Jerald Finney
Copyright © February, 2010
Revised, September 2013, July 13, 2015, December 30, 2106
Preliminary note. The author has made significant revisions to this article as his knowledge grows with continued study. The original title to the article, “Laws Protecting New Testament Churches: Read Them for Yourself,” was changed to “First Amendment Protection of New Testament Churches/Federal Laws Protecting State Churches (Religious Organizations)” on July 13, 2015.
You can always find a lawyer or Christian who will agree with the position that an American church should become a religious organization by becoming a legal entity such as a non-profit corporation (included corporation sole), unincorporated association, charitable trust, etc. and get 501(c)(3) or 508 status. Jerald Finney will discuss the matter, as time avails, with any such person, with confidence that his position is supported by God’s Word, history, and law. He is always willing, free of charge and with love, to support his belief that for a church to submit herself to civil government in any manner grieves our Lord and ultimately results in undesirable consequences. He does not have unlimited time to talk to individuals. However, he will teach or debate groups, and will point individuals to resources which fully explain his positions.
You may go directly to a link (letters in maroon), or, to save time, you may read only the relevant portions of a provision or law which are in the article below.
Virginia Passes Legislation Forcing Churches to Allow “Transgender” Males into Women’s Bathrooms(04720)(Of course, this will be contested in court. Regardless of the outcome of such contest(s), keep in mind that the established church (incorporated, 501(c)(3) or 501(c)(1)(A) churches have voluntarily given up much of their First Amendment protections and placed themselves under the 14th Amendment for many purposes. Churches who choose to remain under the First Amendment for all purposes are not subject to state legislation. Contact this Churches under Christ Ministry for more information.)
Contents:
Note. At the very end is an excellent Facebook comment on “What happens if we abuse liberty” by Herei Stand on October 16, 2015.
I. Introduction
II. The Highest Law: God’s Law
III. United States Law: Man’s Law
A. The First Amendment to the United States Constitution
B. The Internal Revenue Service Code
1. § 501(c)(3). Exemption from tax on corporations, certain trusts, etc.
2. § 508. Special rules with respect to section 501(c)(3) organizations
3. § 7611. Restrictions on church tax inquiries and examinations
4.§ 1402. [Dealing with taxes on income of pastors]
5. § 107. Rental value of parsonages
6. § 102. Gifts and inheritances (According to Internal Revenue Code § 102 tithes and offerings are gifts and, therefore, , not income)
7. § 2503. Taxable gifts
8. § 170. Charitable, etc., contributions and gifts
IV. Laws from one state, Kansas
A. The Kansas Constitution
1. Preamble.
2. Bill of Rights, § 1. Equal rights.
3. Bill of Rights, § 3. Right of peaceable assembly; petition.
4. Bill of Rights, § 7. Religious liberty
5. Bill of Rights, § 11. Liberty of press and speech; libel.
6. Bill of Rights, § 15. Search and seizure.
7. Article 11, § 1(b). System of taxation; classification; exemption.
B. Kansas Statutes
1. Chapter 79. Taxation. Kansas Statutes, Chapter 79. Taxation. Article 2.—PROPERTY EXEMPT FROM TAXATION
§ 79-201. Property exempt from taxation.
2. Chapter 79.–TAXATION. Article 36.–KANSAS RETAILERS’ SALES TAX
79-3603. Retailers’ sales tax imposed; rate.
79-3606. Exempt sales.
I. Introduction
The author is completely aware that most “Christians” and “Christian” lawyers tell churches to incorporate, get 501(c)(3) or 508 status or to become a legal entity in some other manner. The author takes issue with those lawyers and Christians and has written and taught extensively on the God-given principles concerning church and state and the application of those principles in America.
Those of you who do not know the author cannot be expected to trust him. Therefore, in order that a Christian can see for himself what the law says, this article will lay out the law which protects New Testament (the First Amendment) churches, and the laws which allegedly protect state churches. The First Amendment (quoted below) says that Congress shall make “no law” as to certain matters. Yet, 501(c)(3) (and 508) is a law which does exactly what the First Amendment forbids, as to churches. When a church submits herself to either of those laws, she becomes a religious organization (according to the explicit words in those laws) and subjects herself to the rules that come with those laws. The federal government, specifically the Internal Revenue Service, becomes sovereign of a 501(c)(3) or 508 church for certain purposes and enforces the rules that come with 501(c)(3) at its discretion; indeed, as will be seen, the IRS can add rules, having already added one rule which was contested and upheld the Supreme Court. Having succumb to the sovereignty of the federal government for some purposes through willing submission to 501(c)(3) law, the federal government added other laws to the Internal Revenue Code to protect religious organizations to a degree from arbitrary actions by the Internal Revenue Service.
A church which is a legal entity such as in incorporated church and or which gets Internal Revenue Code Section 501(c)(3) status loses much of her First Amendment protection and places herself under the Fourteenth Amendment to a large degree; the author fully explains this in his teachings on this website. One can go directly online to the laws in their entirety by clicking the blue underlined links.
In case you are not aware of it, an American church can operate as a spiritual entity only, under the First Amendment, without persecution, under God as a non-legal entity (as a spiritual entity) instead of a legal entity such as a non-profit corporation, charitable trust, unincorporated association, or corporation sole and without Internal Revenue Code Section (“IRC”) 501(c)(3) (“501(c)(3)” or Section 508 (“508”) status.FN1
New Testament churches are protected, for the time being, by the First Amendment which is a statement of Bible principle and, therefore, in line with God’s law. State churches and other religious organizations – the protection of the First Amendment and God not being enough for them to attain their worldly temporal goals (they think) – have turned to laws which contradict the First Amendment for protection. In so doing, they have shunned the protection of God and the First Amendment for many purposes. The chickens are coming home to roost.
II. The Highest Law: God’s Law
Of course, the highest law that protects churches everywhere, including churches in America, is God’s law as laid out in His Word. Although, in many nations, churches who wish to operate under God only will suffer persecutions, including physical death, for honoring God and His principles of organization and operation, no civil government can take the life or liberty of a true Christian or destroy a true church. The author has done a complete systematic study God’s principles concerning church and state in his other works.FN2
No nation gives anyone or any church life or liberty. Nations choose whether to protect the God-given life and liberty of individuals and churches from persecution.
