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Are Churches Automatically Tax Exempt?

Jerald Finney
Copyright © April 8, 2022

Regardless of what one has been told or believes, an honest examination of the evidence proves that churches are not automatically tax exempt. See the essay below, and other resources linked to below, for proof of this conclusion. However, “Churches that meet the requirements of § 501(c)(3) are automatically considered tax exempt [under § 508(c)(1)(A)] and are not required to apply for and obtain recognition of tax-exempt status from the IRS.” This quote is from IRS publications and is the correct position. If a church does not meet the requirements of 501(c)(3) that church is not “tax exempt.”

Furthermore, according to principles in the Word of God, church tax exempt status is spiritual fornication since she has submitted herself to man’s law, become a temporal legal – as opposed to spiritual eternal only – entity,  and chosen to submit to an authority other than the Lord Jesus Christ as to many church matters. A church can choice is to remain under Christ only as a eternal spiritual organism as opposed to a temporal earthy organizaion. In America, the First Amendment and corresponding state constitutional provisions protect this choice from persecution. This essay, and the other essays and articles on this website explain these matters more comprehensively.

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Jerald Finney
Copyright © April 8, 2022

Many Christians and churches take the position that churches who do not file Form 1023 in order to obtain federal tax exempt status are “automatically exempt.” They believe that Internal Revenue Code § 508(c)(1)(A) grants automatic tax exempt status to churches. Is this position correct? For emphasis, this brief essay will go directly to that one question which I have already answered in more extensive and comprehensive writings such as Church Internal Revenue Code § 508(c)(1)(A) Tax Exempt Status, and  The Rules and Regulations that Come with Church IRS Code Sections 501(c)(3) and 508(c)(1)(A) Tax-Exempt Status.

A church, because of the First Amendment, can choose either to be automatically non-taxable without any civil government control; or it can choose to be 501(c)(3) or 508(c)(1)(A) tax exempt organizations if … (explained below). No if can come with automatic status. Automatically means: “(with reference to a device or process) by itself with no human control.” According to that definition, churches definitely are not “automatically tax exempt.”  Both 501(c)(3) and 508(c)(1)(A) tax exempt status come with IRS rules and regulations. See, The Rules and Regulations that Come with Church IRS Code Sections 501(c)(3) and 508(c)(1)(A) Tax-Exempt Status.  Please let me explain.

508(a),(c)(1)(A) states:

“(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 to
“(A) churches, their integrated auxiliaries, and conventions or associations of churches….”

508(c)(1)(A) does not state that churches are “automatically exempt.” Clearly, 508(c)(1)(A) states that churches are mandatory exceptions to the requirement for for filing for Internal Revenue Code § (501)(c)(3) tax exempt status. “Churches, their integrated auxiliaries, and conventions or associations of churches” (not other types of other organizations)  may claim tax exempt status without filing for it. To claim tax exempt status under 508(c)(1)(A) instead of submitting IRS Form 1023 for tax exempt status under 501(c)(3), a church must make clear to the public and to its members that the church is tax exempt (that givers may deduct their gifts on their income tax returns); and, like a 501(c)(3) church, give IRS Acknowledgements to givers.

Rules and regulations come with both 501(c)(3) and 508(c)(1(A) tax exempt status.  One cannot separate the status from attributes, rules, and regulations that go with it. The attributes, rules, and regulations of the status define the status. According to 508(c)(1)(A), a church may claim the status without filing for it. Contrary to unlearned “Christian” propaganda, churches who do so are to comply with the IRS rules and regulations that come with the status. The requirements of 501(c)(3) and 508(c)(1)(A) status are given in The Rules and Regulations that Come with Church IRS Code Sections 501(c)(3) and 508(c)(1)(A) Tax-Exempt Status.

The IRS, and correctly so, understands this simple truth. Page 3 of IRS Publication 1828 states, churches that meet the requirements of § 501(c)(3) are automatically considered tax exempt and are not required to apply for and obtain recognition of tax-exempt status from the IRS” [Bold red emphasis mine]. The IRS repeats this on page 24 of IRS Publication 557, “Tax –Exempt Status for Your Organization.” Under Organizations Not Required To File Form 1023 churches are listed. The following sentence is included: “These organizations are exempt automatically if they meet the requirements of section 501(c)(3).” [Bold italicized emphasis added.].

