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Are Churches Automatically Tax Exempt?

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.

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….”

501(c)(1)(A) does not state that churches are “automatically exempt.” Clearly, 501(c)(1)(A) states that churches are mandatory exceptions to the requirement for for filing for (501)(c)(3) tax exempt status. “Churches, their integrated auxiliaries, and conventions or associations of churches” (not other types of other organizations)  may claim 501(c)(3) status without filing for it.  501(c)(3) rules and regulations are part of 501(c)(3) status.  One cannot separate the status from attributes that go with it. The attributes of the status define the status. A church may claim the status without filing for it.

The IRS 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.].

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. Some are, but churches who are corporations,  Internal Revenue Code Section 501(c)(3) or 508(c)(1)(A) tax exempt, or legal entities of any kind are not bound by a higher law. They have forsaken higher law by submitting to authorities other than the Lord Jesus Christ.

One requirement for 501(c)(3) 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.

The requirements of 501(c)(3) and 501(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.

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).