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A. Tax-Exempt Status: Congregations and the IRS Guidelines on Advocacy, Lobbying, and Elections
What is a 501(c)(3)?
Congregations and religious organizations, like many other charitable organizations, qualify for exemption from federal income tax under Internal Revenue Code (IRC) Section 501(c)(3) and are generally eligible to receive tax-deductible contributions. In order to qualify for tax exemption, an organization must meet the following requirements:
- the organization must be organized and operated exclusively for religious, educational, scientific, or other charitable purposes,
- net earnings may not inure to the benefit of any private individual or shareholder,
- no substantial part of its activity may be attempting to influence legislation,
- the organization may not intervene in political campaigns, and
- the organization's purposes and activities may not be illegal or violate fundamental public policy.
Although there is no requirement to do so, many congregations seek recognition of tax-exempt status from the IRS because such recognition assures congregational leaders, members, and contributors that the congregation is recognized as exempt and qualifies for related tax benefits.
The term "church" is found, but not specifically defined, in the Internal Revenue Code. IRS Publication 1828 uses the word church, "in its generic sense as a place of worship including, for example, mosques and synagogues." The Real Rules uses "congregation," believing it to be a more inclusive term. It should be noted that the IRS makes a distinction between congregations (which includes conventions and associations of congregations as well as integrated auxiliaries of a congregation) and religious organizations. "Religious organizations that are not [congregations] typically include nondenominational ministries, interdenominational and ecumenical organizations and other entities whose principal purpose is the study or advancement of religion." For a complete definition of terms, see the glossary at the end of Publication 1828.
- This note is derived from IRS Publication 1828, p. 2.