God, the highest authority, establishes His churches and gives life to believers only:
- “And I say also unto thee, That thou art Peter, and upon this rock I will build my church; and the gates of hell shall not prevail against it” (Matthew 16:18).
- “He that hath the Son hath life; and he that hath not the Son of God hath not life” (1 John 5:12).
- “While we look not at the things which are seen, but at the things which are not seen: for the things which are seen are temporal; but the things which are not seen are eternal. For we know that if our earthly house of this tabernacle were dissolved, we have a building of God, an house not made with hands, eternal in the heavens. For in this we groan, earnestly desiring to be clothed upon with our house which is from heaven: If so be that being clothed we shall not be found naked. For we that are in this tabernacle do groan, being burdened: not for that we would be unclothed, but clothed upon, that mortality might be swallowed up of life. Now he that hath wrought us for the selfsame thing is God, who also hath given unto us the earnest of the Spirit. Therefore we are always confident, knowing that, whilst we are at home in the body, we are absent from the Lord: (For we walk by faith, not by sight:) We are confident, I say, and willing rather to be absent from the body, and to be present with the Lord.” (2 Corinthians 4.18; 5.1-6, 7-8; See also, Romans 8.18-25.).
Additionally, only Christ gives liberty to believers, and only to believers who continue in His Word:
- “The Spirit of the Lord is upon me, because he hath anointed me to preach the gospel to the poor; he hath sent me to heal the brokenhearted, to preach deliverance to the captives, and recovering of sight to the blind, to set at liberty them that are bruised” (Luke 4:18).
- “Then said Jesus to those Jews which believed on him, If ye continue in my word, then are ye my disciples indeed; And ye shall know the truth, and the truth shall make you free” (John 8:31-32).
- “If the Son therefore shall make you free, ye shall be free indeed” (John 8:36).
- “Being then made free from sin, ye became the servants of righteousness” (Romans 6:18).
- “But now being made free from sin, and become servants to God, ye have your fruit unto holiness, and the end everlasting life” (Romans 6:22).
- “For the law of the Spirit of life in Christ Jesus hath made me free from the law of sin and death” (Romans 8:2).
- “Because the creature itself also shall be delivered from the bondage of corruption into the glorious liberty of the children of God” (Romans 8:21).
- “For he that is called in the Lord, being a servant, is the Lord’s freeman: likewise also he that is called, being free, is Christ’s servant” (1 Corinthians 7:22)
- “For though I be free from all men, yet have I made myself servant unto all, that I might gain the more” (1 Corinthians 9:19).
- “Now the Lord is that Spirit: and where the Spirit of the Lord is, there is liberty” (2 Corinthians 3:17).
- “And that because of false brethren unawares brought in, who came in privily to spy out our liberty which we have in Christ Jesus, that they might bring us into bondage” (Galatians 2:4).
- “So then, brethren, we are not children of the bondwoman, but of the free” (Galatians 4:31).
- “Stand fast therefore in the liberty wherewith Christ hath made us free, and be not entangled again with the yoke of bondage” (Galatians 5:1).
- “For, brethren, ye have been called unto liberty; only use not liberty for an occasion to the flesh, but by love serve one another” (Galatians 5:13).
- “But whoso looketh into the perfect law of liberty, and continueth therein, he being not a forgetful hearer, but a doer of the work, this man shall be blessed in his deed” (James 1:25).
- “While they promise them liberty, they themselves are the servants of corruption: for of whom a man is overcome, of the same is he brought in bondage” (2 Peter 2:19).
Christians are to walk in the spirit, not in the flesh.(See, e.g., 1 Corinthians 2; 3.1-3; Galatians 5, Romans 6-8). Most do not. New Testament churches are spiritual organisms, not earthly entities. Thus, an incorporated, 501(c)(3) or 508 church has violated God’s principles by placing herself, at least partially, under a head other than the Lord Jesus Christ. For systematic studies of all the arguments used to justify submission of individuals and churches to civil government see FN3.
The Martyrs of the faith clearly understood the liberty given them by Jesus Christ.
Martyr’s Song by Watchmen
III. United States Law-Man’s Law
A. The First Amendment to the United States Constitution
Man’s law is below God’s law. Again, God gives civil governments the option of honoring Him and His principles. America, as a result of a great theological warfare between persecuted dissenters (the persecutions were carried out by colonial governments acting under the guidance of the established churches and their theologies) and the established churches, became the first nation, the second civil government behind the colony of Rhode Island, to apply God’s principles concerning the relationship between church and state and the individual person and the state and to guarantee religious liberty. This was done in the First Amendment to the United States Constitution (the second highest law in America after God’s law) which reads as follows:
“Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceable to assemble, and to petition the Government for a redress of grievances.” FN4
The following lay out the history of the First Amendment:
The History of the First Amendment
An Abridged History of the First Amendment
The First Amendment did not originally apply to the states. As a result, states were free to pass laws which provided state corporate status to churches, and they did so. Many churches ran down to incorporate under state law soon after the Constitution and First Amendment were ratified.FN5 Some did not incorporate or become state churches.
Although the United States Supreme Court has now applied the First Amendment to state and other lower governments, incorporation of churches by state statute has never been held to violate the First Amendment, even though incorporation of churches is contrary to the First Amendment as well as Bible principles.
Churches which become legal entities such as corporations (includes corporation sole), unincorporated associations, charitable trusts, 501c3 and 508 religious organizations lose much or their First Amendment protections and fall, as artificial persons, under the Fourteenth Amendment for many purposes.
Churches which are spiritual entities only are New Testament churches and have the protections of the First Amendment. As we know, First Amendment protections enjoyed since 1791, the date of adoption, are targeted for destruction. When the First Amendment is destroyed, God’s churches, as opposed to state churches (churches which are legal entities) will have no choice but to operate underground, much as the churches in China, North Korea and many other countries, especially in many Muslim countries operate.
B. Internal Revenue Code
Once a church becomes a religious organization under Internal Revenue Code, Section 501(c)(3) or Section 508, she does have some protection from arbitrary attack by the federal government for some purposes. Such protections are not needed by a First Amendment church since that church is under God only. After the government destroys First Amendment protections for churches and believers, they will have to go underground to maintain their New Testament status.
