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Do Religious Organizations Have to Apply for Tax Exemption?

Tax exempt / Papier mit Symbole

Under United States tax law, religious organizations are considered to be public charities, often called Section 501(c)(3) organizations, referring to a section of the federal Internal Revenue Code (IRC) concerning charities.  Religious organizations are eligible to take advantage of the 501(c)(3) exemption, which allows nonprofit charities to remain exempt from federal, state, and local taxes.  Nonprofit organizations generally must apply for tax-exempt status under section 501(c)(3) and file an annual form with the Internal Revenue Service (IRS), in lieu of a tax return, in order to maintain their status.  As any seasoned Illinois nonprofit attorney can tell you, however, churches are treated differently under the law.    

Requirements for tax exemption

To qualify as a tax-exempt charity under 501(c)(3), an organization must satisfy these requirements:

The organization must be organized and operated exclusively for religious, educational, scientific, or other charitable purposes;

  • Net earnings must not go to the personal benefit of a private individual;
  • The organization must not get involved in political campaigns or attempt to influence legislation (political lobbying);
  • The organization’s purposes and activities may not be illegal or violate public policy.

Churches and other places of worship automatically get tax-exempt status

Under IRS rules, churches that otherwise satisfy the 501(c)(3) requirements will be granted tax-exempt status automatically.  They need not file the relevant application.

The rule is not limited to Christian churches:  According to published IRS guidance, the IRS uses the word “church” in a generic sense to refer to any place of worship.  Other examples include mosques and synagogues.  The term “church” also refers to conventions, associations of places of worship, and integrated auxiliaries of churches, in addition to the individual churches.

Other religious organizations do need to apply for 501(c)(3) status

The IRC and, in turn, the IRS distinguish churches from other “religious organizations.”  Religious organizations include other entities that are not places of worship but are still dedicated to the “study or advancement of religion,” such as nondenominational ministries, interdenominational and ecumenical organizations.  Religious organizations other than places of worship must generally apply for tax-exempt status to be recognized under section 501(c)(3). 

Benefits of applying for tax-exempt status

Even though it is not required, churches may still benefit from applying for and receiving official tax-exempt status.  Official recognition provides assurance to ministers, contributors, church leaders and church members that the church is recognized and qualifies for related tax benefits.  Contributors, for example, may be more comfortable donating when they know that their contributions are tax-deductible and will be used for charitable purposes.

If your church, religious organization, or other non-profit company faces legal issues in Illinois, get a seasoned and professional opinion on how to proceed by contacting the Chicago non-profit attorneys at Pluymert, MacDonald, Hargrove & Lee in Hoffman Estates at 847-310-0025 and in Des Plaines at 847-298-5030.

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