By placing a church under a civil government law, either 501(c)(3) or IRC § 508(c)(1)(A), a church rejects her First Amendment non-taxable status and accepts the federal government offer for tax exempt status.  Offer and acceptance are necessary fot the agreement, the contract, to be completed. The First Amendment makes clear that a church may choose to retain religious freedom without persecution. IRS  §§ 501(c)(3) and 508(c)(1)(A) give churches an alternative: giver up First Amendment status as a non-legal entity in favor of Fourteenth Amendment status as a legal entity.

Most churches who obtain either 501(c)(3)  or 508(c)(1)(A) status have already given up much of their their First Amendment protection and status by submitting themselves to state non-profit incorporation law, unincorporated association law, charitable trust law, etc. Churches who are corporations,  Internal Revenue Code Section 501(c)(3) or 508(c)(1)(A) tax exempt, or legal entities of any kind have forsaken higher law by submitting to authorities other than the Lord Jesus Christ.

With 508(c)(1)(A) the government declared in law that they trusted churches and “Christians,” of all people, to understand their actions and to honor their agreements. The government made it more convenient for churches, and for no other type of organization, to obtain tax exempt status. They falsely believed that Christians and churches were bound by a higher law and could be trusted to diligently honor their word.

As mentioned above, one requirement for 501(c)(3) or 508(c)(1)(A) tax exempt status is that the church give donors IRS Acknowledgements for tithes, offerings, and gifts. Should the IRS audit a donor who claimed a deduction for gifts to a church, the IRS will want the IRS Acknowledgment; and proof that the giver of the Acknowledgement was a church. If the church has 501(c)(3) status, the proof is on the IRS list of tax exempt churches. If the church has 508(c)(1)(A) status, the IRS may require the person claiming the exemption to prove that the gift was to a “church” even though they should have a copy of the IRS Acknowledgement for the gift.

The real reason churches file for or claim  tax exempt status is to motivate people to give, and to give more. Some Christians will not give to a church who is not on the Internal Revenue Service list. See, for an interesting study on this matter, “Churches, Politics, and the Charitable Deduction” (Ellen P. Aprill, Churches, Politics, and the Charitable Contribution Deduction, 42 B.C.L. Rev. 843 (2001).

To reject the offer of the federal government for “tax exempt” status, all a church must do is to reject all offers of state and/or federal government for combination with civil government (incorporation, charitable trust status, unincorporated association status, tax exempt status under 501(c)(3) or 508(c)(1)(A), or union with the state in any other way); refuse to give IRS Acknowledgements for tithes, offerings, and gifts; and make it known that the church is a First Amendment church solely under the authority of the Lord Jesus Christ.

Some Christians argue that they don’t care what the government requires in order for granting them the “benefits” of tax-exempt status. They know that their authority, the IRS, probably will not catch them since they do not have the resources to monitor churches and pastors. These Christians and churches take God out of the equation. The Lord knows all and does not honor such behavior by believers and churches. He expects his children to honor their word and their agreements which they voluntarily enter into. They are dishonoring God and man, and ignorance will not excuse their misdeeds:

According as his divine power hath given unto us all things that pertain unto life and godliness, through the knowledge of him that hath called us to glory and virtue:  Whereby are given unto us exceeding great and precious promises: that by these ye might be partakers of the divine nature, having escaped the corruption that is in the world through lust. And beside this, giving all diligence, add to your faith virtue; and to virtue knowledge; And to knowledge temperance; and to temperance patience; and to patience godliness; And to godliness brotherly kindness; and to brotherly kindness charity. For if these things be in you, and abound, they make you that ye shall neither be barren nor unfruitful in the knowledge of our Lord Jesus Christ.  But he that lacketh these things is blind, and cannot see afar off, and hath forgotten that he was purged from his old sins. Wherefore the rather, brethren, give diligence to make your calling and election sure: for if ye do these things, ye shall never fall” (2 Peter 1:1-10).