1. Internal Revenue Code § 501(c)(3)
Click the following link to go to the entire section: IRC § 501(c)(3)
Click the following link to go directly to a more in-depth study of 501(c)(3):
The Internal Revenue Code § 501(c)(3) Exemption-Definition-Control Scheme
IRC § 501 provides in relevant part:
Ҥ 501. Exemption from tax on corporations, certain trusts, etc.:
“(a) Exemption from taxation. An organization described in subsection (c) … shall be exempt from taxation under this subtitle [26 USCS §§ 1 et seq.] unless such exemption is denied under section 502 or 503 [26 USCS § 502 or 503]….
“(c)(3) Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office….
“(h) Expenditures by public charities to influence legislation. (1) General rule. In the case of an organization to which this subsection applies, exemption from taxation under subsection (a) shall be denied because a substantial part of the activities of such organization consists of carrying on propaganda, or otherwise attempting, to influence legislation….”
In the twentieth century, the United States passed § 501(c)(3), a law which, when applied to churches or any other religious organization, “respects an establishment of religion” and prevents “the free exercise thereof.” 501(c)(3) may be utilized by earthly and religious organizations. A church is not required to get 501(c)(3) and 508 status, but that status is available for any church who wants it. That a church is not required, by civil law, to obtain 501(c)(3) status is made clear by the First Amendment. When a church chooses to get 501(c)(3) or 508 status, she has—in addition to placing herself under state authority through incorporation or some other means—also placed herself under the authority of the Federal government. For more on 508 status, see Church Internal Revenue Code § 508 Tax Exempt Status.
When a church gets 501(c)(3) or 508 status, that church becomes a religious organization. Churches who have 501(c)(3) or 508 tax-exempt status are under four rules which are stated in the 501(c)(3) law. Those rules or laws prevent the free exercise of religion under God by churches.
One can see four requirements in 501(c)(3) by reading the law above. Those rules are:
1. must be organized and operated exclusively for religious, educational, scientific, or other charitable purposes,
2. net earnings must not inure to the benefit of any private individual or shareholder,
3. no substantial part of its activity may be attempting to influence legislation,
4. the organization may not intervene in political activity.
Those four rules for religious organizations were in the law made by Congress and signed by President Eisenhower. All 501(c)(3) and 508 religious and other organizations are required to comply with the requirements. Congress and the President are free to put other requirements into law in the future. You see, they are the sovereigns elected by the people. They decided to dishonor God’s law first and the First Amendment second when they made 501(c)(3) and 508 status available to churches. Churches who incorporate and get 501(c)(3) or 508 status dishonor God and place themselves under two other sovereigns. Of course, they still have some of their God-ordained freedom, but they have voluntarily given up some of those freedoms as they have submitted to other sovereigns.
Not only have Congress and the President added requirements to 501(c)(3) since its initial passage into law, the Internal Revenue Service has also added a requirement to the law which was approved by Supreme Court opinion. The case considered an action—deemed to violate fundamental public policy—by Bob Jones University, an incorporated 501(c)(3) religious organization.FN6 Of course, Bob Jones University was not a church, but a future Supreme Court could easily declare that the new requirement applies to churches, and a future Court could add additional requirements to 501(c)(3). The new requirement is this:
“the organization’s purposes and activities may not be illegal or violate fundamental public policy.”FN7
An old adage in the law says, “Ignorance of the law is no excuse.” In other words, just because one is ignorant of the law does not excuse one from obeying it, especially when one was not required to submit to a law but did so voluntarily. Christians are instructed to proceed with knowledge (See, e.g., 2 Peter 1.3-10). Christians are also to have integrity. If they agree to something, they are to keep their part of the contract or bargain. Corporate 501(c)(3) churches contract with the state when they incorporate, the state being the controlling party to the contracts created by incorporation—in the event of disagreement or suit because over contract, civil courts will decide the issue. Those courts will decide such issues based upon man’s law, not Biblical principle.
Likewise, when a church, of her own free will, obtains 501(c)(3) or 508 status, she agrees (whether she knows it or not) both to be bound by the rules in existence at the time she receives state exemption and any rules which may be handed down after obtaining the status. Only ignorance prevents her from recognizing that, in the event of disagreement with IRS assertion that an action of the church is in violation of the statute, the state (not God) will decide the issue.
2. Internal Revenue Code § 508
Click the following link to go to the complete section: IRC § 508
IRC § 508 (the codification of Public Law 91-172 ratified in 1969) provides in relevant part:
Ҥ 508. 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. [Emphasis mine.]
“(1) Mandatory exceptions. Subsections (a) and (b) shall not apply to—
“(A) churches, their integrated auxiliaries, and conventions or associations of churches.” FN8 [Emphasis mine.]
“Note. A church applies for 501(c)(3) recognition by filling out and filing IRS Form 1023.”
§ 508(a),(c) says churches are excepted from obtaining § 501(c)(3) tax exempt status. In other words, the federal government recognized by law that churches are non-taxable; and, therefore, that churches are an exception to the civil government requirement that certain organizations file for 501(c)(3) tax exempt status.
Churches should claim First Amendment, not § 508 status. By claiming § 508 status, a church has claimed the protection of a law made by the federal government. Remember what the First Amendment states: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof….” § 508 is a law respecting an establishment of religion (and likely may be used to prevent the free exercise thereof) made by Congress and is therefore unconstitutional. By claiming § 508 status, a church thereby agrees that, should an issue regarding that church end up in court, that the court may look at § 508 and interpret issues from the perspective of § 508. In other words, the court will define the terms and determine the relevance and meaning of § 508 and the words therein rather than looking at the First Amendment and clear language of that amendment which was written so that anyone can understand it and make the applications. For example, the court would tell the litigants what the term “exception” means. Also, by claiming § 508 status, a church may be argued to have made itself a legal entity required to abide by the rules that come along with § 501(c)(3) in order to maintain their “tax exempt” status. First Amendment churches are non-taxable whereas § 501(c)(3) churches are “tax-exempt.” For more on this, see Church Internal Revenue Code § 508 Tax Exempt Status.
Churches who remain under God and His principles for churches (First Amendment churches) even if there were no First Amendment are non-taxable anyway because they are not businesses, they are not legal entities of any type, and they have no income and make no profits. Even businesses pay no taxes if they make no profit. To make a profit, income must exceed expenses and deductions. A legal entity, such as a corporate 501(c)(3) religious organization, who poses as a church, who is in business(es), and who makes a profit should, in the opinion of the author, pay taxes.
