here-4-You Christian Grant Consulting that churches with a 501(c)(3) have many more opportunities for funding available to them.

Under the Internal Revenue Code and relevant IRS regulations, certain categories of nonprofit organizations - including "churches" - are exempt from the requirement to file an application with the IRS to be recognized as tax-exempt public charities under § 501(c)(3). See generally Tax Guide for Churches and Religious Organizations: Benefits and Responsibilities Under the Federal Tax Law (Sept. 2003), http://www.irs.gov/pub/irs-pdf/p1828.pdf, at 3; William W. Bassett, Religious Organizations and the Law, § 4:37 (West 2002). Specifically, 26 U.S.C. § 508(c)(1)(A) provides "[m]andatory exceptions" from the filing requirement for "churches, their integrated auxiliaries, and conventions or associations of churches." Accord Treasury Reg. § 1.508-1(b)(2); IRS Publication 1828; IRS Publication 4220. See also 26 U.S.C. § 6033(a)(2) (mandatory exemption from filing annual Form 990 returns for "churches, their integrated auxiliaries, and conventions or associations of churches").

In addition, although this is not a direct answer to the request for an IRS determination letter, it may also be helpful for potential donors to know if your church is affiliated as a subordinate entity with a denominational body such as the United Methodist Church, Church of the Nazarene, Southern Baptist Convention, Evangelical Lutheran Churches, or other denomination. Churches with such an affiliation are likely covered by a group exemption and can secure a letter from the denomination stating that it has received an IRS determination letter documenting its section 501(c)(3) tax-exempt status.

In short, to maximize the opportunity to seek and secure grant funding it is best to apply for an exemption with the IRS under IRC section 501(c)(3). Again, it is our experience at Here-4-You Christian Grant Consulting that churches with a 501(c)(3) have many more opportunities for funding available to them.

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