A. Tax-Exempt Status: Congregations and the IRS Guidelines on Advocacy, Lobbying, and Elections

What is a 501(c)(3)?[1]

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.

Please Note:[1]

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.

Footnotes

1. This note is derived from IRS Publication 1828, p. 2.