New Testament (First Amendment) churches are not legal entities, so they cannot and do not receive income. Church members give tithes and offerings to God and which are used for certain purposes and ministries approved by God; for providing for their pastor; for providing for a place to meet; for helping the poor; and for any other purpose consistent with Biblical principle.
If a church does not apply for exempt status, and if it is organized as and operates in conformity to Biblical principle, according to the First Amendment which agrees with the Biblical principle of separation of church and state, the church maintains her non-taxable status.
If a church successfully applies for exempt status under section 501(c)(3) or claims exemption under § 508, the government is granted some jurisdiction over the church since the civil government now declares and grants an exemption.
3. Internal Revenue Code § 7611
Click the following link to go to the entire section: IRC § 7611
IRC § 7611 gives the only reasons for which the Internal Revenue Service can audit a religious organization defined as a church by the federal government. Of course, a New Testament church is not a legal entity, has no income, and cannot be audited. All tithes, offerings, and gifts by church members are given to God, not to a religious organization such as an incorporated 501(c)(3) or 508 church. There are not church (religious organization) books to keepl IRC § 7611 states in relevant part:
Ҥ 7611. Restrictions on church tax inquiries and examinations
“(a) Restrictions on inquiries.—
“(1) In general.—The Secretary may begin a church tax inquiry only if—
“(A) the reasonable belief requirements of paragraph (2), and
“(B) the notice requirements of paragraph (3), have been met.
“(2) Reasonable belief requirements.—The requirements of this paragraph are met with respect to any church tax inquiry if an appropriate high-level Treasury official reasonably believes (on the basis of facts and circumstances recorded in writing) that the church –
“(A) may not be exempt, by reason of its status as a church, from tax under section 501(a), or
“(B) may be carrying on an unrelated trade or business (within the meaning of section 513) or otherwise engaged in activities subject to taxation under this title.
“(3) Inquiry notice requirements.—
“(A) In general.—The requirements of this paragraph are met with respect to any church tax inquiry if, before beginning such inquiry, the Secretary provides written notice to the church of the beginning of such inquiry.
“(B) Contents of inquiry notice.—The notice required by this paragraph shall include—
“(i) an explanation of—
“(I) the concerns which gave rise to such inquiry, and
“(II) the general subject matter of such inquiry, and
“(ii) a general explanation of the applicable—
“(I) administrative and constitutional provisions with respect to such inquiry (including the right to a conference with the Secretary before any examination of church records), and
“(II) provisions of this title which authorize such inquiry or which may be otherwise involved in such inquiry.
“(b) Restrictions on examinations.—
“(1) In general.—The Secretary may begin a church tax examination only if the requirements of paragraph (2) have been met and such examination may be made only—
“(A) in the case of church records, to the extent necessary to determine the liability for, and the amount of, any tax imposed by this title, and
“(B) in the case of religious activities, to the extent necessary to determine whether an organization claiming to be a church is a church for any period.
“(2) Notice of examination; opportunity for conference.—The requirements of this paragraph are met with respect to any church tax examination if—
“(A) at least 15 days before the beginning of such examination, the Secretary provides the notice described in paragraph (3) to both the church and the appropriate regional counsel of the Internal Revenue Service, and
“(B) the church has a reasonable time to participate in a conference described in paragraph (3)(A)(iii), but only if the church requests such a conference before the beginning of the examination.
“(3) Contents of examination notice, et cetera.—
“(A) In general.—The notice described in this paragraph is a written notice which includes –
“(i) a copy of the church tax inquiry notice provided to the church under subsection (a),
“(ii) a description of the church records and activities which the Secretary seeks to examine,
“(iii) an offer to have a conference between the church and the Secretary in order to discuss, and attempt to resolve, concerns relating to such examination, and
“(iv) a copy of all documents which were collected or prepared by the Internal Revenue Service for use in such examination and the disclosure of which is required by the Freedom of Information Act (5 U.S.C. 552).
“(B) Earliest day examination notice may be provided.—The examination notice described in subparagraph (A) shall not be provided to the church before the 15th day after the date on which the church tax inquiry notice was provided to the church under subsection (a).
“(C) Opinion of regional counsel with respect to examination Any regional counsel of the Internal Revenue Service who receives an examination notice under paragraph (1) may, within 15 days after such notice is provided, submit to the regional commissioner for the region an advisory objection to the examination.
“(4) Examination of records and activities not specified in notice.—Within the course of a church tax examination which (at the time the examination begins) meets the requirements of paragraphs (1) and (2), the Secretary may examine any church records or religious activities which were not specified in the examination notice to the extent such examination meets the requirement of subparagraph (A) or (B) of paragraph (1) (whichever applies).
(c) Limitation on period of inquiries and examinations.—
“(1) Inquiries and examinations must be completed within 2 years.—
“(A) In general.—The Secretary shall complete any church tax status inquiry or examination (and make a final determination with respect thereto) not later than the date which is 2 years after the examination notice date.
“(B) Inquiries not followed by examinations.—In the case of a church tax inquiry with respect to which there is no examination notice under subsection (b), the Secretary shall complete such inquiry (and make a final determination with respect thereto) not later than the date which is 90 days after the inquiry notice date.
“(2) Suspension of 2-year period.—The running of the 2-year period described in paragraph (1)(A) and the 90-day period in paragraph (1)(B) shall be suspended –
“(A) for any period during which—
“(i) a judicial proceeding brought by the church against the Secretary with respect to the church tax inquiry or examination is pending or being appealed,
“(ii) a judicial proceeding brought by the Secretary against the church (or any official thereof) to compel compliance with any reasonable request of the Secretary in a church tax examination for examination of church records or religious activities is pending or being appealed, or
“(iii) the Secretary is unable to take actions with respect to the church tax inquiry or examination by reason of an order issued in any judicial proceeding brought under section 7609,
“(B) for any period in excess of 20 days (but not in excess of 6 months) in which the church or its agents fail to comply with any reasonable request of the Secretary for church records or other information, or
“(C) for any period mutually agreed upon by the Secretary and the church.
