IRS Tax guide for Churches

Rufus_1611 · Apr 30, 2007

IRS Tax Guide for Churches

"The Internal Revenue Service (IRS) offers this quick reference guide of federal tax law and procedures for churches and religious organizations to help them voluntarily comply with tax rules."
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Is church compliance with tax rules voluntary?

Churches and religious organizations, like many other charitable organizations, qualify for exemption from federal income tax under IRC section 501(c)(3) and are generally eligible to receive tax-deductible contributions. To qualify for tax-exempt status, such an organization must meet the following requirements (covered in greater detail throughout this publication):

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"the organization’s purposes and activities may not be illegal or violate fundamental public policy."

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All IRC section 501(c)(3) organizations, including churches and religious organizations, must abide by certain rules:

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the organization’s purposes and activities may not be illegal or violate fundamental public policy.
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Is abortion considered to be "fundamental public policy" since the state has deemed it to be legal? How about gay marriage? Is the IRS saying that a church which is 501c3 is at risk of losing their exemption if they speak against "fundamental public policy"?

Since the document doesn't seem to contain a definition, I contacted the IRS to have them define "fundamental public policy" and after being put on hold for 30 minutes, I had a sweet lady say that she'd have an agent call me back within 15 days, as she couldn't find a definition for the expression. Thus, I would be delighted to hear from anyone that can define this term and how it impacts a 501c3 organization.

Rufus_1611 · Jul 3, 2007

I didn't get any takers to the original post so here is a recent example of how this issue seems to be affecting the freedom of speech of pastors. While, this is not so much the "fundamental public policy" issue as the prevention of political speech issue, it still seems to be the IRS telling pastors what they can or can not say.

IRS Crackdown on Church "Political Activities"

CBNNews.com - These days, it appears there's a fine line between making a moral and a political statement.

That's what more and more pastors are finding out as IRS probes enter their churches' doors with threats of removing their tax-exempt status.

Last year, the IRS reported that 37 out of 40 churches were investigated for political activity after the 2004 election. They were issued warnings or penalized with excise taxes for violating the law, yet none lost their tax exemptions.

Kansas Church Stands against Abortion

One church in Wichita, Kansas is under investigation for its "political involvement" prior to the November 2006 election.

Pastor Mark Holick could lose his church's tax-exempt status for taking a stand against abortion.

After the Spirit One Christian Center church posted "Sebelius accepted $300,000.00 from abortionist Tiller, price of 1,000 babies," on its marquee, the IRS sent Holick a letter of inquiry.

"A reasonable belief exists that your organization has engaged in political activities…" were the words Holick read from the statement in an interview with CBN News. "They sent the letter a few weeks ago with 31 different questions and four different themes: statements on our changeable marquee sign, content on our Website, email sent out and voters' guides."

Holick believes that the IRS's main contention revolves around Kansas Governor Kathleen Sebelius. The government agency contends that the context in which her name was used on the church's marquee constitutes unauthorized political involvement.

However, Holick asserts that the church is protected under the First Amendment of the United States Constitution, which says, "Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press…"

"The IRS basically told me I took a political position. It's not. It's a Christian position… a moral position. This is a First Amendment issue, not a tax issue," Holick concluded.

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KenH · Jul 3, 2007

The clean cut idea would be for a church to not worry about being tax-exempt and then the church can legally engage in political activity without any concern about the tax law.

Taking a stand does not always come without a cost.

IRS Tax guide for Churches

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