“(d) Limitations on revocation of tax-exempt status, etc.—
“(1) In general.—The Secretary may—
“(A) determine that an organization is not a church which—
(i) is exempt from taxation by reason of section 501(a), or
(ii) is described in section 170(c), or
“(B)(i) send a notice of deficiency of any tax involved in a church tax examination, or
“(ii) in the case of any tax with respect to which subchapter B of chapter 63 (relating to deficiency procedures) does not apply, assess any underpayment of such tax involved in a church tax examination, only if the appropriate regional counsel of the Internal Revenue Service determines in writing that there has been substantial compliance with the requirements of this section and approves in writing of such revocation, notice of deficiency, or assessment.
(2) Limitations on period of assessment.—
“(A) Revocation of tax-exempt status.—
(i) 3-year statute of limitations generally.—In the case of any church tax examination with respect to the revocation of tax-exempt status under section 501(a), any tax imposed by chapter 1 (other than section 511) may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, only for the 3 most recent taxable years ending before the examination notice date.
“(ii) 6-year statute of limitations where tax-exempt status revoked.—If an organization is not a church exempt from tax under section 501(a) for any of the 3 taxable years described in clause (i), clause (i) shall be applied by substituting “6 most recent taxable years” for “3 most recent taxable years”.
“(B) Unrelated business tax.—In the case of any church tax examination with respect to the tax imposed by section 511 (relating to unrelated business income), such tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, only with respect to the 6 most recent taxable years ending before the examination notice date.
“(C) Exception where shorter statute of limitations otherwise applicable.—Subparagraphs (A) and (B) shall not be construed to increase the period otherwise applicable under subchapter A of chapter 66 (relating to limitations on assessment and collection).
“(e) Information not collected in substantial compliance with procedures to stay summons proceeding.—
“(1) In general.— If there has not been substantial compliance with—
“(A) the notice requirements of subsection (a) or (b),
“(B) the conference requirement described in subsection
(b)(3)(A)(iii), or
“(C) the approval requirement of subsection (d)(1) (if applicable), with respect to any church tax inquiry or examination, any proceeding to compel compliance with any summons with respect to such inquiry or examination shall be stayed until the court finds that all practicable steps to correct the noncompliance have been taken. The period applicable under paragraph (1) or subsection (c) shall not be suspended during the period of any stay under the preceding sentence.
“(2) Remedy to be exclusive.—No suit may be maintained, and no defense may be raised in any proceeding (other than as provided in paragraph (1)), by reason of any noncompliance by the Secretary with the requirements of this section.
“(f) Limitations on additional inquiries and examinations.—
“(1) In general.—If any church tax inquiry or examination with respect to any church is completed and does not result in—
“(A) a revocation, notice of deficiency, or assessment described in subsection (d)(1), or
“(B) a request by the Secretary for any significant change in the operational practices of the church (including the adequacy of accounting practices),
no other church tax inquiry or examination may begin with respect to such church during the applicable 5-year period unless such inquiry or examination is approved in writing by the Secretary or does not involve the same or similar issues involved in the preceding inquiry or examination. For purposes of the preceding sentence, an inquiry or examination shall be treated as completed not later than the expiration of the applicable period under paragraph (1) of subsection (c).
“(2) Applicable 5-year period.—For purposes of paragraph (1), the term “applicable 5-year period” means the 5-year period beginning on the date the notice taken into account for purposes of subsection (c)(1) was provided. For purposes of the preceding sentence, the rules of subsection (c)(2) shall apply.
“(g) Treatment of final report of revenue agent.—Any final report of an agent of the Internal Revenue Service shall be treated as a determination of the Secretary under paragraph (1) of section 7428(a), and any church receiving such a report shall be treated for purposes of sections 7428 and 7430 as having exhausted the administrative remedies available to it.
“(h) Definitions.—For purposes of this section—
“(1) Church.—The term “church” includes—
“(A) any organization claiming to be a church, and
“(B) any convention or association of churches.
“(2) Church tax inquiry.—The term “church tax inquiry” means any inquiry to a church (other than an examination) to serve as a basis for determining whether a church –
“(A) is exempt from tax under section 501(a) by reason of its status as a church, or
“(B) is carrying on an unrelated trade or business (within the meaning of section 513) or otherwise engaged in activities which may be subject to taxation under this title.
“(3) Church tax examination.—The term “church tax examination” means any examination for purposes of making a determination described in paragraph (2) of—
“(A) church records at the request of the Internal Revenue Service, or
“(B) the religious activities of any church.
“(4) Church records.—
“(A) In general.—The term “church records” means all corporate and financial records regularly kept by a church, including corporate minute books and lists of members and contributors.
“(B) Exception.—Such term shall not include records acquired –
“(i) pursuant to a summons to which section 7609 applies, or
“(ii) from any governmental agency.
“(5) Inquiry notice date.—The term “inquiry notice date” means the date the notice with respect to a church tax inquiry is provided under subsection (a).
“(6) Examination notice date.—The term “examination notice date” means the date the notice with respect to a church tax examination is provided under subsection (b) to the church.
“(7) Appropriate high-level Treasury official.—The term “appropriate high-level Treasury official” means the Secretary of the Treasury or any delegate of the Secretary whose rank is no lower than that of a principal Internal Revenue officer for an internal revenue region.
“(i) Section not to apply to criminal investigations, etc.—This section shall not apply to—
“(1) any criminal investigation,
“(2) any inquiry or examination relating to the tax liability of any person other than a church,
“(3) any assessment under section 6851 (relating to termination assessments of income tax), section 6852 (relating to termination assessments in case of flagrant political expenditures of section 501(c)(3) organizations), or section 6861 (relating to jeopardy assessments of income taxes, etc.),
“(4) any willful attempt to defeat or evade any tax imposed by this title, or
“(5) any knowing failure to file a return of tax imposed by this title.”
4. Internal Revenue Code Chapter 26, Subtitle A § 1402
Click the following link to go directly to a complete online copy of § 1402 and surrounding sections of the law: TAX ON SELF EMPLOYMENT INCOME
Note. A New Testament church cannot have employees as defined by American law. If a church has employees, she is a religious organization. Biblical principle defines a church, her members and their roles, and her destiny. No Biblical teaching is consistent with a church having employees. According to God’s Word, however, a New Testament church must have members and a pastor who is to be provided for by the members. Also, members or anyone else may give gifts to anyone they please.
The following is directly from IRC § 1402:
Ҥ 1402. Definitions
“(a) Net earnings from self-employment.—The term “net earnings from self-employment” means the gross income derived by an individual from any trade or business carried on by such individual, less the deductions allowed by this subtitle which are attributable to such trade or business, plus his distributive share (whether or not distributed) of income or loss described in section 702 (a)(8) from any trade or business carried on by a partnership of which he is a member; except that in computing such gross income and deductions and such distributive share of partnership ordinary income or loss—”…
“(8) an individual who is a duly ordained, commissioned, or licensed minister of a church or a member of a religious order shall compute his net earnings from self-employment derived from the performance of service described in subsection (c)(4) without regard to section 107 (relating to rental value of parsonages), section 119 (relating to meals and lodging furnished for the convenience of the employer), and section 911 (relating to citizens or residents of the United States living abroad), but shall not include in such net earnings from self-employment the rental value of any parsonage or any parsonage allowance (whether or not excludable under section 107) provided after the individual retires, or any other retirement benefit received by such individual from a church plan (as defined in section 414 (e)) after the individual retires;
“…
“(14) in the case of church employee income, the special rules of subsection (j)(1) shall apply;
“…
“(b) Self-employment income.—The term “self-employment income” means the net earnings from self-employment derived by an individual (other than a nonresident alien individual, except as provided by an agreement under section 233 of the Social Security Act) during any taxable year; except that such term shall not include—
“…
“(2) the net earnings from self-employment, if such net earnings for the taxable year are less than $400.
“(c) Trade or business.—The term “trade or business”, when used with reference to self-employment income or net earnings from self-employment, shall have the same meaning as when used in section 162 (relating to trade or business expenses), except that such term shall not include—
“…
“(2) the performance of service by an individual as an employee, other than—
“…
“(D) service described in paragraph (4) of this subsection,
“…
“(4) the performance of service by a duly ordained, commissioned, or licensed minister of a church in the exercise of his ministry or by a member of a religious order in the exercise of duties required by such order;
The provisions of paragraph (4) or (5) shall not apply to service (other than service performed by a member of a religious order who has taken a vow of poverty as a member of such order) performed by an individual unless an exemption under subsection (e) is effective with respect to him.
“(d) Employee and wages.—The term “employee” and the term “wages” shall have the same meaning as when used in chapter 21 (sec. 3101 and following, relating to Federal Insurance Contributions Act).
“(e) Ministers, members of religious orders, and Christian Science practitioners.—
“(1) Exemption.—Subject to paragraph (2), any individual who is (A) a duly ordained, commissioned, or licensed minister of a church or a member of a religious order (other than a member of a religious order who has taken a vow of poverty as a member of such order) or (B) a Christian Science practitioner, upon filing an application (in such form and manner, and with such official, as may be prescribed by regulations made under this chapter) together with a statement that either he is conscientiously opposed to, or because of religious principles he is opposed to, the acceptance (with respect to services performed by him as such minister, member, or practitioner) of any public insurance which makes payments in the event of death, disability, old age, or retirement or makes payments toward the cost of, or provides services for, medical care (including the benefits of any insurance system established by the Social Security Act) and, in the case of an individual described in subparagraph (A), that he has informed the ordaining, commissioning, or licensing body of the church or order that he is opposed to such insurance, shall receive an exemption from the tax imposed by this chapter with respect to services performed by him as such minister, member, or practitioner. Notwithstanding the preceding sentence, an exemption may not be granted to an individual under this subsection if he had filed an effective waiver certificate under this section as it was in effect before its amendment in 1967.
“…
“(g) Members of certain religious faiths.—
“(1) Exemption.—Any individual may file an application (in such form and manner, and with such official, as may be prescribed by regulations under this chapter) for an exemption from the tax imposed by this chapter if he is a member of a recognized religious sect or division thereof and is an adherent of established tenets or teachings of such sect or division by reason of which he is conscientiously opposed to acceptance of the benefits of any private or public insurance which makes payments in the event of death, disability, old-age, or retirement or makes payments toward the cost of, or provides services for, medical care (including the benefits of any insurance system established by the Social Security Act). Such exemption may be granted only if the application contains or is accompanied by—
“…
“(h) Regular basis.—An individual shall be deemed to be self-employed on a regular basis in a taxable year, or to be a member of a partnership on a regular basis in such year, if he had net earnings from self-employment, as defined in the first sentence of subsection (a), of not less than $400 in at least two of the three consecutive taxable years immediately preceding such taxable year from trades or businesses carried on by such individual or such partnership.
“…
“(j) Special rules for certain church employee income.—
“(1) Computation of net earnings.—In applying subsection (a)—
“(A) church employee income shall not be reduced by any deduction;
“(B) church employee income and deductions attributable to such income shall not be taken into account in determining the amount of other net earnings from self-employment.
“…
“(4) Church employee income defined.—For purposes of this section, the term “church employee income” means gross income for services which are described in section 3121 (b)(8)(B) (and are not described in section 3121 (b)(8)(A)).”
5. Internal Revenue Code § 107
Click the following link to go online to the entire law: IRC § 107
Ҥ 107. Rental value of parsonages
“In the case of a minister of the gospel, gross income does not include—
“(1) the rental value of a home furnished to him as part of his compensation; or
“(2) the rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home and to the extent such allowance does not exceed the fair rental value of the home, including furnishings and appurtenances such as a garage, plus the cost of utilities.”
6. Internal Revenue Code § 102
Click the following link to go online to the entire section: IRC § 102
Ҥ 102. Gifts and inheritances
“(a) General rule
“Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance.
“(b) Income
“Subsection (a) shall not exclude from gross income—
“(1) the income from any property referred to in subsection (a); or
“(2) where the gift, bequest, devise, or inheritance is of income from property, the amount of such income.
“Where, under the terms of the gift, bequest, devise, or inheritance, the payment, crediting, or distribution thereof is to be made at intervals, then, to the extent that it is paid or credited or to be distributed out of income from property, it shall be treated for purposes of paragraph (2) as a gift, bequest, devise, or inheritance of income from property. Any amount included in the gross income of a beneficiary under subchapter J shall be treated for purposes of paragraph (2) as a gift, bequest, devise, or inheritance of income from property….”
7. Internal Revenue Code § 2503
Click the following link to go online to the entire section: IRC § 2503
Ҥ 2503. Taxable gifts
“(a) General definition.
The term ‘taxable gifts’ means the total amount of gifts made during the calendar year, less the deductions provided in subchapter C (section 2522 and following).
“(b) Exclusions from gifts.
“(1) In general.—In the case of gifts (other than gifts of future interests in property) made to any person by the donor during the calendar year, the first $10,000 of such gifts to such person shall not, for purposes of subsection (a), be included in the total amount of gifts made during such year. Where there has been a transfer to any person of a present interest in property, the possibility that such interest may be diminished by the exercise of a power shall be disregarded in applying this subsection, if no part of such interest will at any time pass to any other person.
“(2) Inflation adjustment.—In the case of gifts made in a calendar year after 1998, the $10,000 amount contained in paragraph (1) shall be increased by an amount equal to—
“(A) $10,000, multiplied by
“(B) the cost-of-living adjustment determined under section 1 (f)(3) for such calendar year by substituting “calendar year 1997” for “calendar year 1992” in subparagraph (B) thereof.
“If any amount as adjusted under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the next lowest multiple of $1,000.
“….”
8. Internal Revenue Code § 170
Click the following link to go to the entire section: IRC § 170
Note. The author has found only one case, Morey v. Riddell, 205 F. Supp. 918 (S.D. Cal. 1962), which addresses the issue of deductions for members of a New Testament church. That case held that § 170 applies to what appears from the record to have been, at least for the most part, a New Testament church. The government argued that contributions did not qualify as deductions. The Court held for the church on all points. The author has done an analysis of the case in God Betrayed/Separation of Church and State: The Biblical Principles and the American Application. Each member of a New Testament church is responsible to God first and the civil government second for the decision he makes as to whether to take a deduction for tithes and offerings to a New Testament church.
IRC 170 provides in relevant part:
Ҥ 170. Charitable, etc., contributions and gifts
“(a) Allowance of deduction.—
“(1) General rule.—There shall be allowed as a deduction any charitable contribution (as defined in subsection (c)) payment of which is made within the taxable year. A charitable contribution shall be allowable as a deduction only if verified under regulations prescribed by the Secretary.
“…
“(c) Charitable contribution defined.—For purposes of this section, the term “charitable contribution” means a contribution or gift to or for the use of—
“…
“(2) A corporation, trust, or community chest, fund, or foundation—
“(A) created or organized in the United States or in any possession thereof, or under the law of the United States, any State, the District of Columbia, or any possession of the United States;
“(B) organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals;
“(C) no part of the net earnings of which inures to the benefit of any private shareholder or individual; and
“(D) which is not disqualified for tax exemption under section 501 (c)(3) by reason of attempting to influence legislation, and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office.
“A contribution or gift by a corporation to a trust, chest, fund, or foundation shall be deductible by reason of this paragraph only if it is to be used within the United States or any of its possessions exclusively for purposes specified in subparagraph (B). Rules similar to the rules of section 501 (j) shall apply for purposes of this paragraph.”
IV. The Laws of Kansas
A. The Kansas Constitution
Click links (maroon colored words) to go directly to quoted provisions.
1. Preamble.
PREAMBLE. We, the people of Kansas, grateful to Almighty God for our civil and religious privileges, in order to insure the full enjoyment of our rights as American citizens, do ordain and establish this constitution of the state of Kansas, with the following boundaries, to wit: Beginning at a point on the western boundary of the state of Missouri, where the thirty-seventh parallel of north latitude crosses the same; thence running west on said parallel to the twenty-fifth meridian of longitude west from Washington; thence north on said meridian to the fortieth parallel of north latitude; thence east on said parallel to the western boundary of the state of Missouri; thence south with the western boundary of said state to the place of beginning.
§ 1. Equal rights. All men are possessed of equal and inalienable natural rights, among which are life, liberty, and the pursuit of happiness.
§ 3. Right of peaceable assembly; petition. The people have the right to assemble, in a peaceable manner, to consult for their common good, to instruct their representatives, and to petition the government, or any department thereof, for the redress of grievances.
§ 7. Religious liberty. The right to worship God according to the dictates of conscience shall never be infringed; nor shall any person be compelled to attend or support any form of worship; nor shall any control of or interference with the rights of conscience be permitted, nor any preference be given by law to any religious establishment or mode of worship. No religious test or property qualification shall be required for any office of public trust, nor for any vote at any elections, nor shall any person be incompetent to testify on account of religious belief.
§ 11. Liberty of press and speech; libel. The liberty of the press shall be inviolate; and all persons may freely speak, write or publish their sentiments on all subjects, being responsible for the abuse of such rights; and in all civil or criminal actions for libel, the truth may be given in evidence to the jury, and if it shall appear that the alleged libelous matter was published for justifiable ends, the accused party shall be acquitted.
§ 15. Search and seizure. The right of the people to be secure in their persons and property against unreasonable searches and seizures shall be inviolate; and no warrant shall issue but on probable cause, supported by oath or affirmation, particularly describing the place to be searched and the persons or property to be seized.
§ 1(b). § 1: System of taxation; classification; exemption. … (b) All property used exclusively for state, county, municipal, literary, educational, scientific, religious, benevolent and charitable purposes, farm machinery and equipment, merchants’ and manufacturers’ inventories, other than public utility inventori es included in subclass (3) of class 2, livestock, and all household goods and personal effects not used for the production of income, shall be exempted from property taxation.
B. Kansas Statutes
1. Chapter 79. Taxation.
Kansas Statutes, Chapter 79. Taxation. Article 2.—PROPERTY EXEMPT FROM TAXATION
§ 79-201
“79-201. Property exempt from taxation; religious, …. The following described property, to the extent herein specified, shall be and is hereby exempt from all property or ad valorem taxes levied under the laws of the state of Kansas:
First. All buildings used exclusively as places of public worship … with the furniture and books therein contained and used exclusively for the accommodation of religious meetings … together with the grounds owned thereby if not leased or otherwise used for the realization of profit, except that: … (b) any building, or portion thereof, used as a place of worship, together with the grounds upon which the building is located, shall be considered to be used exclusively for the religious purposes of this section when used as a not-for-profit day care center for children which is licensed pursuant to K.S.A. 65-501 et seq., and amendments thereto, or when used to house an area where the congregation of a church society and others may purchase tracts, books and other items relating to the promulgation of the church society’s religious doctrines.
Second. All real property, and all tangible personal property, actually and regularly used exclusively for … religious … purposes, including property used exclusively for such purposes by more than one agency or organization for one or more of such exempt purposes. Except with regard to real property which is owned by a religious organization, is to be used exclusively for religious purposes and is not used for a nonexempt purpose prior to its exclusive use for religious purposes which property shall be deemed to be actually and regularly used exclusively for religious purposes for the purposes of this paragraph, this exemption shall not apply to such property, not actually used or occupied for the purposes set forth herein, nor to such property held or used as an investment even though the income or rentals received therefrom is used wholly for … religious … purposes. In the event any such property which has been exempted pursuant to the preceding sentence is not used for religious purposes prior to its conveyance which results in its use for nonreligious purposes, there shall be a recoupment of property taxes in an amount equal to the tax which would have been levied upon such property except for such exemption for all taxable years for which such exemption was in effect. Such recoupment tax shall become due and payable in such year as provided by K.S.A. 79-2004, and amendments thereto. A lien for such taxes shall attach to the real property subject to the same on November 1 in the year such taxes become due and all such taxes remaining due and unpaid after the date prescribed for the payment thereof shall be collected in the manner provided by law for the collection of delinquent taxes. Moneys collected from the recoupment tax hereunder shall be credited by the county treasurer to the several taxing subdivisions within which such real property is located in the proportion that the total tangible property tax levies made in the preceding year for each such taxing subdivision bear to the total of all such levies made in that year by all such taxing subdivisions. Such moneys shall be credited to the general fund of the taxing subdivision or if such taxing subdivision is making no property tax levy for the support of a general fund such moneys may be credited to any other tangible property tax fund of general application of such subdivision. This exemption shall not be deemed inapplicable to property which would otherwise be exempt pursuant to this paragraph because an agency or organization: (a) Is reimbursed for the provision of services accomplishing the purposes enumerated in this paragraph based upon the ability to pay by the recipient of such services; or (b) is reimbursed for the actual expense of using such property for purposes enumerated in this paragraph; or (c) uses such property for a nonexempt purpose which is minimal in scope and insubstantial in nature if such use is incidental to the exempt purposes of this paragraph; or (d) charges a reasonable fee for admission to cultural or educational activities or permits the use of its property for such activities by a related agency or organization, if any such activity is in furtherance of the purposes of this paragraph; or (e) is applying for an exemption pursuant to this paragraph for a motor vehicle that is being leased for a period of at least one year.”
2. Chapter 79.–TAXATION
Article 36.–KANSAS RETAILERS’ SALES TAX
“79-3603. Retailers’ sales tax imposed; rate. For the privilege of engaging in the business of selling tangible personal property at retail in this state or rendering or furnishing any of the services taxable under this act, there is hereby levied and there shall be collected and paid a tax at the rate of 5.3%. Within a redevelopment district established pursuant to K.S.A. 74-8921, and amendments thereto, there is hereby levied and there shall be collected and paid an additional tax at the rate of 2% until the earlier of the date the bonds issued to finance or refinance the redevelopment project have been paid in full or the final scheduled maturity of the first series of bonds issued to finance any part of the project upon:
“(a) The gross receipts received from the sale of tangible personal property at retail within this state; …”
“79-3606. Exempt sales. The following shall be exempt from the tax imposed by this act:
“…
“(aaa) all sales of tangible personal property and services purchased by a religious organization which is exempt from federal income taxation pursuant to section 501(c)(3) of the federal internal revenue code, and used exclusively for religious purposes,”
Non-state churches should contact Jerald Finney for help in seeking exception from sales tax on items bought for use in church ministry.
FN1 Many books, articles, and audio teachings address the Biblical principles, history, and facts one can refer to in order to determine that when a church becomes a legal entity and obtains 501(c)(3) status, she violates Biblical principles and displeases our Lord.
IRC § 5O1 provides in relevant part:
Ҥ 501. Exemption from tax on corporations, certain trusts, etc.:
“(a) Exemption from taxation. An organization described in subsection (c) … shall be exempt from taxation under this subtitle [26 USCS §§ 1 et seq.] unless such exemption is denied under section 502 or 503 [26 USCS § 502 or 503]….
FN2 Browse this website for all written and audio teachings, available at no cost. Books can be ordered – see the Books page. All the books by Jerald Finney are available free in online and PDF form. The links to all online books and PDFs are at the Books Order Information page.
FN3 Ibid. For example, the author analyzes Romans 13:1-3, 1 Peter 2:13 and other articles taken out of context to support a false view of the relationship between individuals and state and the church and state. See, Render Unto God the Things that Are His: A Systematic Study of Romans 13 and Related Verses.
FN4 U.S. CONST. amend. I.
FN5 See God Betrayed/Separation of Church and State: The Biblical Principles and the American Application (Xulon Press, 2008 (www.xulonpress.com) or Austin, TX: Kerygma Publishing Co. 2008 (churchandstatelaw.com), Section IV. This book and all books, articles, audio teachings of Jerald Finney are available at no cost on this website. Ordering information for the books is available at Order Information for Books by Jerald Finney. All the books by Jerald Finney are available free in online and PDF form. The links to all online books and PDFs are at the Books by Jerald Finney Page.
FN6 Bob Jones University, 461 U.S. 574 (1983).
FN7 Ibid.
FN8 26 U.S.C. § 508 (2007).
“(a) Exemption from taxation. An organization described in subsection (c) … shall be exempt from taxation under this subtitle [26 USCS §§ 1 et seq.] unless such exemption is denied under section 502 or 503 [26 USCS § 502 or 503]….
“(c)(3) Corporations, and any community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation (except as otherwise provided in subsection (h)), and which does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of (or in opposition to) any candidate for public office….
“(h) Expenditures by public charities to influence legislation. (1) General rule. In the case of an organization to which this subsection applies, exemption from taxation under subsection (a) shall be denied because a substantial part of the activities of such organization consists of carrying on propaganda, or otherwise attempting, to influence legislation….”
Simply Church 